**UNITED
STATESSECURITIES 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 30,
2002**

**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.****(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)**



**6405 Nineteen Mile Road, Sterling Heights,
MI    48314****(Address of principal executive
offices)                
(Zip Code)**

**Registrant's telephone number, including area
code:**    **(586)
731-6410**

1155 Elm Street, Manchester, New Hampshire 03101
**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 June 30,
    2002**
|-------------------------------- | ---------------------------------------
|**Common Stock, par value $.01** | **14,047,962 shares**                  



---



**NEXIQ TECHNOLOGIES,
INC.**

**INDEX**

|**PART I
      -FINANCIAL INFORMATION**                                                                                          |                                                                                                                                                                                                                                |  |  | Page
    No. | 
|-------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  |  | ------------ | 
|                                                                                                                                 |                                                                                                                                                                                                                               
|Item
      1. Condensed Consolidated Financial Statements                                                                        |                                                                                                                                                                                                                                |  |  |              | 
|                                                                                                                                 |                                                                                                                                                                                                                                |  |  |              | 
|                                                                                                                                 | Condensed
      Consolidated Balance
      Sheets        
               - June 30, 2002 and
      September 30, 2001                                                                                                          |  |  |              | 
|                                                                                                                                 |                                                                                                                                                                                                                                |  |  |              | 
|                                                                                                                                 | Condensed Consolidated Statements of
      Operations        
               - Three Months Ended June
      30, 2002 and June 24,
      2001        
               - Nine months Ended June
      30, 2002 and June 24, 2001 |  |  |              | 
|                                                                                                                                 |                                                                                                                                                                                                                                |  |  |              | 
|                                                                                                                                 | Condensed
      Consolidated Statemens of Stockholders'
      Deficit        
               - Nine months Ended June
      30, 2002                                                                                           |  |  |              | 
|                                                                                                                                 |                                                                                                                                                                                                                                |  |  |              | 
|                                                                                                                                 | Condensed
      Consolidated Statements of Cash
      Flows        
               - Nine months Ended June
      30, 2002 and June 24, 2001                                                                                   |  |  |              | 
|                                                                                                                                 |                                                                                                                                                                                                                                |  |  |              | 
|                                                                                                                                 | 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                                                                                  |                                                                                                                                                                                                                                |  |  |              | 
|                                                                                                                                 |                                                                                                                                                                                                                                |  |  |              | 
|                                                                                                                                 | Statement Regarding Certification Pursuant
    to 18 U.S.C. 1350                                                                                                                                                               |  |  |              | 
|                                                                                                                                 |                                                                                                                                                                                                                                |  |  |              | 
|**SIGNATURES**                                                                                                                   |                                                                                                                                                                                                                                |  |  |              | 



-2-

---



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

|                                                                                                |                                                                                                                                       | September 30,2001                 |            | June
      30,2002(unaudited) |            
|----------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------- | ---------- | ----------------------------- | -----------
|ASSETS                                                                                          |                                                                                                                                      
|**Current
      assets**                                                                        |                                                                                                                                       |                                   |            |                               |            
|                                                                                                | Cash and cash
      equivalents                                                                                                       |                                   | $          | 1,030,601                     |            
|                                                                                                | Accounts receivable - net
      of allowance for doubtful accounts of $57,675 and $93,500,
      respectively                         |                                   |            | 1,657,738                     |            
|                                                                                                | Inventories                                                                                                                           |                                   |            | 844,768                       |            
|                                                                                                | Costs in excess of
      billings                                                                                                     |                                   |            | 113,564                       |            
|                                                                                                | Prepaid expenses and
      other current assets                                                                                       |                                   |            | 469,975                       |            
|                                                                                                | Refundable income
      taxes                                                                                                         |                                   |            | 102,735                       |            
|                                                                                                |                                                                                                                                       |                                   |            |                               |            
|                                                                                                |                                                                                                                                       | Total current assets              |            |                               | 4,219,381  
|                                                                                                |                                                                                                                                       |                                   |            |                               |            
|**Property, Plant
      and Equipment** at cost,   less accumulated
      deprecation           |                                                                                                                                       |                                   | 1,626,038  |                               |            
|                                                                                                |                                                                                                                                       |                                   |            |                               |            
|Goodwill, less
      accumulated amortization                                                   |                                                                                                                                       |                                   | 5,528,321  |                               |            
|Debt
      issuance costs, less accumulated depreciation                                        |                                                                                                                                       |                                   | 2,166,171  |                               |            
|Note receivable - net of
      allowance for doubtful accounts of $0 and $158,320, respectively |                                                                                                                                       |                                   | 1,000,000  |                               |            
|**Other assets**                                                                                |                                                                                                                                       |                                   | 94,814     |                               |            
|                                                                                                |                                                                                                                                       |                                   |            |                               |            
|Total assets                                                                                    |                                                                                                                                       | $                                 | 14,364,725 |                               | $          
|                                                                                                |                                                                                                                                       |                                   |            |                               |            
|LIABILITIES AND STOCKHOLDERS' DEFICIT                                                           |                                                                                                                                      
|**Current Liabilities**                                                                         |                                                                                                                                       |                                   |            |                               |            
|                                                                                                | Notes
      payable                                                                                                                   |                                   | $          | 10,872,335                    |            
|                                                                                                | Accounts
      payable                                                                                                                |                                   |            | 1,503,225                     |            
|                                                                                                | Accrued
      expenses                                                                                                                |                                   |            | 5,010,436                     |            
|                                                                                                |                                                                                                                                       |                                   |            |                               |            
|                                                                                                |                                                                                                                                       | Total current liabilities         |            |                               | 17,385,996 
|                                                                                                |                                                                                                                                       |                                   |            |                               |            
|                                                                                                |                                                                                                                                       |                                   |            |                              
|**Convertible Notes
      Payable**                                                             |                                                                                                                                       |                                   | 17,931,649 |                               |            
|                                                                                                |                                                                                                                                       |                                   |            |                               |            
|**Other Long-Term
      Liability**                                                             |                                                                                                                                       |                                   | 848,457    |                               |            
|                                                                                                |                                                                                                                                       |                                   |            |                               |            
|                                                                                               
|**Stockholders' Deficit:**                                                                      |                                                                                                                                       |                                   |            |                               |            
|                                                                                                | Common
      stock, $0.01 par value; authorized 75,000,000Shares; issued and
      outstanding 11,629,819 and 14,047,962,respectively |                                   |            | 116,298                       |            
|                                                                                                | Additional paid-in capital                                                                                                            |                                   |            | 36,283,795                    |            
|                                                                                                | Accumulated deficit                                                                                                                   |                                   |            | (58,201,470                   | )          
|                                                                                                |                                                                                                                                       |                                   |            |                               |            
|                                                                                                |                                                                                                                                       | Total stockholders'
      deficit |            |                               | (21,801,377
|                                                                                                |                                                                                                                                       |                                   |            |                               |            
|Total liabilities and
      stockholders' deficit                                               |                                                                                                                                       | $                                 | 14,364,725 |                               | $          
|                                                                                                |                                                                                                                                       |                                   |            |                               |            

The accompanying notes are an integral part of
these condensed consolidated financial statements.

-3-



---

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

|                                                                                               |  | Three Months
      Ended |            | Nine Months
      Ended |  
|---------------------------------------------------------------------------------------------- |  | ------------------------ | ---------- | ----------------------- | -
|                                                                                               |  |                          |            |                         |  
|                                                                                               |  | June 24,2001             |            | June 30,2002            |  
|                                                                                               |  |                          |            |                         |  
|**Continuing Operations:**                                                                     |  |                          |            |                         |  
|**Net
      Sales**                                                                            |  | $                        | 3,379,359  |                         | $
|**Cost of Goods
      Sold**                                                                   |  |                          | 1,367,668  |                         |  
|                                                                                               |  |                          |            |                         |  
|**Gross
      Profit**                                                                         |  |                          | 2,011,691  |                         |  
|                                                                                               |  |                          |            |                         |  
|**Operating
      Expenses:**                                                                  |  |                          |            |                         |  
|Research and new product
      development                                                     |  |                          | 2.250,859  |                         |  
|Selling, general and    
          administration                                              |  |                          | 2,194,216  |                         |  
|                                                                                               |  |                          |            |                         |  
|Total Operating Expenses                                                                       |  |                          | 4,445,075  |                         |  
|                                                                                               |  |                          |            |                         |  
|**Operating
    Loss**                                                                         |  |                          | (2,433,384 | )                       |  
|                                                                                               |  |                          |            |                         |  
|**Other Income
      (Expense):**                                                              |  |                          |            |                         |  
|Interest expense                                                                               |  |                          | (1,839,354 | )                       |  
|Other,
      net                                                                               |  |                          | 40,699     |                         |  
|                                                                                               |  |                          |            |                         |  
|**Loss Before Income
      Taxes and cumulative effect     of change in accounting principle** |  |                          | (4,232,039 | )                       |  
|**Income Tax Expense
      (Benefit)**                                                         |  |                          |           |                         |  
|                                                                                               |  |                          |            |                         |  
|**Loss before cumulative effect
            
of change in accounting principle**               |  |                          | (4,232,039 | )                       |  
|****                                                                                          
|                                                                                               |  |                          |            |                         |  
|**Cumulative
      Effect of Change in     Accounting
      Principle**                        |  |                          |           |                         |  
|                                                                                               |  |                          |            |                         |  
|**Net
      Loss**                                                                             |  | $                        | (4,232,039 | )                       | $
|                                                                                               |  |                          |            |                         |  
|**Earnings (Loss) Per
      Share:**                                                           |  |                          |            |                         |  
|Loss before cumulative effect of    
            change in accounting principle                |  | $                        | (0.49      | )                       | $
|Cumulative Effect of Accounting Change                                                         |  |                          |           |                         |  
|                                                                                               |  |                          |            |                         |  
|Net Loss                                                                                       |  | $                        | (0.49      | )                       | $
|                                                                                               |  |                          |            |                         |  
|Weighted Average Common Shares                                                                 |  |                          | 8,723,412  |                         |  
|Effect of Dilutive Options                                                                     |  |                          |           |                         |  
|                                                                                               |  |                          |            |                         |  
|Adjusted Weighted
      Average    Common Shares                                               |  |                          | 8,723,412  |                         |  
|                                                                                               |  |                          |            |                         |  



**The accompanying notes are an integral part of these condensed
consolidated financial statements.

-4-

**NEXIQ TECHNOLOGIES,
INC.CONSOLIDATED STATEMENTS OF STOCKHOLDERS'
DEFICIT(unaudited)**
For the Nine Months Ended June, 2002
Common
      Stock$.01 Par ValueTotalAdditionalPaid-inCapital
    
    RetainedEarnings(AccumulatedDeficit)Shares
    
    AmountBalanceSeptember 30,
      2001
    
    11,629,819
    
    $
    116,298
    
    $
    36,283,795
    
    $
    (58,201,470
    )
    $
    (21,801,377
    )Sale of common stock net of issuance
      costs of $103,841
    
    2,413,764
    
    
    24,138
    
    
    2,053,297
    
    
    
    
    
    2,077,435Sale of warrants to purchasecommon stock
      net of issuance costsof $30,298
    
    
    
    
    
    
    
    644,587
    
    
    
    
    
    644,587Employee stock purchase plan
    
    4,379
    
    
    44
    
    
    5,807
    
    
    
    
    
    5,851Non-cash compensation expense related to
      stock options
    
    
    
    
    
    
    
    585,087
    
    
    
    
    
    585,087Effect of beneficial conversion
    
    
    
    
    
    
    
    1,216,925
    
    
    
    
    
    1,216,925Net loss
    
    
    
    
    
    
    
    
    
    
    (19,794,221
    )
    
    (19,794,221
    )BalanceJune 30,
      2002
    
    14,047,962
    
    $
    140,480
    
    $
    40,789,498
    
    $
    (77,995,691
    )
    $
    (37,065,713
    )The accompanying notes are an integral part of
these consolidated financial statements.
-5-**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                       |                                                
|                                                                                                            |                                                                                                 | Cumulative effect of change in accounting principle |                                                
|                                                                                                            |                                                                                                 | Non-cash compensation                               |                                                
|                                                                                                            |                                                                                                 | Other                                               |                                                
|                                                                                                            | Changes in current
      assets and liabilities net of effects  of businesses
      divested:   |                                                     |                                                
|                                                                                                            |                                                                                                 |                                                     | Accounts receivable                            
|                                                                                                            |                                                                                                 |                                                     | Inventories                                    
|                                                                                                            |                                                                                                 |                                                     | Cost in excess of
    billings                 
|                                                                                                            |                                                                                                 |                                                     | Prepaid expenses and other current
      assets
|                                                                                                            |                                                                                                 |                                                     | Accounts payable                               
|                                                                                                            |                                                                                                 |                                                     | Accrued expenses                               
|                                                                                                            |                                                                                                 |                                                     |                                                
|                                                                                                            |                                                                                                 |                                                     | Total
      adjustments                        
|                                                                                                            |                                                                                                 |                                                     |                                                
|Net cash used in
      operating activities                                                                 |                                                                                                 |                                                     | (7,718,651                                     
|                                                                                                            |                                                                                                 |                                                     |                                                
|**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                                                |                                                     |                                                
|                                                                                                            |                                                                                                 |                                                     |                                                
|                                                                                                            | Net cash provided by
      (used in) investing activities                                       |                                                     |                                                
|                                                                                                            |                                                                                                 |                                                     |                                                
|**Cash Flows From
      Financing Activities:**                                                             |                                                                                                 |                                                     |                                                
|                                                                                                            | Payments of notes
      payable                                                                 |                                                     |                                                
|                                                                                                            | Proceeds from debt, net of
    debt issuance cost of $5,210,540 and   $2,805,904, respectively. |                                                     |                                                
|Payments of other long-term
      liabilities                                                               |                                                                                                 |                                                     | (226,294                                       
|Proceeds from sale of warrants to purchase
      common stock       and beneficial
      conversion feature |                                                                                                 |                                                     | 4,995,571                                      
|Proceeds from issuance of common
      stock                                                                |                                                                                                 |                                                     | 9,984                                          
|                                                                                                            |                                                                                                 |                                                     |                                                
|Net cash provided by investing
      activities                                                             |                                                                                                 |                                                     | 4,457,369                                      
|                                                                                                            |                                                                                                 |                                                     |                                                
|**Net Increase
      (Decrease) in Cash and Cash Equivalents**                                              |                                                                                                 |                                                     | 2,071,314                                      
|                                                                                                            |                                                                                                 |                                                     |                                                
|**Cash and Cash
      Equivalents, Beginning of Period**                                                    |                                                                                                 |                                                     | 102,156                                        
|                                                                                                            |                                                                                                 |                                                     |                                                
|**Cash and Cash
      Equivalents, End of Period**                                                          |                                                                                                 | $                                                   | 2,173,470                                      
|                                                                                                            |                                                                                                 |                                                     |                                                
|**Supplemental
      Disclosure of Cash Information:**                                                      |                                                                                                 |                                                     |                                                
|Interest paid                                                                                               |                                                                                                 | $                                                   | 977,643                                        
|**Supplemental
      Disclosure of Non-Cash Transactions:**                                                 |                                                                                                 |                                                     |                                                
|Issuance of convertible notes in lieu of transction fee payments                                            |                                                                                                 |                                                     |                                               
|Issuance of convertible notes in lieu of interest payments                                                  |                                                                                                 |                                                     |                                               
|Debt issuance cost accrued, not paid                                                                        |                                                                                                 |                                                     |                                               
|                                                                                                            |                                                                                                 |                                                     |                                                
|**Non-cash
      Investing Activities:**                                                                    |                                                                                                 |                                                     |                                                
|Promissory note received in sale of
      business                                                          |                                                                                                 | $                                                   | 1,000,000                                      
|1,714,285 shares of
      common stock issued to acquire business                                           |                                                                                                 |                                                     |                                                

The accompanying notes are an integral part of
these condensed consolidated financial statements.

-6-

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

**1. BASIS OF
PRESENTATION**

The financial statements for the three months and nine
months ended June 30, 2002 and June 24, 2001 are prepared in accordance with
Rule 10-01 of Regulation S-X and include all adjustments which, in the opinion
of management, are necessary to present fairly the results of operations for the
periods then ended. All such adjustments are of a normal recurring nature. These
financial statements should be read in conjunction with the financial statements
and notes thereto included in the Company's Form 10-K filed with the Securities
and Exchange Commission (File No. 333-72391), which included financial statements
for the year ended September 30, 2001.

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

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

**2.  INVENTORIES**



|Inventory consists of: |  |               |         |         
|---------------------- |  | ------------- | ------- | --------
|                       |  | September 30, |         | June 30,
|                       |  | 2001          |         | 2002    
|                       |  |               |         |         
|*Raw Materials*        |  | $             | 618,538 |         
|*Finished Goods*       |  |               | 226,230 |         
|                       |  |               |         |         
|*Total*                |  | $             | 844,768 |         
|                       |  |               |         |         

**3. NOTES PAYABLE**

Notes Payable to Bank

*On June 21, 2002, the Company amended its credit facility
with a syndicate of banks to extend the term to October 31, 2002. As of June 30,
2002, borrowings outstanding under the credit agreement totaled $11,425,000,
consisting of $2,500,000 under the revolving line of credit and $8,925,000 of
term notes. Interest on all borrowings is payable monthly at prime (4.75% at
June 30, 2002) plus 4.0%. In addition, deferred default interest continues to
accrue on all borrowings at an annual rate of 2% above the existing rate. The credit facility is
collaterialized by a priority lien on all the Company's existing and
after-acquired real, personnel and intellectual propery, including a pledge of
100% of all the capital stock of all the Company's subsidiaries.*

In connection with the amendment, the Company is obligated
for amendment fees totaling $425,000 to be earned as follows: $75,000 on August
31, 2002; $100,000 on September 30, 2002; $125,000 on October 24, 2002, and
$125,000 on October 31, 2002. The unearned portion of the amendment fee is
subject to waiver if all the outstanding borrowings have been paid in full, the
banks' commitments to make further loans to the Company have been terminated and
no event of default has occurred on or before August 31, 2002, September 30,
2002 or October 24, 2002. The Company has recognized the full amount of the
amendment fee as debt issuance costs that are being amortized as interest expense
through October 31, 2002.

Convertible Note Agreement

On June 21, 2002, the Company entered into a third Amended Convertible Note Agreement with Sunrise.  The Third Amendment to the Convertible Note Agreement provides for the issuance of Term G Bridge Notes of up to $3 million, which expire on November 30, 2002.

In the quarter ended June 30, 2002, the Company received
$1.0 million in cash in connection with partial funding of the Term G Financing
under the Convertible Note Agreement. The Term G Brige Note bears
interest at an annual rate of prime plus 6.0% payable on the Term G maturity
date.

-7-

---

Subsequent to June 30, 2002, the Company received $0.5
million in cash in connection with an additional partial funding of the Term G
Financing under the Convertible Note Agreement. After this funding, the
remaining funding available under the terms of the Term G Financing is $1.5
million.

**4.  LONG-TERM DEBT**

*In the quarter ended June 30, 2002, the Company completed
the Term F Financing under the Convertible Note Agreement. Under the terms of
the Term F Financing, the Company received $2.5 million in cash in exchange for
the following securities: 501,697 shares of common stock, warrants to purchase
285,714 shares of common stock at $1.75 per share and Term F Convertible Note
with a principal value of $2.5 million. The Term F 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 F Convertible Note is
convertible into common stock at the option of the holder or the Company, under
certain conditions, at $1.75 per share.*

*The Company has allocated $653,173 of the proceeds from the Term E
Financing and $563,752 of the proceeds from the Term F Financing to the
beneficial conversion feature during the nine month period ended June 30, 2002.
The beneficial conversion feature has been recorded in additional paid-in
capital.*

*In accordance with EITF 00-27, the Company has allocated
$2.5 million of the proceeds from the Term A Financing to the beneficial
conversion feature resulting in a discount on the Term A Convertible Note. The
beneficial conversion feature has been recorded in additional paid in capital.
The resulting discount on the Term A Convertible Note has been fully amortized,
since the debt is immediately convertible at the option of the holder.
Consequently, the cumulative effect of a change in accounting principle has been
reflected in the statement of operations for the nine-month period ended June
24, 2001.*

5. LIQUIDITY

The Company intends to utilize the proceeds from financing transactions
under the Convertible Note Agreement to fund operations. The Company needs to
obtain additional financing to fund operations prior to the end of the 2002
fiscal year. The Company also needs to either amend the existing credit facility
or obtain additional financing to repay the remaining amounts outstanding under
the credit facility prior to its expiration in October 2002.

The Company is continuing its efforts to obtain financing to replace the
existing bank facility and provide sufficient cash to support the Company until
positive cash flow is achieved, which management believes will occur in the
Company's 2004 fiscal year. Management is working with investment banks and
other advisors to investigate alternative funding sources and financing
structures. The availability, amount, structure, and timing of this financing is
subject to external factors including market conditions, economic factors, and
investor preferences that are beyond the control of the Company.

There can be no assurances that the Company will be successful in
obtaining additional financing or amending the credit facility. If the Company
is not successful in extending the credit facility or obtaining alternative
financing to repay borrowings under the facility, management would consider all
of the options then available, including a bankruptcy filing.

- 8 -

---

**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 30, 2002,
options and warrants to purchase 10,369,193 and 9,527,756 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 due to the Company's net loss for these periods. For the
comparable three and nine month periods ended June 24, 2001, options and
warrants to purchase 6,374,024 and 5,302,970 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 due to the Company's net loss for these periods.

**7. RECENT ACCOUNTING
PRONOUNCEMENTS**

In 2001, the Financial Accounting Standards Board issued
SFAS No. 142 "Goodwill and Other
Intangible Assets." SFAS 142
replaces Accounting Principles Board Opinion 17, "Intangible Assets." In accordance with SFAS No. 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 the statement to determine its impact.

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

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

-9-

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**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 30, 2002 and the Form 10-K for the year ended September 30,
2001, filed with the Securities and Exchange Commission.*

**RESULTS OF OPERATIONS**

*Net sales of $2.9 million for the third quarter of fiscal
2002 decreased 13.6% from sales of $3.4 million for the third quarter of fiscal
2001. For the first nine months of fiscal 2002 the Company reported sales of
$10.0 million, 1.5% higher than sales of $9.8 million for the first nine months
of fiscal 2001. While the calendarization of sales was different by quarter, net
sales for the first nine months of fiscal 2002 are essentially the equal to the
same period of the prior year.*

Cost of sales of $1.4 million for the third quarter of fiscal 2002 resulted
in a gross profit of 50.4%, compared to a gross profit of 59.5% for the same
period of fiscal 2001. Cost of sales of $4.2 million for the first nine months
of fiscal 2002 resulted in a gross profit of 58.4%, compared to a gross profit
of 59.3% for the same period of fiscal 2001. The decrease in the Company's gross
profit percentage in the third quarter of 2002 was primarily attributable to a
change in mix of products sold and increased discounts to stimulate sales in the
weaker econimic environment.

*Research and new product development
expenses were $1.8 million, 61.5% of sales, and $5.5 million, 54.7% of sales, for the third quarter and the nine months ended June 30, 2002,
respectively. For the same fiscal quarter and nine month period of fiscal 2001,
research and new product development expenses were $2.3 million, 66.6% of sales,
and $5.8 million, 59.1% of sales, respectively. Research and new product
development spending was down from the same period last year reflecting reduced
spending on outside engineering services.*

***Selling, general and administration expenses were $3.1 million and
$2.2 million for the third quarter of fiscal 2002 and 2001, respectively, and
$9.8 million and $6.0 million, for the nine months of fiscal 2002 and 2001,
respectively. As a percentage of sales, selling, general and administrative
expenditures were 105.6% and 64.9% for the fiscal 2002 and 2001 third quarters,
respectively, and 91.6% and 61.2% for the nine months of fiscal 2002 and 2001,
respectively. The changes in selling, general and administrative expenses in
fiscal 2002 are primarily attributable to an increase as a result of the
acquisition of DSI, staffing to support the launch of e-Technician and costs
associated with the Company's efforts to obtain additional financing.*

*The Company's operating loss for the
third quarter of fiscal 2002 and 2001 was $3.4 million and $2.4 million,
respectively. For the nine months ended June 30, 2002 and June 24, 2001 the
Company's operating loss was $8.8 million and $6.0 million, respectively. The
increase in the operating loss was primarily due to the increase in selling,
general and administrative expenses.*





-10-

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**LIQUIDITY AND CAPITAL RESOURCES**

***As of
June 30, 2002 the Company had a working capital deficit of $12.6 million
compared to $13.2 million deficit at September 30, 2001. Net cash used in
operating activities totaled $9.7 million and $7.7 million for the nine months
ended June 30, 2002 and June 24, 2001, respectively.*

*As of June 30, 2002, 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.***

On September 21, 2001, the Company entered into an Amended
Convertible Note Agreement with Sunrise and other participants, which included a
member of the Company's management and certain members of the Allard-Nazarian
Group, Inc. The Amended Convertible Note Agreement provides for a series of
investment transactions: the Term D Financing ($5.0 million) and the Term E
Financing ($3.0 million).

On September 21, 2001, the Company amended its credit
facility agreement with a synidicate of banks. The terms of the modified
agreement provide a $2,500,000 revolving line of credit and term notes, which were to
expire on June 30, 2002.

On June 21, 2002, the credit facility agreement was further
modified to extend the term of the agreement to October 31, 2002. As of June 30,
2002, there were $11,425,067 of borrowings outstanding under the agreement,
consisting of $2,500,000 under the revolving line of credit and $8,925,067 of
term notes. Interest on all borrowings is payable monthly at prime (4.75% at
June 30, 2002) plus 4.0%. In addition, all borrowings under this facility are
accruing deferred default interest at an annual rate of 2%, payable at
termination.

On January 23, 2002, the Company entered into a second
Amended Convertible Note Agreement with Sunrise and certain other participants,
which included a member of the Company's management and certain members of the
Allard-Nazarian Group, Inc. The Second Amendment to the Convertible Note
Agreement provides for the issuance of additional convertible notes up to $6
million - the Term F Financing. The Company borrowed $3.5 million under this
agreement during the second quarter of 2002 and the remaining $2.5 million
during the third quarter of 2002.

On June 21, 2002 the Company entered into a third Amended
Convertible Note Agreement with Sunrise. The Third Amendment to the Convertible
Note Agreement provides for the issuance of Term G Bridge Notes of up to $3
million, which expire on November 30, 2002. The Company borrowed $1 million
under this agreement during the third quarter of 2002. Interest on all
borrowings under the Term G Bridge Notes is prime plus 6%, payable upon
termination of the loan.

The Company intends to utilize the proceeds from the
financing transactions under the Convertible Note Agreement to fund operations.
The Company needs to obtain additional financing to fund operations prior to the
end of the 2002 fiscal year. The Company also needs to either amend the existing bank facility or
obtain additional financing to repay the remaining amounts outstanding under
the credit facility prior to its expiration in October 2002.

The Company is continuing its efforts to obtain financing to replace
the existing bank facility and provide sufficient cash to support the Company
until positive cash flow is achieved, which management believes will occur in
2004 fiscal year. Management is working with investment banks and other advisors
to investigate alternative funding sources and financing structures. The availability, amount, structure, and timing of
this financing is subject to external factors including market conditions,
economic factors, and investor preferences that are beyond the control of the
Company.

-11-

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There can be no assurances that the Company will be
successful in obtaining additional financing or amending the credit facility. If
the Company is not successful in extending the credit facility or obtaining
alternative financing to repay borrowings under the facility, management would
consider all of the options then available, including a bankruptcy
filing.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The Company's discussion and analysis of its financial
condition and results of operations are based upon the Company's consolidated
financial statements, which have been prepared in accordance with accounting
principles generally accepted in the United States of America. The preparation
of these financial statements requires the Company to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of any contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. The Company regularly reviews its estimates and assumptions,
which are based on historical experience and on various other factors and
assumptions that are believed to be reasonable under the circumstances, the
results of which form the basis for making judgments about the carrying values
of assets and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates and assumptions.

The Company believes that the following critical accounting
policies are affected by significant judgments and estimates used in the
preparation of its consolidated financial statements.

The Company records estimated reductions to revenue for
customer programs and incentive offerings, including special pricing agreements,
promotions and other volume-based incentives. Allowances for doubtful accounts
receivable are maintained for estimated losses resulting from the inability of
customers to make required payments. Inventories are recorded at the lower of
cost or market with expense estimates made for obsolescence or unmarketable
inventory equal to the difference between the cost of inventories and their
estimated market value based upon assumptions about future demand and market
conditions. On an on-going basis, the Company monitors these estimates and
records adjustments for differences between estimates and actual experience.
Historically, actual results have not significantly deviated from those
determined using these estimates.

The Company records the excess of purchase cost over the
fair value of net tangible assets of acquired companies as acquired goodwill or
other identifiable intangible assets. In accordance with Statement of Financial
Accounting Standards ("SFAS") No. 121 "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," annually and
when events and circumstances occur that may indicate impairment, management
evaluates the recoverability of acquired goodwill and other intangible assets by
comparing the carrying value of the asset to the associated projected
undiscounted annual cash flows; management also considers business prospects,
market trends and other economic factors in performing this evaluation. Based on
this evaluation, there was no unrecorded impairment related to acquired goodwill
or other intangible assets at June 30, 2002. If actual results or circumstances
are less favorable than those forecasted by management, or if upon completion of
the new impairment tests under SFAS No. 142, "Goodwill and Ohter Intangible
Assets," The Company identifies an impairment, a future charge may be required.
SFAS No. 142 will be effective for the Company beginning in fiscal 2003.
Additional information regarding SFAS No. 142 is set forth below in the "Recent
Accounging Pronouncements" Note in the Condensed Consolidated Financial
Statements.

-12-

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RECENT ACCOUNTING PRONOUNCEMENTS

In 2001, the Financial Accounting Standards Board issued
SFAS No. 142 "Goodwill and Other
Intangible Assets." SFAS 142
replaces Accounting Principles Board Opinion 17, "Intangible Assets." In accordance with SFAS No. 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 the statement to determine its impact.

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

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

FORWARD LOOKING STATEMENTS

In addition to historical information, this Quarterly Report
on Form 10-Q contains forward-looking statements that involve risks and
uncertainties that could cause actual results to differ materially. For this
purpose, any statements contained herein that are not statements of historical
fact may be deemed to be forward-looking statements. Without limiting the
foregoing, the words "believes," "expects," "anticipates," "plans," "intends"
and similar expresssions are intended to identify forward-looking statements.
Forward-looking statements include, without limitation, statements concerning
management's belief that the Company will achieve positive cash flow in fiscal 2004 and
the success of the Company's efforts to obtain additional financing. There are a
number of important factors that could cause the results of the Company or its
subsidiaries to differ materially from those indicated by such forward looking
statements. Among the important factors that could cause actual results to
differ materially from those indicated by such foward-looking statements are
market conditions, economic factors, and investor preferences. Readers should
carefully review the risks described in other documents the Company files from
time to time with the Securities and Exchange Commission, including the
Company's Annual Report on Form 10-K for the fiscal year ended September 30,
2001. Readers are cautioned not to place undue reliance on the forward-looking
statements, which speak as of the date of this report only. The Company
undertakes no obligation to publicly release any revisions to forward-looking
statements or reflect events or circumstances after the date of this document.

-13-



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**ITEM 3.**

**Quantitative and Qualitative Disclosure
About Market Risk**

The Company has considered the provisions of Financial
Reporting Release No. 48, "Disclosure of Accounting Policies for Derivative
Financial Instruments and Derivative Commodity Instruments, and Disclosure of
Quantitative and Qualitative Information about Market Risk Inherent in
Derivative Financial Instruments, Other Financial Instruments and Derivative
Commodity Instruments." The Company had no holdings of derivative financial or
commodity-based instruments at June 30, 2002. 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 30, 2002, the Company had $11,425,067 of
borrowings outstanding under its credit facility with a syndicate of banks and
an additional $1,000,000 of borrowings under the Term G Bridge Note facility
with Sunrise Capital Partners. The Company performed a sensitivity analysis to
assess exposure to interest rate movements relative to this debt. A hypothetical
change of 100 basis points in average interest rates would have an annual impact
on interests costs of $124,250. The Company concluded that a change of this
magnitude would not be expected to materially affect the Company's financial
position, results of operations or cash flows.



-14-

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

**PART II - Other
Information**

|**Item 6.**                                                          | **Exhibits and Reports on Form 8-K**                                                                                                          | 
|-------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------- | 
|                                                                     |                                                                                                                                               | 
|                                                                     | A. Exhibits                                                                                                                                   | 
|                                                                     |                                                                                                                                               | 
|                                                                     | *None.*                                                                                                                                       | 
|                                                                     |                                                                                                                                               | 
|                                                                     | B. Reports on Form 8-K                                                                                                                        | 
|                                                                     |                                                                                                                                               | 
|                                                                     | *None.*                                                                                                                                       | 
|                                                                     |                                                                                                                                               | 
|**Statement Regarding Certification
    Pursuant to 18 U.S.C. 1350**
|                                                                     |                                                                                                                                               | 
|                                                                     | *Certifications by the Company's Chief Executive Officer and Chief
    Financial Officer pursuant to 18 U.S.C. 1350 accompanied this report.*



****

****

**

********

**

********

**



-15-

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*SIGNATURES*

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

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

|                      |  | 
|--------------------- |  | 
|                      |  | 
|Date: August 14, 2002 |  | 
|                      |  | 
|Date: August 14, 2002 |  | 



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