**UNITED STATES**

******SECURITIES AND EXCHANGE
COMMISSION**

**Washington, D.C. 20549**

**FORM
10-Q**

**(Mark One)**

**[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE**

******ACT OF 1934**

**For the quarterly period ended March 25,
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)**

**(603)
627-3500******

**(Registrant's telephone number, including
area code)**

**WPI Group,
Inc.**

**(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 April 30,
    2001**
|-------------------------------- | ----------------------------------------
|**Common Stock, par value $.01** | **7,894,238 shares**                    



****

---



**NEXIQ TECHNOLOGIES,
INC.**

**INDEX******

|******PART I FINANCIAL INFORMATION**                                                                                                                             | **PAGE NO.**
|---------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------
|*Item 1. Consolidated Financial
    Statements*                                                                                                                  |             
|*Consolidated Balance Sheets -
      March 25, 2001 and September 24, 2000*                                                                                      | 3           
|*Consolidated Statements of Operations - Three Months
      Ended March 25, 2001and March 26, 2000 and Six Months Ended March 25, 2001
      and March 26, 2000* | 4           
|*Consolidated Statements of Cash
      Flows - Six Months Ended March 25, 2001 and March 26, 2000*                                                               | 5           
|*Notes to Condensed Consolidated
      Financial Statements*                                                                                                     | 6           
|*Item 2. Management's Discussion and
      Analysis of Financial Condition and Results of Operations*                                                            | 8           
|**PART II OTHER
      INFORMATION**                                                                                                                              |             
|*Item 6. Exhibits and Reports
      on Form 8-K*                                                                                                                 | 11          
|Signatures                                                                                                                                                       | 12          



2

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

**CONSOLIDATED BALANCE
SHEETS**

|                                                                                                         | September 24,           | March 25,       
|-------------------------------------------------------------------------------------------------------- | ----------------------- | ----------------
|                                                                                                         | 2000                    | 2001            
|                                                                                                         |                         | (Unaudited)     
|**ASSETS**                                                                                               |                         |                 
|**Current Assets**                                                                                       |                         |                 
|Cash and
      cash equivalents                                                                          | $102,156                | $2,030,453      
|Accounts receivable - net of allowance
      for doubtful accounts of $300,000 and $60,000, respectively | 1,206,472               | 1,758,130       
|Inventories                                                                                              | 441,151                 | 751,995         
|Prepaid expenses and other current
      assets                                                          | 258,780                 | 592,149         
|Refundable income taxes                                                                                  | 105,551                 | 91,700          
|Prepaid income taxes                                                                                     | 97,425                  | 97,425          
|Net assets of discontinued
      operations                                                              | 6,391,000               | -               
|                                                                                                         | ---------------         | -------------   
|Total current assets                                                                                     | 8,602,535               | 5,321,852       
|**Property, Plant and
      Equipment** at cost, less accumulated depreciation                           | 889,991                 | 813,667         
|                                                                                                         |                         |                 
|**Other Assets**                                                                                         | 3,565,037               | 4,354,870       
|                                                                                                         | ---------------         | ----------------
|                                                                                                         | $13,057,563             | $10,490,389     
|                                                                                                         | =========               | =========       
|**LIABILITIES AND STOCKHOLDERS'
      DEFICIT**                                                          |                         |                 
|**Current Liabilities**                                                                                  |                         |                 
|Notes
      Payable                                                                                      | $18,276,246             | $10,132,770     
|Accounts payable                                                                                         | 1,391,700               | 1,873,941       
|Accrued expenses                                                                                         | 2,788,878               | 3,204,451       
|                                                                                                         | ----------------        | ----------------
|Total current liabilities                                                                                | 22,456,824              | 15,211,162      
|                                                                                                         | ----------------        | --------------- 
|**Convertible Notes
      Payable**                                                                      | 10,978,369              | 17,099,773      
|                                                                                                         | ----------------        | --------------- 
|**Other Long-Term
      Liability**                                                                      | 944,238                 | 814,230         
|                                                                                                         |                         |                 
|                                                                                                         | ********--------------- | --------------  
|**Deferred Income
      Taxes**                                                                          | 144,537                 | 144,537         
|****                                                                                                     | ----------------        | --------------  
|**Commitments**                                                                                          |                         |                 
|**Stockholders ' Deficit:**                                                                              |                         |                 
|Common
      stock, $.01 par value;                                                                      |                         |                 
|authorized
      75,000,000 shares issued and                                                            |                         |                 
|outstanding
      7,891,963 and                                                                          |                         |                 
|7,894,238,
      respectively                                                                            | 78,920                  | 78,942          
|Additional paid-in capital                                                                               | 18,191,200              | 24,796,419      
|Accumulated deficit                                                                                      | (39,736,525)            | (47,654,674)    
|                                                                                                         | ----------------        | --------------- 
|Total stockholders' deficit                                                                              | (21,466,405)            | (22,779,313)    
|                                                                                                         | ----------------        | --------------- 
|                                                                                                         | $13,057,563             | $10,490,389     
|                                                                                                         | ==========              | ==========      

*See notes to* *consolidated financial
statements*

3

**NEXIQ TECHNOLOGIES,
INC.**

**CONSOLIDATED STATEMENTS OF
OPERATIONS**

**(unaudited)******

|                                                                      | **Three Months Ended** | **Six Months Ended**
|--------------------------------------------------------------------- | ---------------------- | --------------------
|                                                                      | **March 26,**          | **March 25,**       
|                                                                      | **2000**               | **2001**            
|                                                                      | -------------          | -------------       
|**Continuing Operations:**                                            |                        |                     
|**Net Sales**                                                         | $3,588,053             | $3,302,783          
|**Cost of Goods Sold**                                                | 1,422,127              | 1,242,769           
|                                                                      | ---------------        | ---------------     
|**Gross Profit**                                                      | 2,165,926              | 2,060,014           
|                                                                      | ---------------        | ---------------     
|**Operating Expenses:**                                               |                        |                     
|Research and development                                              | 822,166                | 2,096,739           
|Selling, general and administration                                   | 2,028,200              | 1,900,751           
|Restructuring costs                                                   | 130,000                | -                   
|                                                                      | -------------          | --------------      
|Total Operating Expenses                                              | 2,980,366              | 3,997,490           
|                                                                      | ----------------       | ---------------     
|**Operating
Loss**                                                    | (814,440)              | (1,937,476)         
|                                                                      |                        |                     
|**Other Income
      (Expense):**                                     |                        |                     
|Interest expense                                                      | (739,171)              | (1,551,266)         
|Forbearance expense                                                   | -                      | -                   
|Other, net                                                            | (159)                  | 55,859              
|                                                                      | ---------------        | --------------      
|**Loss Before Income
      Taxes**                                    | (1,553,770)            | (3,432,883)         
|****                                                                  |                        |                     
|**Income Tax Expense (Benefit)**                                      | -                      | -                   
|****                                                                  | ---------------        | --------------      
|****                                                                  |                        |                     
|**Loss from Continuing Operations**                                   | (1,553,770)            | (3,432,883)         
|****                                                                  |                        |                     
|**Discontinued Operations:**                                          |                        |                     
|Estimated loss from disposal of discontinued
      operations         | (1,560,000)            | -                   
|                                                                      | ------------------     | -----------------   
|Loss before cumulative effect of change in accounting
      principle | (3,113,770)            | (3,432,883)         
|**Cumulative Effect of Change in
      Accounting Principle**         | -                      | -                   
|                                                                      | ----------------       | -----------------   
|**Net Loss**                                                          | $(3,113,770)           | $(3,432,883)        
|                                                                      | ==========             | ===========         
|                                                                      |                        |                     
|**Earnings (Loss)
      Per Share:**                                  |                        |                     
|Continuing operations                                                 | $ (0.26)               | $(0.43)             
|Discontinued operations                                               | (0.26)                 | -                   
|Effect of accounting change                                           | -                      | -                   
|                                                                      | ---------------        | -----------------   
|Net loss                                                              | $(0.52)                | $(0.43)             
|                                                                      | ==========             | ==========          
|                                                                      |                        |                     
|Weighted Average Common
      Shares                                  | 6,052,568              | 7,893,992           
|Effect of Dilutive Options                                            | -                      | -                   
|                                                                      | --------------         | -------------- -    
|Adjusted Weighted Average Common
      Shares                         | 6,052,568              | 7,893,992           
|                                                                      | =========              | ==========          
|                                                                      |                        |                     



***See notes to consolidated financial statements*

4

**NEXIQ TECHNOLOGIES,
INC.**

**CONSOLIDATED STATEMENTS OF
CASH FLOWS**

**(unaudited)******

|                                                                                                | **********Six Months Ended**     
|----------------------------------------------------------------------------------------------- | ---------------------------------
|****                                                                                            | **March 26,**                    
|****                                                                                            | **2000**                         
|****                                                                                            | **-----------------------------**
|**Cash Flows From Operating
      Activities:**                                                 | ****                             
|********Net loss****                                                                            | ****$(6,065,531)
      ****      
|****                                                                                            | **-----------------**            
|****Adjustments to reconcile net income to
      net cash used in operating activities:****     | ****                             
|********Depreciation and amortization                                                           | 1,285,934                        
|Loss from disposal of discontinued operations                                                   | 1,560,000                        
|Cumulative effect of change in
      accounting principle                                       | -                                
|Other                                                                                           | -                                
|Changes in current assets and
      liabilities net of effects of businesses
    divested:****  | ****                             
|********Accounts
      receivable                                                               | 4,164,420                        
|Accounts receivable - other                                                                     | (258,915)                        
|Inventories                                                                                     | (540,759)                        
|Prepaid expenses and other current
      assets                                                 | (54,294)                         
|Accounts payable                                                                                | (1,536,929)                      
|Accrued expenses                                                                                | 753,014                          
|Accrued income taxes                                                                            | 405,439                          
|                                                                                                | --------------
      ****        
|****Total
      adjustments****                                                                 | ****5,777,910                    
|                                                                                                | --------------                   
|Net cash used in operating
      activities                                                     | (287,621)                        
|                                                                                                | **----------------**             
|**Cash Flows From Investing
      Activities**:****                                             | ****                             
|********Proceeds
      from sale of businesses                                                  | 39,367,083                       
|Additions to property, plant and
      equipment                                                | (310,112)                        
|Payments of accrued acquisition
      costs****                                                 | ****(149,066)                    
|                                                                                                | ----------------
      ****      
|****Net cash provided by
      investing activities                                             | 38,907,905                       
|                                                                                                | -----------------                
|**Cash Flows From Financing
      Activities:**                                                 |                                  
|Payments of debt****                                                                            | ****(39,129,624)                 
|Proceeds from debt, net of debt issuance
      costs                                            | -                                
|Proceeds from sale of warrants to
      purchase common stock and beneficial conversion feature | -                                
|Proceeds from issuance of common
      stock****                                                | ****11,173                       
|                                                                                                | ----------------
      ****      
|****Net cash provided by
      (used in) investing activities****                               | ****(39,118,451)                 
|                                                                                                | ----------------
      ****      
|****Net Increase (Decrease)
      in Cash and Cash Equivalents****                              | (498,167)                        
|**Cash and Cash Equivalents,
      Beginning of Period**                                        | 550,320                          
|****                                                                                            | -----------------                
|**Cash and Cash Equivalents, End
      of Period**                                              | $52,153                          
|                                                                                                | ==========
      ****            
|****Supplemental Disclosure
      of Cash Information:****                                      |                                  
|Income taxes refunded                                                                           | $(117,054)                       
|Interest paid****                                                                               | ****5,480,641                    

*See notes to consolidated financial
statements*

5

**NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS**

**1. BASIS OF PRESENTATION**

*The financial statements for the three months and six
months ended March 25, 2001 and March 26, 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 and September 26, 1999.*

*Certain prior year amounts have been reclassified to
conform with 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,**    | **March 25,**      
|------------------- | -------------------- | -------------------
|                    | **2000**             | **2001**           
|                    | -------------------- | -------------------
|                    |                      |                    
|*****Raw Materials* | *$281,199*           | *$514,595*         
|*Work-in-Process*   | *40,422*             | *104,449*          
|*Finished Goods*    | *119,530*            | *132,951*          
|**                  | *------------------* | *----------------* 
|*Total*             | *$441,151*           | *$751,995*         
|                    | ==========           | =========          

**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 reduce the
outstanding bank loans by $5.0 million.*

**4. 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 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 at the option of the
holder or the Company, under certain conditions at $1.75 per
share.*

*In January 2000, 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).*

6

*In accordance with the Emerging Issues Task Force
(EITF) 00-27, "Accounting of Issue 98.5 to Certain Convertible Instruments," the
Company has recorded a beneficial conversion feature in additional paid in
capital related to the Term A Financing of approximately $1.6 million as a
cumulative effect of a change in accounting principle. The resulting discount on
the debt has been fully amortized immediately, since the debt is convertible at
any time at the option of the holder.*

*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 Term C
Financing resulting in a discount on the Term C Convertible Notes. The discount
is being amortized over the period ended July 2003.*

****

7

**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 ending March 25, 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 where the fiscal year ended September 24,
2000. Readers are cautioned not to place undue reliance on the forward-looking
statements that 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 $3.3 million for the second quarter of fiscal
2001 decreased 8.0% from sales of $3.6 million for the second quarter of fiscal
2000. For the first six months of fiscal 2001 the Company reported sales of $6.5
million, 9.7% lower than sales of $7.2 million for the first six months of
fiscal 2000. The decrease was primarily due to a decline in product sales to its
former principal distributor.*

Cost of sales of $1.2 million for the second quarter of fiscal 2001 resulted
in a gross profit of 62.4%, compared to a gross profit of 60.4% for the same
period of fiscal 2000. Cost of sales of $2.6 million for the first six months of
fiscal 2001 resulted in a gross profit of 59.2%, compared to a gross profit of
60.1% for the same period of fiscal 2000. The decrease in the Company's gross
profit percentage in the first six months of fiscal 2001 was primarily
attributable to a change in mix of products sold.

*Research and new product development
expenses were $2.1 million, 63.5% of sales, and $3.6 million, 55.1% of net
sales, for the fiscal quarter and the six months ended March 25, 2001,
respectively. For the same fiscal quarter and six month periods of fiscal 2000,
research and new product development expenses were $0.8 million, 22.9% of sales,
and $1.5 million, 21.0% of sales, respectively. The increase was attributed to
the development e-Technician, a web-based remote diagnostic and "telematics"
platform for commercial vehicles.*

***Selling, general and administration expenses were $1.9 million and
$2.0 million for the second quarter of fiscal 2001 and 2000, respectively, and
$3.8 million and $4.3 million, for the six months of fiscal 2001 and 2000,
respectively. As a percentage of sales, selling, general and administrative
expenditures were 57.6% and 56.5% for the fiscal 2001 and 2000 quarters,
respectively, and 59.3% and 59.4% for the six month of fiscal 2000 and 1999,
respectively. The changes in selling, general and administrative expenses in
fiscal 2001 is primarily attributable to a reduction in executive and
administration personnel and costs related to consultants and advisors incurred
in connection with the debt negotiations with the bank syndicate. The Company
recognized a charge of $0.1 million in the second quarter of fiscal 2001 in
connection with the settlement of litigation matter.*

*The Company's operating loss for the
second quarter of fiscal 2001 and 2000 was $1.9 million and $0.8 million,
respectively. For the six months ended March 25, 2001 and March 26, 2000 the
Company's operating loss was $3.6 million and $3.2 million, respectively. The
increase in the operating loss was primarily due to the increase in research and
new product development costs.*

8

*****The Company's other income (expense) was ($1.5) million for the
second quarter of fiscal 2001 compared to ($0.7) million in the second quarter
of fiscal 2000. For the six months ended March 25, 2001 and March 26, 2000 other
income (expense) was ($2.7) million and ($1.3), 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 $1.6 million in the second
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
March 25, 2001 the Company had a working capital deficit of $9.9 million
compared to $13.8 million deficit at September 24, 2000. Net cash used in
operating activities totaled $5.1 million and $0.3 million for the six months
ended March 25, 2001 and March 26, 2000, respectively.*

*As of March 25, 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 investments 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 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 at the option of the
holder or the Company, under certain conditions at $1.75 per
share.*

***************Term C Financing - In January 2000, 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.*****

9

******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 March 25, 2001, there was $10.8 of term note
borrowings outstanding under the agreement. Interest on all borrowings is
payable monthly at prime (8.0% at March 25, 2001) plus 1.75%.

***************The Company intends to utilize the proceeds from the financing
transactions under the Convertible Note Agreement to fund operations and repay a
portion of the amounts outstanding under the credit facility. The Company
anticipates the need to either amend the existing credit facility or obtain
additional financing to repay the remaining amounts outstanding under the credit
facility when it expires in July 2001.*

*There can be no assurance that the
Company will be successful in obtaining additional financing or amending the
credit facility. If the Company is unsuccessful, the cash from operations and
the financing transactions under the Convertible Note Agreement may not be
sufficient to cover the short-term or long-term liquidity
requirements**.***

****10

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

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

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

********A. Exhibits

*None.*****

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

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

*None.*

**11**

***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: May 7, 2001

/s/ Jack E. Schang

Jack E. Schang

President

and Chief Operating Officer

Date May 7, 2001

/s/ John W. Powers

John W. Powers

Vice President and

Chief Financial Officer

12****

********