UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q10-Q/A
Amendment No.2

(Mark One)


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

For the quarterly period ended JuneDecember 24, 20012000


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 specifiedSpecified in its charter)Charter)


TR vAlign=top>

New HampshireNEW HAMPSHIRE

02-0218767


(State or other jurisdiction of incorporation or organization)

02-0218767
(I.R.S. Employer Identification Number)

1155 Elm Street, Manchester, New Hampshire
(Address of principal executive offices)

03101
(Zip Code)


1155 Elm Street, Manchester, New Hampshire03101
(Address of principal executive offices)                 (Zip Code)


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

(603) 627-3500


_________________________________________________________________________________
(Former name, former address, and former fiscal year, if changed since last reportreport)

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.

YesXNo ___   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 ___Yes___    No___

Applicable only to corporate issuers:

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


Class

Outstanding as of July 26,January 22, 2001

Common Stock, par value $.01

7,893,958 shares

9,611,443 shares

NEXIQ TECHNOLOGIES, INC.

INDEX





Page No.
PART I -FINANCIAL- FINANCIAL INFORMATION

Page No.   Item 1.   Consolidated Financial Statements
Consolidated Balance Sheets3
- December 24, 2000 and September 24, 2000
Consolidated Statements of Operations4
- Three months ended December 24, 2000 and December 26, 1999
Consolidated Statements of Cash Flows5
- Three months ended December 24, 2000 and December 26, 1999
Notes to Consolidated Financial Statements6
  
    Item 1. Condensed Consolidated Financial Statements
                Condensed Consolidated Balance Sheets
                  -June 24, 2001 and September 24, 2000		3
                 Condensed Consolidated Statements of Operations
                  - Thee Months Ended June 24, 2001 and June 25, 2000
                  - Nine months Ended June 24, 2001 and June 25, 2000		4
                Condensed Consolidated Statements of Cash Flows
                  - Nine months Ended June 24, 2001 and June 25, 2000		5
                 Notes to Condensed Consolidated Financial Statements6
   Item 2.  Management's Discussion and Analysis of Financial Condition and
Results of Operations		98
    Item 3  Quantitative and Qualitative Disclosure About Market Risk11
  
PART II - OTHER INFORMATION 
  
   Item 6.   Exhibits and Reports on Form 8-K1210
  
SIGNATURES1311

-2-

NEXIQ TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS



 
 
September 24,
2000
 
June 24,
2001
(unaudited)
 
ASSETS 

Current assets
 
 
 
 
 
 
 
 Cash and cash equivalents $102,156 $2,173,470 
 Accounts receivable - net of allowance for doubtful accounts of $300,000 and $67,675, respectively  1,206,472  1,833,702 
 Inventories  441,151  944,900 
 Prepaid expenses and other current assets  258,780  605,489 
 Refundable income taxes  105,551  102,735 
 Deferred income taxes  97,425  97,425 
 Net assets of discontinued operations  6,391,000  — 
  
 
 
  Total current assets  8,602,535  5,757,811 
          
Property, Plant and Equipment at cost,
   less accumulated deprecation		  889,991  1,358,948 
          
Other assets  3,565,037  7,968,329 
  
 
 
  $13,057,363 $15,085,088 
  
 
 

LIABILITIES AND STOCKHOLDERS' EQUITY
 

Current Liabilities
 
 
 
 
 
 
 
 Notes payable $18,276,246 $13,544,894 
 Accounts payable  1,391,700  1,585,942 
 Accrued expenses  2,788,878  3,609,886 
  
 
 
  Total current liabilities  22,456,824  18,740,722 
  
 
 
     
Convertible Notes Payable  10,978,369  17,940,691
  
 
 
Other Long-Term Liability  944,238  909,094
  
 
 
Deferred Income Taxes  144,537  144,537 
  
 
    
Stockholders' Deficit:       
 Common stock, $0.01 par value; authorized 75,000,000
Shares; issued and outstanding 7,891,963 and
  9,611,443, respectively		  78,920  96,114 
 Additional paid-in capital  18,191,200  29,140,644 
 Accumulated deficit  (39,736,525) (51,886,714)
  
 
 
  Total stockholders' deficit  (21,466,405) (22,649,956)
  
 
 
  $13,057,563 $15,085,088 
  
 
 

See notes to condensed consolidated financial statements

-3-

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



 Three Months EndedNine Months Ended 
 
 
 
  June 25,
2000		 June 24,
2001		 June 25,
2000		 June 24,
2001		 
  
 
 
 
 
Continuing Operations:             
    Net Sales $3,573,724 $3,379,359 $10,734,845 $9,848,837 
    Cost of Goods Sold  1,409,141  1,367,668  4,265,729  4,006,764 
  
 
 
 
 
    Gross Profit  2,164,583  2,011,691  6,469,116  5,842,073 
  
 
 
 
 
    Operating Expenses:             
       Research and development  818,748  2,250,859  2,323,483  5,816,137 
      Selling, general and
        administration		  1,670,593  2,194,216  5,923,983  6,029,883 
       Restructuring costs  —  —  1,770,000  — 
  
 
 
 
 
            Total Operating Expenses  2,489,341  4,445,075  10,017,466  11,846,020 
  
 
 
 
 
    Operating Loss  (324,758) (2,433,384) (3,548,350) (6,003,947)
  
 
 
 
 
    Other Income (Expense):             
       Interest expense  (1,030,919) (1,839,354) (2,022,424) (4,637,800)
       Forbearance expense  (253,500) —  (538,500) — 
        Other, net  1,479  40,699  (3,955) 96,558 
  
 
 
 
 
    Loss Before Income Taxes  (1,607,698) (4,232,039) (6,113,229) (10,545,189)
    Income Tax Expense (Benefit)  —  —  —  — 
  
 
 
 
    Loss from Continuing
       Operations		 $(1,607,698)$(4,232,039)$(6,113,229)$(10,545,189)
     
     Discontinued Operations:             
        Estimated loss from
            disposal of discontinued operations		  (615,000) —  (2,175,000) — 
  
 
 
 
 
        Loss before cumulative effect of change in
            accounting principle		  (2,222,698) (4,232,039) (8,288,229) (10,545,189)
     
    Cumulative Effect of Change in
     Accounting Principle		  —  —  —  (1,605,000)
  
 
 
 
     Net Loss  $(2,222,698)$(4,232,039)$(8,288,229)$(12,150,189)
  
 
 
 
 
     Earnings (Loss) Per Share:             
          Continuing operations $(0.27)$(0.49)$(1.01)$(1.29)
          Discontinued Operations  (0.10) —  (0.36) — 
          Effect of Accounting Change  —  —  —  (0.20)
  
 
 
 
 
          Net Loss  $(0.37)$(0.49)$(1.37)$(1.49)
  
 
 
 
 
Weighted Average Common Shares  6,053,259  8,723,412  6,053,243  8,169,862 
Effect of Dilutive Options  —  —  —  — 
  
 
 
 
 
Basic and Dilutive Weighted Average
    Shares Outstanding		  6,053,259  8,723,412  6,053,243  8,169,862 
  
 
 
 
 



 
 
September 24,
2000
 
December 24,
2000
(unaudited)
 
ASSETS 

Current assets
 
 
 
 
 
 
 
 Cash and cash equivalents $102,156 $624,112 
 Accounts receivable - net of allowance for doubtful accounts of $300,000 at September 24, 2000 and December 24, 2000  1,206,472  1,492,547 
 Inventories  441,151  507,595 
 Prepaid expenses and other current assets  258,780  441,037 
 Refundable income taxes  105,551  105,551 
 Prepaid income taxes  97,425  97,425 
 Net assets of discontinued operations  6,391,000  — 
  
 
 
  Total current assets  8,602,535  3,268,267 
          
Property, Plant and Equipment at cost,
   less accumulated deprecation		  889,991  852,812 
          
Other assets  3,565,037  3,510,741 
  
 
 
  $13,057,363 $7,631,820 
  
 
 

LIABILITIES AND STOCKHOLDERS' EQUITY
 

Current Liabilities
 
 
 
 
 
 
 
 Notes payable $18,276,246 $10,758,626 
 Accounts payable  1,391,700  1,694,368 
 Accrued expenses  2,788,878  2,759,152 
  
 
 
  Total current liabilities  22,456,824  15,212,146 
  
 
 
     
Convertible Notes Payable  10,978,369  16,310,645
  
 
 
Other Long-Term Liability  944,238  879,734
  
 
 
Deferred Income Taxes  144,537  144,537 
  
 
    
Stockholders' Deficit:       
 Common stock, $0.01 par value; authorized 75,000,000
Shares; issued and outstanding 7,891,963 and
  7,893,538, respectively		  78,920  78,936 
 Additional paid-in capital  18,191,200  20,108,089 
 Accumulated deficit  (39,736,525) (45,102,267)
  
 
 
  Total stockholders' deficit  (21,466,405) (24,915,242)
  
 
 
  $13,057,563 $7,631,820 
  
 
 

See notes to condensed consolidated financial statements

-4--3-

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

 
 Three Months Ended 
 
 December 26,
1999
 December 24,
2000
 
Continuing Operations:       
   Net Sales $3,573,068 $3,166,695 
      
   Cost Of Goods Sold  1,434,461  1,396,327 
  
 
 
   Gross Profit  2,138,607  1,770,368 
  
 
 
  Operating Expenses:     <  
      Research and development  682,569  1,671,784 
      Selling, general and administration  2,225,190  1,731,671 
      Restructuring costs  1,640,000  — 
  
 
 
          Total Operating Expenses  4,547,759  3,403,455 
  
 
 
 Operating Loss  (2,409,152) (1,633,087)
      
 Other Income (Expense):       
   Interest expense  (252,334) (1,247,180)
   Forbearance expense  (285,000) — 
   Other, net  (5,275) — 
  
 
 
 Loss Before Income Taxes  (2,951,761) (2,880,267)
 Income Tax Expense (Benefit)  —  — 
  
 
 
 Loss from Continuing Operations  (2,951,761) (2,880,267)
           
Discontinued Operations:       
   Loss from disposal of discontinued operations  —  — 
  
 
 
Loss Before Cumulative Effect of Change in Accounting Principle  (2,951,761) (2,880,267)
      
Cumulative Effect of Change in Accounting Principle  —  (2,485,475)
  
 
 
Net Loss $(2,951,761)$(5,365,742)
  
 
 
Earnings (Loss) Per Share:       
   Continuing operations $(0.49)$(0.37)
   Discontinued operations  —  — 
   Effect of accounting change  —  (0.31)
  
 
 
   Net loss $(0.49)$(0.68)
  
 
 
Weighted Average Common Shares  6,050,608  7,892,182 
Effect of Dilutive Options  —  — 
  
 
 
Adjusted Weighted Average Common Shares  6,050,608  7,892,182 
  
 
 

See notes to consolidated financial statements

-4-

NEXIQ TECHNOLOGIES, INC.,
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
 Nine Months Ended
 
 Three Months Ended
 
 June 25,
2000
 June 24,
2001
 
 December 26,
1999
 December 24,
2000
 
Cash Flows From Operating Activities:Cash Flows From Operating Activities:      Cash Flows From Operating Activities:      
Net loss $(8,288,229)$(12,150,189)Net loss $(2,951,761)$(4,584,267)
 
 
   
 
 
Adjustments to reconcile net loss to net cash
   used in operating activities:		      Adjustments to reconcile net loss to net cash
   used in operating activities:		      
      Depreciation and amortization  1,555,722 2,677,209       Depreciation and amortization  795,465  
      Loss from disposal of discontinued operations  2,175,000 —       Cumulative effect of change in accounting principle  — 1,605,000 
      Cumulative effect of change in accounting principle  — 1,605,000       Other  1,589 5,919 
      Other  — 110,919 Changes in current assets and liabilities net of effects
  of businesses divested:		      
Changes in current assets and liabilities net of effects
  of businesses divested:		       Accounts receivable  3,074,810 (22,957)
 Accounts receivable  4,327,085 166,669  Accounts receivable - other  321,054 — 
 Accounts receivable - other  476,833 —  Inventories  (1,346,374) (66,444)
 Inventories  (664,932) (503,839) Prepaid expenses and other current assets  (286,520) (209,531)
 Prepaid expenses and other current assets  (21,276) (353,716) Accounts payable  18,002 (174,539)
 Accounts payable  (1,853,532) (417,565) Accrued expenses  2,520,658 426,192 
 Accrued expenses  794,209 1,146,861  Accrued income taxes  447,280 — 
 Accrued income taxes  405,439 —   
 
 
 
 
      Total adjustments  5,545,964 2,209,190 
     Total adjustments  7,194,548 4,431,538   
 
 
 
 
 
Net cash used in operating activities  (1,093,681) (7,718,651)
Net cash provided by (used in) operating activitiesNet cash provided by (used in) operating activities  2,594,203 (2,276,077)
 
 
   
 
 
Cash Flows From Investing Activities:Cash Flows From Investing Activities:      Cash Flows From Investing Activities:      
Proceeds from sale of businesses, net of expenses  41,203,602 5,550,572 
Acquisitions of business, net of acquisition costs  — 150,167 Proceeds from sale of businesses  7,083,254 5,550,572 
Additions to property, plant and equipment  (518,051) (368,143)Additions to property, plant and equipment  (188,525) (145,916)
Payment of accrued acquisition costs  (149,040) — Payments of accrued acquisition costs  (89,032) — 
 
 
   
 
 
Net cash provided by investing activities  40,536,511 5,332,596    Net cash provided by investing activities  6,805,697 5,404,656 
 
 
   
 
 
Cash Flows From Financing Activities:Cash Flows From Financing Activities:      Cash Flows From Financing Activities:      
Payments of notes payable  (40,530,647) (5,111,352)Payments of notes payable  (9,842,677) (7,517,620)
Proceeds from debt, net of debt issuance costs  — 4,789,460 Proceeds from debt, net of debt issuance costs  — 4,599,092 
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 sale of warrants to purchase common stock Proceeds from sale of warrants to purchase common stock  — 308,571 
Proceeds from issuance of common stock Proceeds from issuance of common stock  11,463 9,984  Proceeds from issuance of common stock  3,3044 3,334 
 
 
   
 
 
Net cash provided by (used in) investing activities  (40,519,184) 4,457,369 
Net cash used in financing activities Net cash used in financing activities  (9,839,633) (2,606,623)
 
 
 
Effect of Foreign Currency Translation on CashEffect of Foreign Currency Translation on Cash  31,102 — 
 
 
   
 
 
Net Increase (Decrease) in Cash and Cash EquivalentsNet Increase (Decrease) in Cash and Cash Equivalents  (1,076,345) 2,071,314 Net Increase (Decrease) in Cash and Cash Equivalents  (408,631) 521,956 
             
Cash and Cash Equivalents, Beginning of PeriodCash and Cash Equivalents, Beginning of Period  1,086,708 102,156 Cash and Cash Equivalents, Beginning of Period  550,320 102,156 
 
 
   
 
 
Cash and Cash Equivalents, End of PeriodCash and Cash Equivalents, End of Period $10,354 $2,173,470 Cash and Cash Equivalents, End of Period $141,689 $624,112 
 
 
   
 
 
Supplemental Disclosure of Cash Information:Supplemental Disclosure of Cash Information:      Supplemental Disclosure of Cash Information:      
Income taxes paid (refunded) Income taxes paid (refunded) $(117,054)$—  Income taxes paid (refunded) $—)$— 
Interest paid Interest paid  6,309,867 977,643  Interest paid  2,910,879 433,569 
   
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     

See notes to condensed consolidated financial statements

-5-

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)



1. BASIS OF PRESENTATIONBasis of Presentation

The financial statements for the three months ended December 24, 2000 and nine months ended June 24, 2001 and June 25, 2000December 26, 1999 are unaudited and include all adjustments which, in the opinion of management, are necessary to present fairly the results of operations for the periods then ended. All such adjustments are of a normal recurring nature. These financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's Form 10-K filed with the Securities and Exchange Commission (File No. 0-19717), which included financial statements for the years ended September 24, 2000.2000 and September 26, 1999.

Certain prior year amounts have been reclassified to conform towith 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. INVENTORIESInventories

Inventory consists of:  
September 24,June 24,
20002001
         
Raw Materials $281,199 $763,443 
Work in Process 40,422  27,761 
Finished Goods  119,530  153,786 
     Total $441,151 $944,990 
 
 September 24,
2000
 December 24,
2000
 
Inventories consist of: 
 Raw Materials $281,199 $377,894 
 Work in Process  40,422  37,061 
 Finished Goods  119,530  92,640 
    
  
 
     Total $441,151 $507,595 
    
  
 

3. DISCONTINUED OPERATIONSDiscontinued Operations

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

4. ACQUISTION

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

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

-6-

 Three Months EndedNine Months Ended 
 
 
 
  June 25,
2000		 June 24,
2001		 June 25,
2000		 June 24,
2001		 
  
 
 
 
 
Net Sales $3,986,727 $3,464,838 $12,706,103 $10,807,540 
Loss before cumulative effect of
    change in accounting principle		  (2,868,633) (4,654,823) (9,412,478) (12,299,621)
Net loss  (2,868,633) (4,654,823) (9,412,478) (13,904,621)
      
Earnings (Loss) Per Share:             
   Loss before cumulative effect of
    change in accounting principle		 $(0.37)$(0.48)$(1.21)$(1.28)
Net loss  (0.37) (0.48) (1.21) (1.45)

5. LONG-TERM DEBTLong-Term Debt

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

In January 2001,2000, the Company received $5.0 million in cash upon completing the Term C Financing under the Convertible Note Agreement in exchange for issuingAgreement. The securities issued and the following securities: warrants to purchase 571,000 shares of common stock at $1.75 per share (initially valued at $0.9 million) and a $5.0 million Term C Convertible Note with terms thereof are identical to the Term B Convertible Notes (initially valued at $0.3 million).discussed above.



-6-

5. Restatement

In accordance withSubsequent to the Company's filing on Form 10-Q for the first quarter ended December 24, 2000, the Company concluded it was necessary to reflect the impact of Emerging Issues Task Force (EITF) 00-27 "Application of Issue 98-5 to Certain Convertible Instruments,"Instruments" as a cumulative change in accounting principle as of the beginning of the quarter ended December 24, 2000. As a result, the Company has recorded aconcluded that it was necessary to revise its previously disclosed unaudited results of operations for the three months ended December 24, 2000.

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 related tocapital. The resulting discount on the Term A FinancingConvertible Note has been fully amortized, since the debt is immediately convertible at the option of approximately $1.6 million as athe holder. Consequently, the cumulative effect of a change in accounting principle. The resulting discountprinciple has been reflected in the statement of operations as of the beginning of the quarter ended December 24, 2000.

A summary of the impact of the restatement on the debt has been fully amortized immediately, since the debt is convertible at any time at the option of the holder.

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

-7-

6. NET LOSS PER COMMON SHARE

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

During the three and nine month periods ended June 24, 2001, options and warrants to purchase 5,217,000 and 4,224,000 shares of common stock, respectively, were outstanding and were not included in the computation of diluted EPS because the effect would have been anti-dilutive. For the comparable three and nine month periods ended June 25, 2000, options and warrants to purchase 1,157,000 and 1,025,000 shares of common stock, respectively, were outstanding and were not included in the computation of diluted EPS because the effect would have been anti-dilutive.

7. RECENT ACCOUNTING PRONOUNCEMENTS

In July 2001, the Financial Accounting Standards Board issued SFAS No. 141, "Business Combinations" and SFAS No. 142 "Goodwill and Other Intangible Assets." SFAS 141 replaces Accounting Principles Board Opinion 16, "Business Combinations," and requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. SFAS 142 replaces APB 17, "Intangible Assets." In accordance with SFAS No. 141 and 142, effectiveconsolidated financial statements for the Company's fiscal year 2003,unaudited three month period ended December 24, 2000, is 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.follows:

 
 As previously reported
 As restated
 
 Cumulative effect of a change in accounting principle $(1,605,000)$(2,485,475)
         
 Net Loss  (4,485,267) (5,365,742)
         
 Net loss per share  (0.57) (0.68)
         
 Additional Paid in Capital  20,108,089  20,108,089 
    
  
 
         
 Accumulated deficit  (44,221,792) (45,102,267)
    
  
 
         
 Ttoal Equity operations  (24,034,767) (24,915,242)
    
  
 
         

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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 Juneending December 24, 20012000 and the Form 10-K for the year ended September 24, 2000, filed with the Securities and Exchange Commission. In addition to historical information, this report contains forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially. Factors that might cause or contribute to such differences include, but are not limited to, those discussed in this section. Readers should carefully review the risks described in other documents the Company files from time to time with the Securities and Exchange Commission, including the Company's Annual Report on Form 10-K forwhere the fiscal year ended September 24, 2000. Readers are cautioned not to place undue reliance on the forward-looking statements whichthat speak as of the date of this report only. The Company undertakes no obligation to publicly release any revisions to the forward-looking statements or reflect events or circumstances after the date of this document.

RESULTS OF OPERATIONS

Net sales of $3.4$3.2 million for the thirdfirst quarter of fiscal 2001 decreased 5.4%11.4% from sales of $3.6 million for the thirdfirst quarter of fiscal 2000. For the first nine months of fiscal 2001 the Company reported sales of $9.8 million, 8.3% lower than sales of $10.7 million for the first nine months of fiscal 2000. The decrease was primarily due to agrowth in shipments to the decline in product sales to its former principal distributor.

Cost of sales of $1.4 million for the thirdfirst quarter of fiscal 2001 resulted in a gross profit of 59.5%55.9%, compared to a gross profit of 60.6% for the same period of fiscal 2000. Cost of sales of $4.0 million for the first nine months of fiscal 2001 resulted in a gross profit of 59.3%, compared to a gross profit of 60.3%59.9% for the same period of fiscal 2000. The decrease in the Company's gross profit percentage in the first nine months of fiscal 2001 was primarily attributable to a change in the mix of products sold.

Research and new product development expenses were $2.3increased to $1.7 million, 66.6% of sales, and $5.8 million, 59.1% of net sales,compared to $683,000 for the fiscal quarter and the nine months ended June 24, 2001, respectively. For the same fiscal quarter and ninethree month period ofin fiscal 2000, research and new product development expenses were $0.8 million, 22.9% of sales, and $2.3 million, 21.6% of sales, respectively.2000. The increase was attributed to the development of e-Technician, a web-based, remote diagnostic platform and "telematics" platform for commercial vehiclesvehicles. Research and new product development expenses were 52.8% and 19.1% of net sales for the acquisition of Diversified Software Industries, Inc.quarters ended December 24, 2000 and December 26, 1999, respectively.

Selling, general and administration expenses were $2.2 million and $1.7 million for the third quarter of fiscal 2001 and 2000, respectively, and $6.0 million and $5.9 million, for the nine months of fiscal 2001 and 2000, respectively. As a percentage of net sales, selling, general and administrative expenditures were 64.9%54.7% and 46.7%62.3% for the fiscal 2001quarters ended December 24, 2000 and 2000 third quarters, respectively, and 61.2% and 55.2%December 26, 1999, respectively. Actual expenditures decreased to $1.7 million from $2.2 million for the nine monthsfirst quarter of fiscal 2001 and 2000, respectively.2000. The changes in selling, general and administrative expenses of sales in fiscal 2001 arewere primarily attributable to an increase as a result of the acquisition of Diversified Software offset in part by a reduction in executive and administrative personnel and costs related to consultants and advisors incurred in connection with the debt negotiations with the bank syndicate.administration personnel.

The Company's operatingOperating loss for the thirdfirst quarter of fiscal 2001 and 2000 wasdecreased to $1.6 million from $2.4 million and $0.3 million, respectively. Forfor the nine months ended June 24, 2001 and June 25, 2000 the Company's operating loss was $6.0 million and $3.5 million, respectively.first quarter of fiscal 2000. The increasedecrease in the operating loss in fiscal 2001 compared to fiscal 2000 was primarily due to the decrease in selling, general and administration expenses and the restructuring and non-recurring costs in excess of the Company's decreased gross profit and increase in research and new product development costs.development.

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The Company's otherOther income (expense) was ($1.8) million for the third quarter of fiscal 2001 comparedincreased to ($1.3)1.2 ) million in the third quarter of fiscal2001 from ($543,000 ) in 2000. For the nine months ended June 24, 2001 and June 25, 2000 other income (expense) was ($4.5) million and ($2.6), respectively. The increase in the Company's interest expense in 2001 compared to 2000 is primarily the result of increased debt related to continuedcontinuing operations as well as an increase in the overall effective interest rate from 2000 to 2001.

The Company recognized an estimated loss on disposal of discontinued operations of $0.6 million in the third quarter of fiscal 2000. The loss was primarily attributable to a higher than anticipated loss on the sales of its rugged handheld computer and terminal businesses and the operating results of the discontinued operations and higher than anticipated interest expense.-8-

LIQUIDITY AND CAPITAL RESOURCES

As of JuneDecember 24, 20012000, the Company had a working capital deficit of $13.0$11.9 million compared to $13.9$13.8 million deficit at September 24, 2000. Net cash used inprovided by (used in) operating activities totaled $7.7$(2.3) million in 2000 and $1.1$2.6 million for the nine months ended June 24, 2001 and June 25, 2000, respectively.in 1999.

As of JuneDecember 24, 2001,2000, 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 investmentinvestments transactions: the Term A Financing, Term B Financing and the Term C financing, as follows:

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

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

Term C Financing - In January 2001,2000, the Company received $5.0 million in cash upon completing the Term C Financing. The securities issued and the terms thereof are identical to the Term B Convertible Notes discussed above.

On August 9, 2000, the Company amended its credit facility agreement with a syndication of banks. The terms of the modified agreement provide a $6.5 million revolving line of credit and term notes that expire on July 31, 2001. As of JuneDecember 24, 2001,2000, there was $10.8 of borrowings outstanding under the agreement, totaled $13.2 million, consisting of $3.1 million$626,000 under the revolving line of credit and $10.1 million of term notes. Interest on all borrowings is payable monthly at prime (6.75%(9.5% at JuneSeptember 24, 2001)2000) plus 1.25% through December 31, 2000 and prime plus 1.75%. thereafter.

The Company has requestedintends to utilize the proceeds from the financing transactions under the Convertible Note Agreement to fund operations and is presently inrepay a portion of the process of negotiating the terms of further extension of its credit facility with the banks. In addition, managment is pursuing an increase in its borrowing capacityamounts outstanding under the credit facility. IfThe Company anticipates the Company is not successful in extending itsneed to either amend the existing credit facility andor obtain additional financing to repay the remaining amounts outstanding under the credit facility when it expires in increasing its borrowing capacity, management plans to pursue other sources of debt and equity financing. July 2001.

There can be no assurance that the Company will be successful in obtaining additional financing or amending and extending the credit facility. If the Company is not successful in extendingunsuccessful, the credit facility or obtaining alternativecash from operations and the financing to repay borrowingstransactions under the facility, management would consider all of the options then available, including a bankruptcy filing.

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

RECENT ACCOUNTING PRONOUNCEMENTS

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

-10-

ITEM 3.

Quantitative and Qualitative Disclosure About Market Risk

The Company has considered the provisions of Financial Reporting Release No. 48, "Disclosure of Accounting Policies for Derivative Financial Instruments and Derivative Commodity Instruments, and Disclosure of Quantitative and Qualitative Information about Market Risk Inherent in Derivative Financial Instruments, Other Financial Instruments and Derivative Commodity Instruments." The Company had no holdings of derivative financial or commodity-based instruments at June 24, 2001. A review of the Company's other financial instruments and risk exposures at that date revealed that the Company had exposure to interest risk. At June 24, 2001, the Company performed sensitivity analysis to assess these risks and concluded that the effects of hypothetical changes of 100 basis points in average interest rates wouldConvertible Note Agreement may not be expectedsufficient to materially affectcover the Company's financial position, results of operationsshort-term or cash flows.long-term liquidity requirements.



-11--9-

NEXIQ TECHNOLOGIES, INC.


PART II - Other Information



Item 6. Exhibits and Reports on Form 8-K



A. Exhibits

None.

B. Reports on Form 8-K

On May 18, 2001November 28, 2000, the Registrant filed a report under Item 2 of Form 8-K
reporting the sale of WPI Instruments, Inc., WPI Magnetec, Inc. and Crompton Modutec (Barbados) Limited to report the acquisition of Diversified Software Industries, Inc.Jewell Instruments, LLC.

              On May 31, 2001 the Registrant filed a report under Item 4 of Form 8-K
              to report a change in independent accountants.-10-

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

-12-

SIGNATURES



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


NEXIQ TECHNOLOGIES, INC.
(Registrant)


Date: August 8, 2001

By:/s/January 14, 2002Jack E. Schang
      Jack E. Schang
          President and
          Chief Operating Officer

 
By:

/s/ John R. Allard
John R. Allard
Chief Executive Officer





   

Date: August 8, 2001January 14, 2002
 
By:
 		By:
/s/John W. PowersKevin F. Kelly
          John W. PowersKevin F. Kelly
Vice President and
Chief Financial Officer



-13--11-