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

**FORM
10-Q**

**(Mark One)**

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

**For the quarterly period ended March 31,
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.****(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)**



**********6405 Niniteen 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 March 31,
    2002**
|-------------------------------- | ----------------------------------------
|**Common Stock, par value $.01** | **13,545,695 shares**                   



---



**NEXIQ TECHNOLOGIES,
INC.**

**INDEX******

|**PART I
      -FINANCIAL INFORMATION**                                                                                          |                                                                                                                                                                                                                                    |  |  | Page
    No. | 
|-------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  | ------------ | 
|                                                                                                                                 |                                                                                                                                                                                                                                   
|Item
      1. Condensed Consolidated Financial Statements                                                                        |                                                                                                                                                                                                                                    |  |  |              | 
|                                                                                                                                 |                                                                                                                                                                                                                                    |  |  |              | 
|                                                                                                                                 | Condensed
      Consolidated Balance
      Sheets        
               -March 31, 2002 and
      September 30, 2001                                                                                                              |  |  |              | 
|                                                                                                                                 |                                                                                                                                                                                                                                    |  |  |              | 
|                                                                                                                                 | Condensed Consolidated Statements of
      Operations        
               - Three Months Ended March
      31, 2002 and March 25, 2001
              
               - Six months Ended March
      31, 2002 and March 25, 2001 |  |  |              | 
|                                                                                                                                 |                                                                                                                                                                                                                                    |  |  |              | 
|                                                                                                                                 | Condensed Consolidated Statement of Stockholders' Deficit
              
               - Six months Ended March
      31, 2002                                                                                                    |  |  |              | 
|                                                                                                                                 |                                                                                                                                                                                                                                    |  |  |              | 
|                                                                                                                                 | Condensed
      Consolidated Statements of Cash
      Flows        
               - Six months Ended March
      31, 2002 and March 25, 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                                                                                  |                                                                                                                                                                                                                                    |  |  |              | 
|                                                                                                                                 |                                                                                                                                                                                                                                    |  |  |              | 
|**SIGNATURES**                                                                                                                   |                                                                                                                                                                                                                                    |  |  |              | 



-2-

---



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

|                                                                                                |                                                                                                                                          | September
      30,2001                           |            | March
      31,2002(unaudited) |            
|----------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------- | ---------- | ------------------------------ | -----------
|ASSETS                                                                                          |                                                                                                                                         
|**Current
      assets**                                                                        |                                                                                                                                          |                                                   |            |                                |            
|                                                                                                | Cash and cash equivalents                                                                                                                |                                                   | $          | 1,030,601                      |            
|                                                                                                | Accounts receivable - net of
      allowance for doubtful accounts of $57,675 and $63,000,
    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 amortization                                        |                                                                                                                                          |                                                   | 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
      Liabilities**                                                           |                                                                                                                                          |                                                   | 848,457    |                                |            
|                                                                                                |                                                                                                                                          |                                                   |            |                                |            
|**Stockholders'
      Deficit:**                                                                |                                                                                                                                          |                                                   |            |                                |            
|                                                                                                | Common stock, $0.01 par value;
      authorized 75,000,000shares; issued and outstanding 11,629,819 and
        13,545,695, 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 |            | $                              | 14,634,725 
|                                                                                                |                                                                                                                                          |                                                   |            |                                |            

See notes to condensed consolidated financial
statements

-3-



---

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

|                                                                                               |  | Three Months
      Ended |            | Six Months
      Ended |  
|---------------------------------------------------------------------------------------------- |  | ------------------------ | ---------- | ---------------------- | -
|                                                                                               |  |                          |            |                        |  
|                                                                                               |  | March 25,2001            |            | March 31,2002          |  
|                                                                                               |  |                          |            |                        |  
|**Net
      Sales**                                                                            |  | $                        | 3,302,783  |                        | $
|**Cost of Goods
      Sold**                                                                   |  |                          | 1,242,769  |                        |  
|                                                                                               |  |                          |            |                        |  
|**Gross
      Profit**                                                                         |  |                          | 2,060,014  |                        |  
|                                                                                               |  |                          |            |                        |  
|**Operating
      Expenses:**                                                                  |  |                          |            |                        |  
|Research and new
      product development                                                     |  |                          | 2,096,739  |                        |  
|Selling, general and    
          administration                                              |  |                          | 1,900,751  |                        |  
|                                                                                               |  |                          |            |                        |  
|Total Operating Expenses                                                                       |  |                          | 3,997,490  |                        |  
|                                                                                               |  |                          |            |                        |  
|**Operating
    Loss**                                                                         |  |                          | (1,937,476 | )                      |  
|                                                                                               |  |                          |            |                        |  
|**Other Income
      (Expense):**                                                              |  |                          |            |                        |  
|Interest expense                                                                               |  |                          | (1,551,266 | )                      |  
|Other,
      net                                                                               |  |                          | 55,859     |                        |  
|                                                                                               |  |                          |            |                        |  
|**Loss Before Income
      Taxes and cumulative effect of     change in accounting principle** |  |                          | (3,432,883 | )                      |  
|**Income Tax Expense
      (Benefit)**                                                         |  |                          |           |                        |  
|                                                                                               |  |                          |            |                        |  
|**Loss before cumulative effect
             of change in accounting
      principle**         |  |                          | (3,432,883 | )                      |  
|****                                                                                          
|                                                                                               |  |                          |            |                        |  
|**Cumulative Effect of Change
      in     Accounting Principle**                              |  |                          |           |                        |  
|                                                                                               |  |                          |            |                        |  
|**Net
      Loss**                                                                             |  | $                        | (3,432,883 | )                      | $
|                                                                                               |  |                          |            |                        |  
|**Earnings
      (Loss) Per Share:**                                                           |  |                          |            |                        |  
|Loss before cumulative effect of           change in
      accounting principle                |  | $                        | (0.43      | )                      | $
|Cumulative effect of accounting change                                                         |  |                          |           |                        |  
|                                                                                               |  |                          |            |                        |  
|Net
      Loss                                                                                 |  | $                        | (0.43      | )                      | $
|                                                                                               |  |                          |            |                        |  
|Weighted Average Common Shares                                                                 |  |                          | 7,893,992  |                        |  
|Effect of Dilutive Securities                                                                  |  |                          |           |                        |  
|                                                                                               |  |                          |            |                        |  
|Adjusted Weighted Average Common Shares                                                        |  |                          | 7,893,992  |                        |  
|                                                                                               |  |                          |            |                        |  



**See notes to condensed consolidated financial
statements

-4-

**NEXIQ TECHNOLOGIES,
INC.CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS'
DEFICIT(unaudited)**
For the Six Months Ended March 31,
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 $84,288
    
    1,912,067
    
    
    19,121
    
    
    1,589,051
    
    
    
    
    
    1,608,172Sale of warrants to purchase common
      stock net of issuance cost of $22,432
    
    
    
    
    
    
    
    455,789
    
    
    
    
    
    455,789Employee stock purchase plan
    
    3,809
    
    
    38
    
    
    5,433
    
    
    
    
    
    5,471Non-cash compensation expense related to
      stock options
    
    
    
    
    
    
    
    388,917
    
    
    
    
    
    388,917Effect of beneficial conversion
    
    
    
    
    
    
    
    990,033
    
    
    
    
    
    990,033Net loss
    
    
    
    
    
    
    
    
    
    
    (11,841,377
    )
    
    (11,841,377
    )BalanceMarch 31,
      2002
    
    13,545,695
    
    $
    135,457
    
    $
    39,713,018
    
    $
    (70,042,847
    )
    $
    (30,194,372
    )See notes to condensed consolidated financial
statements
-5-**NEXIQ TECHNOLOGIES,
INC.****CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS****(unaudited)******

|                                                                                                     |                                                                                         | Six 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:                                        |                                                     |                                                
|                                                                                                     |                                                                                         |                                                     | 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                                                          |                                                                                         |                                                     | (5,055,811                                     
|                                                                                                     |                                                                                         |                                                     |                                                
|**Cash Flows From
      Investing Activities:**                                                      |                                                                                         |                                                     |                                                
|                                                                                                     | Proceeds from sale of
      businesses                                                  |                                                     |                                                
|                                                                                                     | Additions to property,
      plant and equipment                                        |                                                     |                                                
|                                                                                                     |                                                                                         |                                                     |                                                
|                                                                                                     | Net cash provided by
      (used in) investing activities                               |                                                     |                                                
|                                                                                                     |                                                                                         |                                                     |                                                
|**Cash Flows From
      Financing Activities:**                                                      |                                                                                         |                                                     |                                                
|                                                                                                     | Payments on notes
      payable                                                         |                                                     |                                                
|                                                                                                     | Proceeds from debt, net
      of debt issuance costs                                    |                                                     |                                                
|Proceeds from sale of warrants to purchase
      common stock and      beneficial conversion feature |                                                                                         |                                                     | 4,995,571                                      
|Proceeds from issuance of common
      stock                                                         |                                                                                         |                                                     | 4,670                                          
|                                                                                                     |                                                                                         |                                                     |                                                
|Net cash provided by financing
      activities                                                      |                                                                                         |                                                     | 1,668,857                                      
|                                                                                                     |                                                                                         |                                                     |                                                
|**Net Increase
      (Decrease) in Cash and Cash Equivalents**                                       |                                                                                         |                                                     | 1,928,297                                      
|                                                                                                     |                                                                                         |                                                     |                                                
|**Cash and Cash
      Equivalents, Beginning of Period**                                             |                                                                                         |                                                     | 102,156                                        
|                                                                                                     |                                                                                         |                                                     |                                                
|**Cash and Cash
      Equivalents, End of Period**                                                   |                                                                                         | $                                                   | 2,030,453                                      
|                                                                                                     |                                                                                         |                                                     |                                                
|**Supplemental
      Disclosure of Cash Information:**                                               |                                                                                         |                                                     |                                                
|Interest paid                                                                                        |                                                                                         | $                                                   | 719,331                                        
|                                                                                                     |                                                                                         |                                                     |                                                
|**Supplemental
      Disclosure of Non-Cash Transactions:**                                          |                                                                                         |                                                     |                                                
|Issuance of Transaction Fee PIK Conversion Shares                                                    |                                                                                         |                                                     |                                               

See notes to condensed consolidated financial
statements

-6-

**NEXIQ TECHNOLOGIES, INC.NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)**

**1. BASIS OF
PRESENTATION**

The financial statements for the three months and six months
ended March 31, 2002 and March 25, 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. 0-19717), 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, |         | March 31,
|                       |  | 2001          |         | 2002     
|                       |  |               |         |          
|                       |  |               |         |          
|*Raw Materials*        |  | $             | 618,538 |          
|*Finished Goods*       |  |               | 226,230 |          
|                       |  |               |         |          
|*Total*                |  | $             | 844,768 |          
|                       |  |               |         |          

**3.  LONG-TERM DEBT**

*In the quarter ended March 31, 2002, the Company received
$3.5 million in cash in connection with partial funding of the Term F Financing
under the Convertible Note Agreement. Under the terms of the Term F Financing,
the Company received $3.5 million in cash in exchange for the following
securities: 702,376 shares of common stock, warrants to purchase 400,001 shares
of common stock at $1.75 per share and Term F Convertible Note with a principal
value of $3.5 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 additonal 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.*

*Subsequent to March 31, 2002, the Company received $1.0
million in cash in connection with an additional partial funding of Term F Financing under the
Convertible Note Agreement in exchange for the following securities: 200,679
shares of common stock, warrants to purchase 114,286 shares of common stock at
$1.75 per share and Term F Convertible Note with a principal value of $1.0
million. The Term F 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. After this funding, the remaining funding available under the terms of the Term F Financing
is $1.5 million.*

In accordance with EITF 00-27, the Company 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 operationsfor the six months ended March 25, 2001.

-7-

---

**4. NET LOSS PER COMMON
SHARE**

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

During the three and six month periods ended March 31, 2002,
options and warrants to purchase 8,725,208 and 8,388,470 shares of common stock,
respectively, were outstanding and were not included in the computation of
diluted EPS because the effect would have been anti-dilutive. For the comparable
three and six month periods ended March 25, 2001, options and warrants to
purchase 5,659,739 and 4,884,244 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.

**5. RECENT ACCOUNTING
PRONOUNCEMENTS**

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

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

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

-8-

---



**ITEM 2.**

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

*This Management's Discussion and Analysis of Financial
Condition and Results of Operations should be read in conjunction with the
financial statements and footnotes contained in the Company's Form 10-Q for the
period ended March 31, 2002 and the Form 10-K for the year ended September 30,
2001, filed with the Securities and Exchange Commission. In addition to
historical information, this report contains forward-looking statements that
involve risks and uncertainties that could cause actual results to differ
materially. Factors that might cause or contribute to such differences include,
but are not limited to, those discussed in this section. Readers should
carefully review the risks described in other documents the Company files from
time to time with the Securities and Exchange Commission, including the
Company's Annual Report on Form 10-K for the fiscal year ended September 30,
2001. Readers are cautioned not to place undue reliance on the forward-looking
statements which speak as of the date of this report only. The Company
undertakes no obligation to publicly release any revisions to the
forward-looking statements or reflect events or circumstances after the date of
this document.*

***RESULTS OF OPERATIONS***

*Net sales of $4.1 million for the second quarter of fiscal
2002 increased 25.6% from sales of $3.3 million for the second quarter of fiscal
2001. For the first six months of fiscal 2002 the Company reported sales of $7.1
million, 9.4% higher than sales of $6.5 million for the first six months of
fiscal 2001. The increase was primarily due to incremental revenue from
Diversified Software Industries, Inc. ("DSI").*

Cost of sales of $1.5 million for the second quarter of fiscal 2002 resulted
in a gross profit of 62.6%, compared to a gross profit of 62.4% for the same
period of fiscal 2001. Cost of sales of $2.7 million for the first six months of
fiscal 2002 resulted in a gross profit of 61.8%, compared to a gross profit of
59.2% for the same period of fiscal 2001. The increase in the Company's gross
profit percentage in the second quarter of 2002 was primarily attributable to a
change in mix of products sold.

*Research and new product development
expenses were $1.9 million, 45.8% of sales, and $3.7 million, 51.8% of net
sales, for the second quarter and the six months ended March 31, 2002,
respectively. For the same fiscal quarter and six month period of fiscal 2001,
research and new product development expenses were $2.1 million, 63.5% of sales,
and $3.6 million, 55.1% of sales, respectively. Research and new product
development spending was consistent with same period spending last year;
research and new product development as a percent of net sales was lower because
net sales were higher in 2002 than in 2001.*

***Selling, general and administration expenses were $3.2 million and
$1.9 million for the second quarter of fiscal 2002 and 2001, respectively, and
$6.1 million and $3.8 million, for the first six months of fiscal 2002 and 2001,
respectively. As a percentage of sales, selling, general and administration
expenditures were 77.6% and 57.5% for the fiscal 2002 and 2001 second quarters,
respectively, and 85.9% and 59.3% for the first six months of fiscal 2002 and
2001, respectively. The change in selling, general and administration 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 initial funding efforts.*

*The Company's operating loss for the
second quarter of fiscal 2002 and 2001 was $2.5 million and $1.9 million,
respectively. For the six months ended March 31, 2002 and March 25, 2001 the
Company's operating loss was $5.4 million and $3.6 million, respectively. The
increase in the operating loss was primarily due to the increase in selling,
general and administrative expenses.*

-9-

*****The Company's other income (expense) was ($3.6) million for the
second quarter of fiscal 2002 compared to ($1.5) million in the second quarter
of fiscal 2001. For the six months ended March 31, 2002 and March 25, 2001 other
income (expense) was ($6.5) million and ($2.7), respectively. The increase in
the Company's interest expense in 2002 compared to 2001 is primarily the result
of increased debt required to fund operations and the development and
sales efforts related to e-Technician.*

**LIQUIDITY AND CAPITAL
RESOURCES**

***As of
March 31, 2002 the Company had a working capital deficit of $14.0 million
compared to $13.2 million deficit at September 30, 2001. Net cash used in
operating activities totaled $7.3 million and $5.1 million for the six months
ended March 31, 2002 and March 25, 2001, respectively.*

*As of March 31, 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 certain other participants, which included a member
of the Company's management and certain members of the Allard-Nazarian Group,
Inc. The Amended Convertible Note Agreement provides for a series of investment
transactions: the Term D Financing ($5.0 million) and the Term E Financing ($3.0
million).*

*On September 21, 2001, the Company amended its credit
facility agreement with a syndicate of banks. The terms of the modified
agreement provide a $2,500,000 revolving line of credit and term notes which
expire on June 30, 2002. As of March 31, 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 March 31, 2002)plus 3.5% from
January 1, 2002 through March 31, 2002 and prime plus 4.0%
thereafter.*

*On January 23, 2002, the Company
entered into a second Amended Convertible Note Agreement with Sunrise and
certain other participants, which included a member of the Company's management
and certain members of the Allard-Nazarian Group, Inc. The Second Amendment to
the Convertible Note Agreement provides for the issuance of additional
convertible notes up to $6 million - the Term F Financing. The Company borrowed
$3.5 million under this agreement during the second quarter of 2002 and an
additional $1 million on April 5, 2002.*

The Company intends to utilize the proceeds from the
financing transaction under the Convertible Note Agreement to fund operations.
The Company anticipates the need to either amend the existing credit facility or
obtain additional financing to repay the remaining amounts outstanding under the
credit facility when it expires in June 2002.

The Company has begun efforts to obtain funding to replace
the existing bank facility and provide sufficient cash to support the Company
until positive cash flow is achieved, which management believes will occur in
early 2004 fiscal year. Management is working with investment banks and other
advisors to investigate alternative funding sources and financing structures and
is confident these efforts will prove successful. Implementation is targeted for
the third quarter of 2002, however, the amount, structure, and timing of this
financing is subject to external factors including market conditions, economic
factors, and investor preferences that are beyond the control of the
Company.

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---

There can be no assurance that the Company will be
successful in obtaining additional financing or amending the credit facility. If
the Company is not successful in extending the credit facility or obtaining
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 prepartion 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 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 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 March 31, 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 Other 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 in "Recent Accounting Pronouncements" Note in the Condensed Consolidated Financial
Statements.

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RECENT ACCOUNTING PRONOUNCEMENTS

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

IN 2001, the FASB issued SFAS No. 143, "Accounting for
Obligations Associated with the Retirement of Long-Lived Assets." SFAS 143
establishes accounting standards for the recognition and measurement of an asset
retirement obligation and its associated asset retirement cost. SFAS 143 also
provides accounting guidance for legal obligations associated with the 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.

-12

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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 March 31, 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 March 31, 2002 the Company has $11,425,067 of
borrowings outstanding under its credit facility with a syndicate of banks. The
Company performed a sensitivity analysis to assess these risks and concluded
that the effects of hypothetical changes of 100 basis points in average interest
rates would have an annual impact on interests costs of $114,251. The Company
concluded that a change of this magnitude would not be expected to materially
affect the Company's financial position, results of operations or cash
flows.



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

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

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

****A.
Exhibits

*None.*****

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

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

*None.*

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*SIGNATURES*

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

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

|Dated: May 6, 2002 |  | By: |  | /s/ Jack E. SchangJack E. Schang President and Chief Operating Officer    
|------------------ |  | --- |  | --------------------------------------------------------------------------
|Dated: May 6, 2002 |  | By: |  | /s/ Kevin F. KellyKevin F. Kelly Vice President andChief Financial Officer





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