<PAGE>

--------------------------------------------------------------------------------

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

                                    FORM 10-Q

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

For the quarterly period ended July 1, 2001

                                       OR

[_]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

For the transition period from ___________ to ___________

Commission file number 000-22221

                         KONTRON MOBILE COMPUTING, INC.
             (Exact name of registrant as specified in its charter)

                  Minnesota                             41-1731723
(State or other jurisdiction of incorporation        (I.R.S. Employer
               or organization)                     Identification No.)


                               7631 Anagram Drive
                          Eden Prairie, Minnesota 55344
                    (Address of principal executive offices)
                                   (Zip Code)

                                 (952) 974-7000
              (Registrant's telephone number, including area code)


         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 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  [_]


The number of shares of the registrant's Common Stock, $.001 par value,
outstanding as of August 8, 2001 was 14,944,426.

--------------------------------------------------------------------------------

                                       1
<PAGE>

PART I. FINANCIAL INFORMATION
-----------------------------
ITEM 1. FINANCIAL STATEMENTS

                         KONTRON MOBILE COMPUTING, INC.
                                 BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                         July 1,        December 31,
                                                                                          2001              2000
                                                                                       -----------      ------------
                                                                                       (Unaudited)
<S>                                                                                    <C>              <C>
                                            ASSETS
Current Assets:
Cash and cash equivalents ..........................................................   $  3,200,266    $    552,887
Accounts receivable, net of allowance for doubtful accounts of $399,825 and $334,100      3,157,696       3,096,451
Inventories ........................................................................      1,846,991       2,487,643
Prepaid expenses and other .........................................................        452,597         472,287
                                                                                       ------------    ------------
           Total current assets ....................................................      8,657,550       6,609,268
                                                                                       ------------    ------------

Property and equipment:
   Computers and equipment .........................................................      1,699,278       1,699,278
   Furniture and fixtures ..........................................................        937,385         943,795
   Leasehold improvements ..........................................................        348,384         331,736
   Less: Accumulated depreciation and amortization .................................     (2,425,144)     (2,116,720)
                                                                                       ------------    ------------
       Property and equipment, net .................................................        559,903         858,089
Deposits and other assets, net .....................................................         10,589           7,774
                                                                                       ------------    ------------
Total Assets .......................................................................   $  9,228,042    $  7,475,131
                                                                                       ============    ============

                             LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities:
Accounts payable ...................................................................   $  2,011,605    $  3,192,823
Accrued warranty expenses ..........................................................        331,360         507,099
Accrued compensation and benefits ..................................................        168,446         285,893
Other accrued liabilities ..........................................................        844,568       1,816,182
Deferred revenue ...................................................................      1,310,149         738,994
Current maturities of capitalized lease obligations ................................         20,056          38,598
Notes payable:
       Subordinated note, due September 2001 .......................................      3,000,000       3,000,000
       Less: Discount on notes payable .............................................       (110,250)       (330,750)
       Note to Kontron for operating line ..........................................      5,601,490       3,211,583
                                                                                       ------------    ------------
Notes payable, net .................................................................      8,491,240       5,880,833
                                                                                       ------------    ------------
       Total current liabilities ...................................................     13,177,424      12,460,422
                                                                                       ------------    ------------
Total Liabilities ..................................................................     13,177,424      12,460,422
                                                                                       ------------    ------------

Shareholders' Equity (Deficit):
Series B Convertible Preferred Stock, $.001 par value, 4,250,000 shares authorized;
   4,250,000 issued and outstanding ................................................          4,250           4,250
Series C Convertible Preferred Stock, $.001 par value, 500,000 shares authorized;
   500,000 issued and outstanding ..................................................            500             500
Common stock, $.001 par value, 30,000,000 shares authorized; 14,944,426 and
   14,894,426 issued and outstanding ...............................................         14,944          14,894
Additional paid-in capital .........................................................     32,545,861      32,524,911
Accumulated deficit ................................................................    (36,514,937)    (37,529,846)
                                                                                       ------------    ------------
           Total shareholders' equity (deficit) ....................................     (3,949,382)     (4,985,291)
                                                                                       ------------    ------------
Total Liabilities and Shareholders' Equity (Deficit) ...............................   $  9,228,042    $  7,475,131
                                                                                       ============    ============
</TABLE>

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

                                       2
<PAGE>

                         KONTRON MOBILE COMPUTING, INC.
                            STATEMENTS OF OPERATIONS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                         For the Three Months Ended       For the Six Months Ended
                                                        ----------------------------    ----------------------------
                                                           July 1,        July 2,          July 1,         July 2,
                                                            2001           2000             2001            2000
                                                        ------------    ------------    ------------    ------------
<S>                                                     <C>             <C>             <C>             <C>
Net Sales ...........................................   $  4,861,712    $  4,049,904    $  9,871,240    $  8,397,061
Cost of Sales .......................................      2,665,104       3,368,537       5,419,559       6,751,066
                                                        ------------    ------------    ------------    ------------
     Gross profit ...................................      2,196,608         681,367       4,451,681       1,645,995
                                                        ------------    ------------    ------------    ------------
Operating Expenses:
     Sales and marketing ............................        579,751       1,310,240       1,431,256       2,282,302
     General and administrative .....................        379,269       1,244,413         883,984       2,131,570
     Research and development .......................        327,718       1,416,438         665,395       2,545,098
                                                        ------------    ------------    ------------    ------------
          Total operating expenses ..................      1,286,738       3,971,091       2,980,635       6,958,970
                                                        ------------    ------------    ------------    ------------
          Operating profit (loss) ...................        909,870      (3,289,724)      1,471,046      (5,312,975)
Gain (loss) on currency conversion ..................        (75,279)           --           250,456            --
Interest and other income (expense), net ............       (374,026)       (235,012)       (706,594)       (491,638)
                                                        ------------    ------------    ------------    ------------
Net income (loss) ...................................        460,565      (3,524,736)      1,014,908      (5,804,613)
Beneficial conversion feature applicable to preferred
   shareholders .....................................           --              --              --          (250,000)
                                                        ------------    ------------    ------------    ------------
Net income (loss) applicable to common shareholders..   $    460,565    $ (3,524,736)   $  1,014,908    $ (6,054,613)
                                                        ============    ============    ============    ============


Basic and Diluted Income (Loss) Per Common Share:
Net income (loss) per common share ..................   $        .03    $       (.40)   $        .07    $       (.68)
                                                        ------------    ------------    ------------    ------------
Basic weighted average common shares outstanding ....     14,944,426       8,894,426      14,939,481       8,894,426
                                                        ============    ============    ============    ============
Diluted weighted average common shares outstanding ..     15,029,426       8,894,426      15,027,085       8,894,426
                                                        ============    ============    ============    ============
</TABLE>


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

                                       3
<PAGE>

                         KONTRON MOBILE COMPUTING, INC.
                            STATEMENTS OF CASH FLOWS
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                            For the Six Months Ended
                                                                             July 1,        July 2,
                                                                              2001           2000
                                                                           -----------    -----------
<S>                                                                        <C>            <C>
Operating Activities:
Net income (loss) ......................................................   $ 1,014,908    $(5,804,613)
Adjustments to reconcile net income (loss) to net cash provided by (used
  for) operating activities--
     Depreciation and amortization .....................................       312,804        369,568
     Gain on currency conversion .......................................      (250,456)          --
     Product upgrade and restructuring costs ...........................          --         (314,704)
     Non-cash financing expense ........................................       220,500        220,500
     Loss on disposal of property and equipment ........................         2,030         14,843
     Changes in operating items:
          Accounts receivable ..........................................       (61,245)     2,070,329
          Inventories ..................................................       640,652        159,821
          Prepaid expenses and other ...................................        16,876        (53,443)
          Accounts payable .............................................    (1,181,218)      (840,919)
          Accrued expenses .............................................    (1,264,800)      (372,108)
          Deferred revenue .............................................       571,155       (126,630)
                                                                           -----------    -----------
     Net cash provided by (used for) operating activities ..............        21,206     (4,677,356)
                                                                           -----------    -----------
Investing Activities:
     Purchases of property and equipment ...............................       (16,648)      (161,469)
                                                                           -----------    -----------
Financing Activities:
     Proceeds from notes to Kontron ....................................     2,640,363      2,500,000
     Proceeds from issuance of preferred stock .........................          --        5,073,924
     Proceeds from issuance of common stock ............................        21,000           --
     Net line of credit borrowings (repayments) ........................          --         (494,937)
     Payment of capitalized lease obligations ..........................       (18,542)       (20,074)
                                                                           -----------    -----------
     Net cash provided by financing activities .........................     2,642,821      7,058,913
                                                                           -----------    -----------
Change in Cash and Cash Equivalents ....................................     2,647,379      2,220,088
Cash and Cash Equivalents, beginning of period .........................       552,887         86,786
                                                                           -----------    -----------
Cash and Cash Equivalents, end of period ...............................   $ 3,200,266    $ 2,306,874
                                                                           ===========    ===========

Supplemental Cash Flow Disclosure:
Cash paid for interest .................................................   $   738,972    $   229,454
                                                                           ===========    ===========
</TABLE>

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

                                       4
<PAGE>

                          Notes to Financial Statements
                                   (Unaudited)


1.   Basis of Presentation:

     The accompanying unaudited financial statements of Kontron Mobile
Computing, Inc. ("Kontron Mobile Computing" or "the Company") should be read in
conjunction with the financial statements and notes thereto filed with the
Securities and Exchange Commission in the Company's Annual Report on Form 10-K,
for the fiscal year ended December 31, 2000, filed under the former name of
FieldWorks, Incorporated. In the opinion of management, the accompanying
financial statements reflect all adjustments (consisting only of normal
recurring adjustments) considered necessary to present fairly the financial
results for the interim periods presented. The results of operations for the
interim periods are not necessarily indicative of the results to be expected for
the entire fiscal year.

     Kontron Embedded Computers AG (Kontron) has a controlling interest in the
Company. Kontron and its affiliates reported on Amendment No. 4 to Schedule 13D
filed with the Securities and Exchange Commission on January 5, 2001 beneficial
ownership of 13,163,242 shares which includes 7,694,492 shares of common stock
and 4,750,000 shares of Series B and C Preferred Convertible Stock convertible
into 5,468,750 shares of common stock.


2.   Inventories:

     Inventories are stated at the lower of cost or market value, as determined
by the first-in, first-out cost method, and consisted of the following:

                                             July 1,      December 31,
                                              2001            2000
                                            ----------    ------------
            Raw materials.................. $  481,325     $1,026,833
            Work in process................    206,692        259,485
            Finished goods.................  1,158,974      1,201,325
                                            ----------     ----------
                 Total..................... $1,846,991     $2,487,643
                                            ==========     ==========


3.   Financing:

     On January 29, 2001, Kontron agreed to provide the Company financial
support to enable the Company to meet its cash flow needs and obligations as and
when they become due through the period ending December 31, 2001. On September
28, 2000 (revised November 9, 2000), the Company entered into credit line
agreements with Kontron to provide up to $5 million (US$) of cash for
operations. Borrowings under these agreements bear interest at 11% per annum
(payable monthly), and were due on December 15, 2000. The agreement was revised
on December 16, 2000 for Kontron to provide up to DM 10 million and further
revised on April 1, 2001 to provide up to DM 14 million for operations ($6.1
million based on July 1, 2001 exchange rate). Borrowings under this agreement
bear interest at 11% per annum (payable monthly), with no stated maturity date.
Outstanding borrowings under this line of credit were $5.6 million at July 1,
2001.

     On June 29, 2000, the Company entered into a Purchase and Option Agreement
with FWRKS Acquisition Corp., a wholly-owned subsidiary of Kontron. The
agreement was amended on August 16, 2000. Under the amended agreement, Kontron
acquired 6 million shares of common stock of the Company for a purchase price of
$5.4 million. In addition, the option Kontron previously granted to
Industrial-Works Holding Co., LLC, (IWHC), a wholly owned subsidiary of
Glenmount International was amended. As amended, IWHC was granted an option to
acquire 62,000 shares of Kontron in exchange for preferred shares of the Company
that were convertible into 3.4 million shares of the Company common stock. Both
of these matters were approved at a special shareholders meeting held on October
18, 2000 and adjourned to October 27, 2000 and the transactions were closed in
December 2000.

     In addition, the Company received $2.5 million from Kontron on June 30,
2000 in the form of a subordinated note bearing interest at 11% per annum and
matures in September 2001. Kontron also received warrants to purchase

                                       5
<PAGE>

1.25 million shares of common stock exercisable at $1.00 per share. The warrants
were exercisable until November 15, 2000, and were recorded at their estimated
fair value of $437,500 at the date of issuance. These warrants were cancelled
under the terms of the amended agreement described above.

     On March 31, 2000, the Company issued 500,000 shares of the Company's
Series C Convertible Preferred Stock to IWHC. The Company recorded a $250,000
charge relating to the beneficial conversion feature associated with this
preferred stock. The Company issued a warrant to IWHC to purchase 100,000 shares
of common stock with an exercise price of $2.00 per share in connection with
this transaction. Subsequent to March 31, 2000, the conversion rate was adjusted
to such that the holders have the right to receive a total of 1,041,666 shares
of common stock upon conversion of the Series C Convertible Participating
Preferred Stock. In connection with this conversion rate adjustment, an
additional beneficial conversion feature of $270,833 was recorded.

     On February 22, 2000, the Company completed a $4.25 million equity
investment by IWHC. In exchange for the $4.25 million investment, the Company
issued 4,250,000 shares of Series B Convertible Preferred Stock (each share of
which was initially convertible into one share of Common Stock). Subsequent to
February 22, 2000, the conversion rate was adjusted to such that the holders
have the right to receive a total of 4,427,083 shares of common stock upon
conversion of the Series B Convertible Participating Preferred Stock. IWHC
received 500,000 warrants exercisable at $1.00 per share. The transaction was
approved at a special shareholders' meeting on February 7, 2000. The Company
used the net proceeds for market expansion and new product development as well
as for working capital and general corporate purposes. In December 2000, IWHC
exchanged all of its shares of Series B and Series C Convertible Preferred Stock
with Kontron for shares of Kontron Common Stock.

     In September 1999, the Company completed a private placement of $3.0
million in subordinated notes. The notes bear interest at 11% per annum and
mature in September 2001. Noteholders also received warrants to purchase 1.5
million shares of common stock exercisable at $1.00 per share. The warrants are
exercisable for five years, and were recorded at their estimated fair value of
$882,000 at the date of issuance.


4.   Foreign Currency Transactions:

     The Company records foreign currency transaction gains and losses as a
component of net income (loss). For the quarter ended July 1, 2001, the Company
recorded a loss of $75,279 related to the Company's borrowings under its credit
line with Kontron, which is payable in Deutschmarks. For the six months ended
July 1, 2001, the Company recorded a net gain of $250,456.

     On May 10, 2001, the Company entered into a forward contract foreign
exchange agreement with Wells Fargo Bank, National Association, in order to
hedge the foreign currency risk under the credit line with Kontron. Under the
terms of the agreement, the Company has the availability to hedge up to 14.0
million Deutschmarks.

     The Company currently has no other balances or transactions conducted in a
foreign currency.



ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

Cautionary Statement Regarding Forward Looking Statements

     This Quarterly Report on Form 10-Q contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. When used in
this Form 10-Q and in future filings by the Company with the Securities and
Exchange Commission, in the Company's press releases and in oral statements made
with the approval of an authorized executive officer, the words or phrases
"believes," "anticipates," "expects," "intends," "estimates," "should," "may" or
similar expressions are intended to identify such forward-looking statements,
but are not the exclusive means of identifying such statements. These
forward-looking statements involve risks and uncertainties that may cause the
Company's actual results to differ materially from the results discussed in the
forward-looking statements. Factors that might cause such differences include,
but are not limited to, the following: risks associated with the development of
new

                                       6
<PAGE>

products, market acceptance of new products and services, technological
obsolescence, dependence on third-party manufacturers and suppliers, risks
associated with the Company's dependence on proprietary technology and the long
customer sales cycle. The Company wishes to caution readers not to place undue
reliance on any such forward-looking statements, which speak only as of the date
made. The Company undertakes no obligation to revise any forward-looking
statements in order to reflect events or circumstances after the date of such
statements. Readers are urged to carefully review and consider the various
disclosures made by the Company in this report and in the Company's other
reports filed with the Securities and Exchange Commission that attempt to advise
interested parties of the risks and factors that may affect the Company's
business. The Company's forward-looking statements are qualified in their
entirety by the cautions and risk factors set forth under the "Cautionary
Statement" filed as Exhibit 99.1 to its Form 10-K for the year ended December
31, 2000, filed under the former name of FieldWorks, Incorporated.


Results of Operations

     The following table sets forth certain financial data expressed as a
percentage of net sales for the periods indicated:

<TABLE>
<CAPTION>
                                                                   For the Three Months Ended   For the Six Months Ended
                                                                  ---------------------------   ------------------------
                                                                      July 1,     July 2,       July 1,       July 2,
                                                                       2001        2000          2001          2000
                                                                      -------     -------       -------       -------
<S>                                                                   <C>         <C>           <C>           <C>
Net sales ........................................................        100 %       100 %         100 %         100 %
Cost of sales.....................................................         55          83            55            80
                                                                      -------     -------       -------       -------
     Gross profit.................................................         45          17            45            20
Operating expenses:
     Sales and marketing..........................................         12          32            14            27
     General and administrative...................................          8          31             9            25
     Research and development.....................................          6          35             7            30
                                                                      -------     -------       -------       -------
          Total operating expenses................................         26          98            30            83
                                                                      -------     -------       -------       -------
Operating profit (loss)...........................................         19         (81)           15           (63)
Gain (loss) on currency conversion................................         (2)         --             2            --
Interest and other income (expense), net..........................         (8)         --            (7)            *
                                                                      -------     -------       -------       -------
Net income (loss).................................................          9 %       (87)%          10%          (69)%
Beneficial conversion feature applicable to preferred shareholders         --          --            --            (3)
                                                                      -------     -------       -------       -------
Net income (loss) applicable to common shareholders...............          9%        (87)%          10 %         (72)%
                                                                      =======     =======       =======       =======

</TABLE>
     * Less than .5%

     Net Sales. The Company's net sales increased $0.8 million, or 20%, to $4.9
million in the second quarter of 2001 from $4.0 million in the second quarter of
fiscal year 2000 and increased 18% to $9.9 million in the first six months of
2001 from $8.4 million in the first six months of fiscal year 2000. The increase
was due to a large order from the United States Army for the 2000 Series
Embedded Vehicle Server that shipped in the first two quarters of 2001.

     The Company is targeting key vertical markets including government and
military, public services, heavy equipment and utilities/telecommunications. One
customer, the United States Army, accounted for greater than 10% of net sales in
the second quarter of 2001, representing $1.8 million of the Company's net
sales. In the second quarter of fiscal year 2000, John Deere Information Systems
and the Franklin Police Department represented $0.5 million and $0.6 million of
the Company's net sales, respectively.

     International sales decreased to $0.6 million, or 12% of net sales, for the
second quarter of 2001 from $0.7 million, or 16% of net sales, for the
comparable period in fiscal year 2000. The majority of international sales, 99%
and 76% of net sales for the second quarter of 2001 and 2000, respectively, are
in Europe. During late fiscal year 2000, Kontron began distributing the
Company's products in Europe and the Company began distribution of Kontron
products within the United States. The Company believes that international sales
as a percentage of net sales for the year 2001 will be in the mid-teen to 20%
range with little impact on the Company's results of operations and liquidity.
The Company records all sales in U.S. Dollars.

                                       7
<PAGE>

     Gross Profit. Gross profit increased to $2.2 million, or 45% of net sales,
for the second quarter of 2001 from $0.7 million, or 17% of net sales for the
second quarter of fiscal year 2000. Gross profit increased to $4.5 million, or
45% of net sales for the first six months of year 2001 from $1.6 million, or 20%
of net sales for the first six months of fiscal year 2000. The increased gross
profit is due to a higher margin on the sales mix for the first half of 2001.
The Company's gross profit margin will fluctuate as a result of a number of
factors, including mix of products sold, inventory obsolescence, the proportion
of international sales, large customer contracts (with the associated volume
discounts) and outsourcing expenses.

     Sales and Marketing. Sales and marketing expenses include salaries,
incentive compensation, commissions, travel, trade shows, technical support and
professional services personnel and general advertising and promotion. These
expenses also include the labor and material costs related to maintaining the
Company's standard one-year warranty program. Sales and marketing expenses
decreased to $0.6 million for the second quarter of 2001 compared to $1.3
million for the second quarter of fiscal year 2000. As a percentage of net
sales, sales and marketing expenses decreased to 12% for the second quarter of
2001 from 32% for the second quarter of fiscal year 2000. In the first six
months of 2001, sales and marketing expenses were $1.4 million and 14% of net
sales as compared to $2.3 million and 27% of net sales in the first six months
of fiscal year 2000. The decrease is due to a workforce reduction in fiscal year
2000. In addition, the Company reduced warranty expense by approximately
$170,000 due to the expiration of FieldWorks 5000 Series I extended warranty
agreements. The Company anticipates growth of sales and marketing expenses to be
less than the growth of sales in the future.

     General and Administrative. General and administrative expenses include the
Company's executive, finance, information services and human resources
departments. These expenses decreased to $0.4 million for the quarter ended July
1, 2001, from $1.2 million for the quarter ended July 2, 2000. As a percentage
of net sales, general and administrative expenses decreased to 8% for the
quarter ended July 1, 2001, from 31% for the quarter ended July 2, 2001. General
and administrative expenses were $0.9 million, or 9% of net sales for the first
six months of 2001 as compared to $2.1 million, or 25% of net sales for the
comparable period in fiscal year 2000. The decrease is due to the management
workforce reduction that occurred in August 2000, in addition to a reduction in
consulting fees. The Company anticipates holding the percentage growth of
general and administrative expenses to a level less than the growth of sales in
the future.

     Research and Development. Research and development expenses are incurred in
the design, development and testing of new or enhanced products, services and
customized computing platforms. All research and development costs are expensed
as incurred. Research and development expenses decreased to $0.3 million in the
second quarter of 2001 from $1.4 million for the second quarter of fiscal year
2000. As a percentage of net sales, research and development costs were 6% and
35% for the second quarter of 2001 and 2000, respectively. Research and
development expenses decreased to $0.7 million for the first six months of 2001
from $2.5 million for the comparable period in fiscal year 2000. As a percentage
of net sales, research and development expenses decreased to 7% for the first
six months of 2001 from 30% for the first six months of fiscal year 2000. The
decrease is due to sharing research and development costs with Kontron and the
synergy gained by the combined efforts, in addition to a workforce reduction in
fiscal year 2000. The Company anticipates holding the percentage growth of
research and development expenses to a level less than the growth of sales in
the future.

     Gain (Loss) on Currency Conversion. The Company's credit agreements with
Kontron allow for borrowings which are payable in Deutschmarks. For the quarter
ended July 1, 2001, the Company recorded a loss of $75,279 related to the
Company's borrowings under this line of credit. For the six months ended July 1,
2001, the Company recorded a net gain of $250,456.

     On May 10, 2001, the Company entered into a forward contract foreign
exchange agreement with Wells Fargo Bank, National Association, in order to
hedge the foreign currency risk under the credit line with Kontron. Under the
terms of the agreement, the Company has the availability to hedge up to 14.0
million Deutschmarks.

     Interest and Other Income (Expense), Net. Net interest expense was
approximately $372,000 for the second quarter of 2001 compared to net interest
expense of $235,000 for the comparable period in fiscal year 2000. Net interest
expense for the first six months of 2001 was $706,000 compared to net interest
expense of $492,000 for the comparable period in fiscal year 2000. The increase
in interest expense is due to borrowings on the Company's line of credit with
Kontron. Additionally, financing costs of $882,000 related to warrants issued in
September 1999 are being amortized over the two-year term of the subordinated
notes.

                                       8
<PAGE>

Liquidity and Capital Resources

     During the three-year period ended December 31, 2000, the Company incurred
cumulative net losses applicable to common shareholders totaling approximately
$30.2 million. During this three-year period, the Company used cash of
approximately $2.0 million to support capital expenditures and approximately
$17.4 million for net operating activities. The Company has financed these
expenditures and losses principally through equity and debt financing.

     In fiscal 2001, management is focusing on measures designed to assist the
Company in achieving profitability such as i) implementing and further refining
new sales and marketing strategies, ii) achieving cost and productivity
improvements with its third-party manufacturers and iii) adequately managing its
inventory to avoid significant inventory write-offs in the future. However,
there can be no assurance that the Company will be successful in achieving these
measures and increasing its profitability.

     Although the Company has achieved profitability in two consecutive
quarters, the Company could incur operating losses in the balance of 2001. In
addition, the uncertainty of the timing of sales growth could continue to place
significant pressure on the Company. Management believes that the proceeds of
$5.4 million from the December 2000 Kontron equity investment will only be
partially sufficient to fund operating cash requirements and debt payments in
2001. Accordingly, the Company expects that additional funding sources will be
required, to potentially include additional borrowings, extension of existing
subordinated notes or further investments by Kontron or other sources to
alleviate the Company's cash flow and liquidity constraints and provide the
needed cash flow to continue to fund normal operations. The Company is currently
evaluating various possible cash flow arrangements. However, there can be no
assurance as to the outcome of these efforts, including whether financing will
be available to the Company, or if available, whether it would be on terms
favorable to the Company and its shareholders. Failure by the Company to secure
additional financing could result in significant cash constraints and financial
issues for the Company.

     On January 29, 2001, Kontron agreed to provide the Company financial
support to enable the Company to meet its cash flow needs and obligations as and
when they become due through the period ending December 31, 2001. On September
28, 2000 (revised November 9, 2000), the Company entered into credit line
agreements with Kontron to provide up to $5 million (US$) of cash for
operations. Borrowings under these agreements bear interest at 11% per annum
(payable monthly), and were due on December 15, 2000. The agreement was revised
on December 16, 2000 for Kontron to provide up to DM 10 million and further
revised on April 1, 2001 to provide up to DM 14 million for operations ($6.1
million based on July 1, 2001 exchange rate). Borrowings under this agreement
bear interest at 11% per annum (payable monthly), with no stated maturity date.
Outstanding borrowings under this line of credit were $5.6 million at July 1,
2001.

     On June 29, 2000, the Company entered into a Purchase and Option Agreement
with FWRKS Acquisition Corp., a wholly-owned subsidiary of Kontron. The
agreement was amended on August 16, 2000. Under the amended agreement, Kontron
acquired 6 million shares of common stock of the Company for a purchase price of
$5.4 million. In addition, the option Kontron previously granted to
Industrial-Works Holding Co., LLC, (IWHC), a wholly owned subsidiary of
Glenmount International was amended. As amended, IWHC was granted an option to
acquire 62,000 shares of Kontron in exchange for preferred shares of the Company
that were convertible into 3.4 million shares of the Company common stock. Both
of these matters were approved at a special shareholders meeting held on October
18, 2000 and adjourned to October 27, 2000 and the transactions were closed in
December 2000.

     In addition, the Company received $2.5 million from Kontron on June 30,
2000 in the form of a subordinated note bearing interest at 11% per annum and
matures in September 2001. Kontron also received warrants to purchase 1.25
million shares of common stock exercisable at $1.00 per share. The warrants were
exercisable until November 15, 2000, and were recorded at their estimated fair
value of $437,500 at the date of issuance. These warrants were cancelled under
the terms of the amended agreement described above.

     On March 31, 2000, the Company issued 500,000 shares of the Company's
Series C Convertible Preferred Stock to IWHC. The Company recorded a $250,000
charge relating to the beneficial conversion feature associated with this
preferred stock. The Company issued a warrant to IWHC to purchase 100,000 shares
of common stock with an exercise price of $2.00 per share in connection with
this transaction. Subsequent to March 31, 2000, the

                                       9
<PAGE>

conversion rate was adjusted to such that the holders have the right to receive
a total of 1,041,666 shares of common stock upon conversion of the Series C
Convertible Participating Preferred Stock. In connection with this conversion
rate adjustment, an additional beneficial conversion feature of $270,833 was
recorded.

     On February 22, 2000, the Company completed a $4.25 million equity
investment by IWHC. In exchange for the $4.25 million investment, the Company
issued 4,250,000 shares of Series B Convertible Preferred Stock (each share of
which was initially convertible into one share of Common Stock). Subsequent to
February 22, 2000, the conversion rate was adjusted to such that the holders
have the right to receive a total of 4,427,083 shares of common stock upon
conversion of the Series B Convertible Participating Preferred Stock. IWHC
received 500,000 warrants exercisable at $1.00 per share. The transaction was
approved at a special shareholders' meeting on February 7, 2000. The Company
used the net proceeds for market expansion and new product development as well
as for working capital and general corporate purposes. In December 2000, IWHC
exchanged all of its shares of Series B and Series C Convertible Preferred Stock
with Kontron for shares of Kontron Common Stock.

     In September 1999, the Company completed a private placement of $3.0
million in subordinated notes. The notes bear interest at 11% per annum and
mature in September 2001. Noteholders also received warrants to purchase 1.5
million shares of common stock exercisable at $1.00 per share. The warrants are
exercisable for five years, and were recorded at their estimated fair value of
$882,000 at the date of issuance.

     Cash provided by operating activities was $21,206 for the first six months
of 2001, relative to $4.7 million used for operating activities in the
comparable period in fiscal year 2000. The primary reasons for the improvement
relate to net income generated in 2001, as well as reduced inventory levels,
partially offset by changes in other working capital items. Inventories
decreased to $1.8 million at July 1, 2001, from $2.5 million at December 31,
2000 due to further improvements in arrangements with outsource suppliers,
partially offset by purchases in preparation for the United States Army order.
Accrued liabilities decreased to $0.8 million at July 1, 2001, from $1.8 million
at December 31, 2000 due to a large vendor payment made in the first quarter.


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     As of July 1, 2001 the Company had $5.6 million outstanding on its line of
credit from Kontron. This loan bears interest at 11% per annum, payable monthly.
Both the principal amount borrowed under the line of credit and interest payable
thereunder are payable in German Deutschmarks. See the earlier discussion under
"Foreign Currency Transactions" for a description of the foreign currency
forward contract in effect. All remaining transactions of the Company are
conducted and accounts are denominated in United States dollars. Based on our
overall foreign currency rate exposure at July 1, 2001, the Company does not
believe that a hypothetical 10% change in foreign currency rates would
materially adversely affect our financial position.

     The Company has no derivative financial instruments or derivative commodity
instruments in its cash and cash equivalents. The Company had $3.2 million in
cash and cash equivalents at July 1, 2001. Based on analysis, shifts in money
market rates would have an immaterial impact on the Company.


PART II. OTHER INFORMATION
--------------------------
ITEM 1. LEGAL PROCEEDINGS

     The Company is involved in legal actions in the ordinary course of its
business. Although the Company cannot predict the outcome of any such legal
actions, management believes that there is no pending legal proceeding against
or involving the Company for which the outcome is likely to have a material
adverse effect upon the Company's financial position, results of operations or
cash flows.


ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

     See the discussion under "Liquidity and Capital Resources" above for a
description of securities sold by the Company within the past three years which
were not registered under the Securities Act.

                                       10
<PAGE>

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

     Not applicable.


ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     An Annual Meeting of Shareholders was held on May 17, 2001. The
shareholders voted to elect six directors, each of whom will serve until such
director's successor shall have been elected and shall qualify or until such
director's earlier death, resignation, removal or disqualification. Management's
entire slate of six directors was elected to serve until the next Annual Meeting
of Shareholders by the following vote tallies:

                                                            Authority
                                           For               Withheld
                                        ----------          ----------
      David C. Malmberg                 13,270,062            40,801
      Pierre McMaster                   13,270,062            40,801
      William P. Perron                 13,270,062            40,801
      Richard L. Poss                   13,270,062            40,801
      Thomas Sparrvik                   13,270,062            40,801
      Rudolf Wieczorek                  13,270,062            40,801


ITEM 5. OTHER INFORMATION

     None.


ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

   (a)    Exhibits

          Exhibit 3.1      Second Amended and Restated Articles of Incorporation
                           of the Company (incorporated by reference to Exhibit
                           3.2 to the Company's Registration Statement filed on
                           Form S-1, File No. 333-18335)

          Exhibit 3.2      Second Amended and Restated Bylaws of the Company
                           (incorporated by reference to Exhibit 3.4 to the
                           Company's Registration Statement filed on Form S-1,
                           File No. 333-18335)

          Exhibit 3.3      Articles of Merger amending the Company's Articles of
                           Incorporation effective June 4, 2001 (incorporated by
                           reference to the exhibit 3.1 filed with the Company's
                           Report on Form 8-K filed June 4, 2001)


   (b)    Reports on Form 8-K: One report on Form 8-K was filed by the Company
          during the fiscal quarter ended July 1, 2001. The report, dated and
          effective June 4, 2001, stated that the Company filed Articles of
          Merger with the Minnesota Secretary of State's office to change its
          name from FieldWorks, Incorporated to Kontron Mobile Computing, Inc.

                                       11
<PAGE>

                                    SIGNATURE

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

KONTRON MOBILE COMPUTING, INC.


Date:  August 13, 2001
                                   /s/ Thomas Sparrvik
                                   -----------------------------------------
                                   Thomas Sparrvik, President and Chief
                                   Executive Officer (as authorized officer)

                                       12
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{"company-data": {"conformed-name": "KONTRON MOBILE COMPUTING INC", "cik": "0000912643", "assigned-sic": "3571", "irs-number": "411731723", "state-of-incorporation": "MN", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "10-Q", "act": "34", "file-number": "333-18335", "film-number": "1705726"}, "business-address": {"street1": "7631 ANAGRAM DRIVE", "city": "EDEN PRAIRIE", "state": "MN", "zip": "55344", "phone": "952.974.7000"}, "mail-address": {"street1": "7631 ANAGRAM DRIVE", "city": "EDEN PRAIRIE", "state": "MN", "zip": "55344"}, "former-company": {"former-conformed-name": "FIELDWORKS INC", "date-changed": "19960729"}}
--------------------------------------------------------------------------------

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

                                    FORM 10-Q

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

For the quarterly period ended July 1, 2001

                                       OR

[_]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

For the transition period from ___________ to ___________

Commission file number 000-22221

                         KONTRON MOBILE COMPUTING, INC.
             (Exact name of registrant as specified in its charter)

                  Minnesota                             41-1731723
(State or other jurisdiction of incorporation        (I.R.S. Employer
               or organization)                     Identification No.)

                               7631 Anagram Drive
                          Eden Prairie, Minnesota 55344
                    (Address of principal executive offices)
                                   (Zip Code)

                                 (952) 974-7000
              (Registrant's telephone number, including area code)

         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 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  [_]

The number of shares of the registrant's Common Stock, $.001 par value,
outstanding as of August 8, 2001 was 14,944,426.

--------------------------------------------------------------------------------

                                       1
PART I. FINANCIAL INFORMATION
-----------------------------
ITEM 1. FINANCIAL STATEMENTS

                         KONTRON MOBILE COMPUTING, INC.
                                 BALANCE SHEETS
July 1,        December 31,
                                                                                          2001              2000
                                                                                       -----------      ------------
                                                                                       (Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents ..........................................................   $  3,200,266    $    552,887
Accounts receivable, net of allowance for doubtful accounts of $399,825 and $334,100      3,157,696       3,096,451
Inventories ........................................................................      1,846,991       2,487,643
Prepaid expenses and other .........................................................        452,597         472,287
                                                                                       ------------    ------------
           Total current assets ....................................................      8,657,550       6,609,268
                                                                                       ------------    ------------

Property and equipment:
   Computers and equipment .........................................................      1,699,278       1,699,278
   Furniture and fixtures ..........................................................        937,385         943,795
   Leasehold improvements ..........................................................        348,384         331,736
   Less: Accumulated depreciation and amortization .................................     (2,425,144)     (2,116,720)
                                                                                       ------------    ------------
       Property and equipment, net .................................................        559,903         858,089
Deposits and other assets, net .....................................................         10,589           7,774
                                                                                       ------------    ------------
Total Assets .......................................................................   $  9,228,042    $  7,475,131
                                                                                       ============    ============

                             LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities:
Accounts payable ...................................................................   $  2,011,605    $  3,192,823
Accrued warranty expenses ..........................................................        331,360         507,099
Accrued compensation and benefits ..................................................        168,446         285,893
Other accrued liabilities ..........................................................        844,568       1,816,182
Deferred revenue ...................................................................      1,310,149         738,994
Current maturities of capitalized lease obligations ................................         20,056          38,598
Notes payable:
       Subordinated note, due September 2001 .......................................      3,000,000       3,000,000
       Less: Discount on notes payable .............................................       (110,250)       (330,750)
       Note to Kontron for operating line ..........................................      5,601,490       3,211,583
                                                                                       ------------    ------------
Notes payable, net .................................................................      8,491,240       5,880,833
                                                                                       ------------    ------------
       Total current liabilities ...................................................     13,177,424      12,460,422
                                                                                       ------------    ------------
Total Liabilities ..................................................................     13,177,424      12,460,422
                                                                                       ------------    ------------

Shareholders' Equity (Deficit):
Series B Convertible Preferred Stock, $.001 par value, 4,250,000 shares authorized;
   4,250,000 issued and outstanding ................................................          4,250           4,250
Series C Convertible Preferred Stock, $.001 par value, 500,000 shares authorized;
   500,000 issued and outstanding ..................................................            500             500
Common stock, $.001 par value, 30,000,000 shares authorized; 14,944,426 and
   14,894,426 issued and outstanding ...............................................         14,944          14,894
Additional paid-in capital .........................................................     32,545,861      32,524,911
Accumulated deficit ................................................................    (36,514,937)    (37,529,846)
                                                                                       ------------    ------------
           Total shareholders' equity (deficit) ....................................     (3,949,382)     (4,985,291)
                                                                                       ------------    ------------
Total Liabilities and Shareholders' Equity (Deficit) ...............................   $  9,228,042    $  7,475,131
                                                                                       ============    ============
The accompanying notes are an integral part of these financial statements.

                                       2
KONTRON MOBILE COMPUTING, INC.
                            STATEMENTS OF OPERATIONS
                                   (Unaudited)
For the Three Months Ended       For the Six Months Ended
                                                        ----------------------------    ----------------------------
                                                           July 1,        July 2,          July 1,         July 2,
                                                            2001           2000             2001            2000
                                                        ------------    ------------    ------------    ------------
Net Sales ...........................................   $  4,861,712    $  4,049,904    $  9,871,240    $  8,397,061
Cost of Sales .......................................      2,665,104       3,368,537       5,419,559       6,751,066
                                                        ------------    ------------    ------------    ------------
     Gross profit ...................................      2,196,608         681,367       4,451,681       1,645,995
                                                        ------------    ------------    ------------    ------------
Operating Expenses:
     Sales and marketing ............................        579,751       1,310,240       1,431,256       2,282,302
     General and administrative .....................        379,269       1,244,413         883,984       2,131,570
     Research and development .......................        327,718       1,416,438         665,395       2,545,098
                                                        ------------    ------------    ------------    ------------
          Total operating expenses ..................      1,286,738       3,971,091       2,980,635       6,958,970
                                                        ------------    ------------    ------------    ------------
          Operating profit (loss) ...................        909,870      (3,289,724)      1,471,046      (5,312,975)
Gain (loss) on currency conversion ..................        (75,279)           --           250,456            --
Interest and other income (expense), net ............       (374,026)       (235,012)       (706,594)       (491,638)
                                                        ------------    ------------    ------------    ------------
Net income (loss) ...................................        460,565      (3,524,736)      1,014,908      (5,804,613)
Beneficial conversion feature applicable to preferred
   shareholders .....................................           --              --              --          (250,000)
                                                        ------------    ------------    ------------    ------------
Net income (loss) applicable to common shareholders..   $    460,565    $ (3,524,736)   $  1,014,908    $ (6,054,613)
                                                        ============    ============    ============    ============

Basic and Diluted Income (Loss) Per Common Share:
Net income (loss) per common share ..................   $        .03    $       (.40)   $        .07    $       (.68)
                                                        ------------    ------------    ------------    ------------
Basic weighted average common shares outstanding ....     14,944,426       8,894,426      14,939,481       8,894,426
                                                        ============    ============    ============    ============
Diluted weighted average common shares outstanding ..     15,029,426       8,894,426      15,027,085       8,894,426
                                                        ============    ============    ============    ============
The accompanying notes are an integral part of these financial statements.

                                       3
KONTRON MOBILE COMPUTING, INC.
                            STATEMENTS OF CASH FLOWS
                                   (Unaudited)
For the Six Months Ended
                                                                             July 1,        July 2,
                                                                              2001           2000
                                                                           -----------    -----------
Operating Activities:
Net income (loss) ......................................................   $ 1,014,908    $(5,804,613)
Adjustments to reconcile net income (loss) to net cash provided by (used
  for) operating activities--
     Depreciation and amortization .....................................       312,804        369,568
     Gain on currency conversion .......................................      (250,456)          --
     Product upgrade and restructuring costs ...........................          --         (314,704)
     Non-cash financing expense ........................................       220,500        220,500
     Loss on disposal of property and equipment ........................         2,030         14,843
     Changes in operating items:
          Accounts receivable ..........................................       (61,245)     2,070,329
          Inventories ..................................................       640,652        159,821
          Prepaid expenses and other ...................................        16,876        (53,443)
          Accounts payable .............................................    (1,181,218)      (840,919)
          Accrued expenses .............................................    (1,264,800)      (372,108)
          Deferred revenue .............................................       571,155       (126,630)
                                                                           -----------    -----------
     Net cash provided by (used for) operating activities ..............        21,206     (4,677,356)
                                                                           -----------    -----------
Investing Activities:
     Purchases of property and equipment ...............................       (16,648)      (161,469)
                                                                           -----------    -----------
Financing Activities:
     Proceeds from notes to Kontron ....................................     2,640,363      2,500,000
     Proceeds from issuance of preferred stock .........................          --        5,073,924
     Proceeds from issuance of common stock ............................        21,000           --
     Net line of credit borrowings (repayments) ........................          --         (494,937)
     Payment of capitalized lease obligations ..........................       (18,542)       (20,074)
                                                                           -----------    -----------
     Net cash provided by financing activities .........................     2,642,821      7,058,913
                                                                           -----------    -----------
Change in Cash and Cash Equivalents ....................................     2,647,379      2,220,088
Cash and Cash Equivalents, beginning of period .........................       552,887         86,786
                                                                           -----------    -----------
Cash and Cash Equivalents, end of period ...............................   $ 3,200,266    $ 2,306,874
                                                                           ===========    ===========

Supplemental Cash Flow Disclosure:
Cash paid for interest .................................................   $   738,972    $   229,454
                                                                           ===========    ===========
The accompanying notes are an integral part of these financial statements.

                                       4
Notes to Financial Statements
                                   (Unaudited)

1.   Basis of Presentation:

     The accompanying unaudited financial statements of Kontron Mobile
Computing, Inc. ("Kontron Mobile Computing" or "the Company") should be read in
conjunction with the financial statements and notes thereto filed with the
Securities and Exchange Commission in the Company's Annual Report on Form 10-K,
for the fiscal year ended December 31, 2000, filed under the former name of
FieldWorks, Incorporated. In the opinion of management, the accompanying
financial statements reflect all adjustments (consisting only of normal
recurring adjustments) considered necessary to present fairly the financial
results for the interim periods presented. The results of operations for the
interim periods are not necessarily indicative of the results to be expected for
the entire fiscal year.

     Kontron Embedded Computers AG (Kontron) has a controlling interest in the
Company. Kontron and its affiliates reported on Amendment No. 4 to Schedule 13D
filed with the Securities and Exchange Commission on January 5, 2001 beneficial
ownership of 13,163,242 shares which includes 7,694,492 shares of common stock
and 4,750,000 shares of Series B and C Preferred Convertible Stock convertible
into 5,468,750 shares of common stock.

2.   Inventories:

     Inventories are stated at the lower of cost or market value, as determined
by the first-in, first-out cost method, and consisted of the following:

                                             July 1,      December 31,
                                              2001            2000
                                            ----------    ------------
            Raw materials.................. $  481,325     $1,026,833
            Work in process................    206,692        259,485
            Finished goods.................  1,158,974      1,201,325
                                            ----------     ----------
                 Total..................... $1,846,991     $2,487,643
                                            ==========     ==========

3.   Financing:

     On January 29, 2001, Kontron agreed to provide the Company financial
support to enable the Company to meet its cash flow needs and obligations as and
when they become due through the period ending December 31, 2001. On September
28, 2000 (revised November 9, 2000), the Company entered into credit line
agreements with Kontron to provide up to $5 million (US$) of cash for
operations. Borrowings under these agreements bear interest at 11% per annum
(payable monthly), and were due on December 15, 2000. The agreement was revised
on December 16, 2000 for Kontron to provide up to DM 10 million and further
revised on April 1, 2001 to provide up to DM 14 million for operations ($6.1
million based on July 1, 2001 exchange rate). Borrowings under this agreement
bear interest at 11% per annum (payable monthly), with no stated maturity date.
Outstanding borrowings under this line of credit were $5.6 million at July 1,
2001.

     On June 29, 2000, the Company entered into a Purchase and Option Agreement
with FWRKS Acquisition Corp., a wholly-owned subsidiary of Kontron. The
agreement was amended on August 16, 2000. Under the amended agreement, Kontron
acquired 6 million shares of common stock of the Company for a purchase price of
$5.4 million. In addition, the option Kontron previously granted to
Industrial-Works Holding Co., LLC, (IWHC), a wholly owned subsidiary of
Glenmount International was amended. As amended, IWHC was granted an option to
acquire 62,000 shares of Kontron in exchange for preferred shares of the Company
that were convertible into 3.4 million shares of the Company common stock. Both
of these matters were approved at a special shareholders meeting held on October
18, 2000 and adjourned to October 27, 2000 and the transactions were closed in
December 2000.

     In addition, the Company received $2.5 million from Kontron on June 30,
2000 in the form of a subordinated note bearing interest at 11% per annum and
matures in September 2001. Kontron also received warrants to purchase

                                       5
1.25 million shares of common stock exercisable at $1.00 per share. The warrants
were exercisable until November 15, 2000, and were recorded at their estimated
fair value of $437,500 at the date of issuance. These warrants were cancelled
under the terms of the amended agreement described above.

     On March 31, 2000, the Company issued 500,000 shares of the Company's
Series C Convertible Preferred Stock to IWHC. The Company recorded a $250,000
charge relating to the beneficial conversion feature associated with this
preferred stock. The Company issued a warrant to IWHC to purchase 100,000 shares
of common stock with an exercise price of $2.00 per share in connection with
this transaction. Subsequent to March 31, 2000, the conversion rate was adjusted
to such that the holders have the right to receive a total of 1,041,666 shares
of common stock upon conversion of the Series C Convertible Participating
Preferred Stock. In connection with this conversion rate adjustment, an
additional beneficial conversion feature of $270,833 was recorded.

     On February 22, 2000, the Company completed a $4.25 million equity
investment by IWHC. In exchange for the $4.25 million investment, the Company
issued 4,250,000 shares of Series B Convertible Preferred Stock (each share of
which was initially convertible into one share of Common Stock). Subsequent to
February 22, 2000, the conversion rate was adjusted to such that the holders
have the right to receive a total of 4,427,083 shares of common stock upon
conversion of the Series B Convertible Participating Preferred Stock. IWHC
received 500,000 warrants exercisable at $1.00 per share. The transaction was
approved at a special shareholders' meeting on February 7, 2000. The Company
used the net proceeds for market expansion and new product development as well
as for working capital and general corporate purposes. In December 2000, IWHC
exchanged all of its shares of Series B and Series C Convertible Preferred Stock
with Kontron for shares of Kontron Common Stock.

     In September 1999, the Company completed a private placement of $3.0
million in subordinated notes. The notes bear interest at 11% per annum and
mature in September 2001. Noteholders also received warrants to purchase 1.5
million shares of common stock exercisable at $1.00 per share. The warrants are
exercisable for five years, and were recorded at their estimated fair value of
$882,000 at the date of issuance.

4.   Foreign Currency Transactions:

     The Company records foreign currency transaction gains and losses as a
component of net income (loss). For the quarter ended July 1, 2001, the Company
recorded a loss of $75,279 related to the Company's borrowings under its credit
line with Kontron, which is payable in Deutschmarks. For the six months ended
July 1, 2001, the Company recorded a net gain of $250,456.

     On May 10, 2001, the Company entered into a forward contract foreign
exchange agreement with Wells Fargo Bank, National Association, in order to
hedge the foreign currency risk under the credit line with Kontron. Under the
terms of the agreement, the Company has the availability to hedge up to 14.0
million Deutschmarks.

     The Company currently has no other balances or transactions conducted in a
foreign currency.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

Cautionary Statement Regarding Forward Looking Statements

     This Quarterly Report on Form 10-Q contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. When used in
this Form 10-Q and in future filings by the Company with the Securities and
Exchange Commission, in the Company's press releases and in oral statements made
with the approval of an authorized executive officer, the words or phrases
"believes," "anticipates," "expects," "intends," "estimates," "should," "may" or
similar expressions are intended to identify such forward-looking statements,
but are not the exclusive means of identifying such statements. These
forward-looking statements involve risks and uncertainties that may cause the
Company's actual results to differ materially from the results discussed in the
forward-looking statements. Factors that might cause such differences include,
but are not limited to, the following: risks associated with the development of
new

                                       6
products, market acceptance of new products and services, technological
obsolescence, dependence on third-party manufacturers and suppliers, risks
associated with the Company's dependence on proprietary technology and the long
customer sales cycle. The Company wishes to caution readers not to place undue
reliance on any such forward-looking statements, which speak only as of the date
made. The Company undertakes no obligation to revise any forward-looking
statements in order to reflect events or circumstances after the date of such
statements. Readers are urged to carefully review and consider the various
disclosures made by the Company in this report and in the Company's other
reports filed with the Securities and Exchange Commission that attempt to advise
interested parties of the risks and factors that may affect the Company's
business. The Company's forward-looking statements are qualified in their
entirety by the cautions and risk factors set forth under the "Cautionary
Statement" filed as Exhibit 99.1 to its Form 10-K for the year ended December
31, 2000, filed under the former name of FieldWorks, Incorporated.

Results of Operations

     The following table sets forth certain financial data expressed as a
percentage of net sales for the periods indicated:
For the Three Months Ended   For the Six Months Ended
                                                                  ---------------------------   ------------------------
                                                                      July 1,     July 2,       July 1,       July 2,
                                                                       2001        2000          2001          2000
                                                                      -------     -------       -------       -------
Net sales ........................................................        100 %       100 %         100 %         100 %
Cost of sales.....................................................         55          83            55            80
                                                                      -------     -------       -------       -------
     Gross profit.................................................         45          17            45            20
Operating expenses:
     Sales and marketing..........................................         12          32            14            27
     General and administrative...................................          8          31             9            25
     Research and development.....................................          6          35             7            30
                                                                      -------     -------       -------       -------
          Total operating expenses................................         26          98            30            83
                                                                      -------     -------       -------       -------
Operating profit (loss)...........................................         19         (81)           15           (63)
Gain (loss) on currency conversion................................         (2)         --             2            --
Interest and other income (expense), net..........................         (8)         --            (7)            *
                                                                      -------     -------       -------       -------
Net income (loss).................................................          9 %       (87)%          10%          (69)%
Beneficial conversion feature applicable to preferred shareholders         --          --            --            (3)
                                                                      -------     -------       -------       -------
Net income (loss) applicable to common shareholders...............          9%        (87)%          10 %         (72)%
                                                                      =======     =======       =======       =======
* Less than .5%

     Net Sales. The Company's net sales increased $0.8 million, or 20%, to $4.9
million in the second quarter of 2001 from $4.0 million in the second quarter of
fiscal year 2000 and increased 18% to $9.9 million in the first six months of
2001 from $8.4 million in the first six months of fiscal year 2000. The increase
was due to a large order from the United States Army for the 2000 Series
Embedded Vehicle Server that shipped in the first two quarters of 2001.

     The Company is targeting key vertical markets including government and
military, public services, heavy equipment and utilities/telecommunications. One
customer, the United States Army, accounted for greater than 10% of net sales in
the second quarter of 2001, representing $1.8 million of the Company's net
sales. In the second quarter of fiscal year 2000, John Deere Information Systems
and the Franklin Police Department represented $0.5 million and $0.6 million of
the Company's net sales, respectively.

     International sales decreased to $0.6 million, or 12% of net sales, for the
second quarter of 2001 from $0.7 million, or 16% of net sales, for the
comparable period in fiscal year 2000. The majority of international sales, 99%
and 76% of net sales for the second quarter of 2001 and 2000, respectively, are
in Europe. During late fiscal year 2000, Kontron began distributing the
Company's products in Europe and the Company began distribution of Kontron
products within the United States. The Company believes that international sales
as a percentage of net sales for the year 2001 will be in the mid-teen to 20%
range with little impact on the Company's results of operations and liquidity.
The Company records all sales in U.S. Dollars.

                                       7
Gross Profit. Gross profit increased to $2.2 million, or 45% of net sales,
for the second quarter of 2001 from $0.7 million, or 17% of net sales for the
second quarter of fiscal year 2000. Gross profit increased to $4.5 million, or
45% of net sales for the first six months of year 2001 from $1.6 million, or 20%
of net sales for the first six months of fiscal year 2000. The increased gross
profit is due to a higher margin on the sales mix for the first half of 2001.
The Company's gross profit margin will fluctuate as a result of a number of
factors, including mix of products sold, inventory obsolescence, the proportion
of international sales, large customer contracts (with the associated volume
discounts) and outsourcing expenses.

     Sales and Marketing. Sales and marketing expenses include salaries,
incentive compensation, commissions, travel, trade shows, technical support and
professional services personnel and general advertising and promotion. These
expenses also include the labor and material costs related to maintaining the
Company's standard one-year warranty program. Sales and marketing expenses
decreased to $0.6 million for the second quarter of 2001 compared to $1.3
million for the second quarter of fiscal year 2000. As a percentage of net
sales, sales and marketing expenses decreased to 12% for the second quarter of
2001 from 32% for the second quarter of fiscal year 2000. In the first six
months of 2001, sales and marketing expenses were $1.4 million and 14% of net
sales as compared to $2.3 million and 27% of net sales in the first six months
of fiscal year 2000. The decrease is due to a workforce reduction in fiscal year
2000. In addition, the Company reduced warranty expense by approximately
$170,000 due to the expiration of FieldWorks 5000 Series I extended warranty
agreements. The Company anticipates growth of sales and marketing expenses to be
less than the growth of sales in the future.

     General and Administrative. General and administrative expenses include the
Company's executive, finance, information services and human resources
departments. These expenses decreased to $0.4 million for the quarter ended July
1, 2001, from $1.2 million for the quarter ended July 2, 2000. As a percentage
of net sales, general and administrative expenses decreased to 8% for the
quarter ended July 1, 2001, from 31% for the quarter ended July 2, 2001. General
and administrative expenses were $0.9 million, or 9% of net sales for the first
six months of 2001 as compared to $2.1 million, or 25% of net sales for the
comparable period in fiscal year 2000. The decrease is due to the management
workforce reduction that occurred in August 2000, in addition to a reduction in
consulting fees. The Company anticipates holding the percentage growth of
general and administrative expenses to a level less than the growth of sales in
the future.

     Research and Development. Research and development expenses are incurred in
the design, development and testing of new or enhanced products, services and
customized computing platforms. All research and development costs are expensed
as incurred. Research and development expenses decreased to $0.3 million in the
second quarter of 2001 from $1.4 million for the second quarter of fiscal year
2000. As a percentage of net sales, research and development costs were 6% and
35% for the second quarter of 2001 and 2000, respectively. Research and
development expenses decreased to $0.7 million for the first six months of 2001
from $2.5 million for the comparable period in fiscal year 2000. As a percentage
of net sales, research and development expenses decreased to 7% for the first
six months of 2001 from 30% for the first six months of fiscal year 2000. The
decrease is due to sharing research and development costs with Kontron and the
synergy gained by the combined efforts, in addition to a workforce reduction in
fiscal year 2000. The Company anticipates holding the percentage growth of
research and development expenses to a level less than the growth of sales in
the future.

     Gain (Loss) on Currency Conversion. The Company's credit agreements with
Kontron allow for borrowings which are payable in Deutschmarks. For the quarter
ended July 1, 2001, the Company recorded a loss of $75,279 related to the
Company's borrowings under this line of credit. For the six months ended July 1,
2001, the Company recorded a net gain of $250,456.

     On May 10, 2001, the Company entered into a forward contract foreign
exchange agreement with Wells Fargo Bank, National Association, in order to
hedge the foreign currency risk under the credit line with Kontron. Under the
terms of the agreement, the Company has the availability to hedge up to 14.0
million Deutschmarks.

     Interest and Other Income (Expense), Net. Net interest expense was
approximately $372,000 for the second quarter of 2001 compared to net interest
expense of $235,000 for the comparable period in fiscal year 2000. Net interest
expense for the first six months of 2001 was $706,000 compared to net interest
expense of $492,000 for the comparable period in fiscal year 2000. The increase
in interest expense is due to borrowings on the Company's line of credit with
Kontron. Additionally, financing costs of $882,000 related to warrants issued in
September 1999 are being amortized over the two-year term of the subordinated
notes.

                                       8
Liquidity and Capital Resources

     During the three-year period ended December 31, 2000, the Company incurred
cumulative net losses applicable to common shareholders totaling approximately
$30.2 million. During this three-year period, the Company used cash of
approximately $2.0 million to support capital expenditures and approximately
$17.4 million for net operating activities. The Company has financed these
expenditures and losses principally through equity and debt financing.

     In fiscal 2001, management is focusing on measures designed to assist the
Company in achieving profitability such as i) implementing and further refining
new sales and marketing strategies, ii) achieving cost and productivity
improvements with its third-party manufacturers and iii) adequately managing its
inventory to avoid significant inventory write-offs in the future. However,
there can be no assurance that the Company will be successful in achieving these
measures and increasing its profitability.

     Although the Company has achieved profitability in two consecutive
quarters, the Company could incur operating losses in the balance of 2001. In
addition, the uncertainty of the timing of sales growth could continue to place
significant pressure on the Company. Management believes that the proceeds of
$5.4 million from the December 2000 Kontron equity investment will only be
partially sufficient to fund operating cash requirements and debt payments in
2001. Accordingly, the Company expects that additional funding sources will be
required, to potentially include additional borrowings, extension of existing
subordinated notes or further investments by Kontron or other sources to
alleviate the Company's cash flow and liquidity constraints and provide the
needed cash flow to continue to fund normal operations. The Company is currently
evaluating various possible cash flow arrangements. However, there can be no
assurance as to the outcome of these efforts, including whether financing will
be available to the Company, or if available, whether it would be on terms
favorable to the Company and its shareholders. Failure by the Company to secure
additional financing could result in significant cash constraints and financial
issues for the Company.

     On January 29, 2001, Kontron agreed to provide the Company financial
support to enable the Company to meet its cash flow needs and obligations as and
when they become due through the period ending December 31, 2001. On September
28, 2000 (revised November 9, 2000), the Company entered into credit line
agreements with Kontron to provide up to $5 million (US$) of cash for
operations. Borrowings under these agreements bear interest at 11% per annum
(payable monthly), and were due on December 15, 2000. The agreement was revised
on December 16, 2000 for Kontron to provide up to DM 10 million and further
revised on April 1, 2001 to provide up to DM 14 million for operations ($6.1
million based on July 1, 2001 exchange rate). Borrowings under this agreement
bear interest at 11% per annum (payable monthly), with no stated maturity date.
Outstanding borrowings under this line of credit were $5.6 million at July 1,
2001.

     On June 29, 2000, the Company entered into a Purchase and Option Agreement
with FWRKS Acquisition Corp., a wholly-owned subsidiary of Kontron. The
agreement was amended on August 16, 2000. Under the amended agreement, Kontron
acquired 6 million shares of common stock of the Company for a purchase price of
$5.4 million. In addition, the option Kontron previously granted to
Industrial-Works Holding Co., LLC, (IWHC), a wholly owned subsidiary of
Glenmount International was amended. As amended, IWHC was granted an option to
acquire 62,000 shares of Kontron in exchange for preferred shares of the Company
that were convertible into 3.4 million shares of the Company common stock. Both
of these matters were approved at a special shareholders meeting held on October
18, 2000 and adjourned to October 27, 2000 and the transactions were closed in
December 2000.

     In addition, the Company received $2.5 million from Kontron on June 30,
2000 in the form of a subordinated note bearing interest at 11% per annum and
matures in September 2001. Kontron also received warrants to purchase 1.25
million shares of common stock exercisable at $1.00 per share. The warrants were
exercisable until November 15, 2000, and were recorded at their estimated fair
value of $437,500 at the date of issuance. These warrants were cancelled under
the terms of the amended agreement described above.

     On March 31, 2000, the Company issued 500,000 shares of the Company's
Series C Convertible Preferred Stock to IWHC. The Company recorded a $250,000
charge relating to the beneficial conversion feature associated with this
preferred stock. The Company issued a warrant to IWHC to purchase 100,000 shares
of common stock with an exercise price of $2.00 per share in connection with
this transaction. Subsequent to March 31, 2000, the

                                       9
conversion rate was adjusted to such that the holders have the right to receive
a total of 1,041,666 shares of common stock upon conversion of the Series C
Convertible Participating Preferred Stock. In connection with this conversion
rate adjustment, an additional beneficial conversion feature of $270,833 was
recorded.

     On February 22, 2000, the Company completed a $4.25 million equity
investment by IWHC. In exchange for the $4.25 million investment, the Company
issued 4,250,000 shares of Series B Convertible Preferred Stock (each share of
which was initially convertible into one share of Common Stock). Subsequent to
February 22, 2000, the conversion rate was adjusted to such that the holders
have the right to receive a total of 4,427,083 shares of common stock upon
conversion of the Series B Convertible Participating Preferred Stock. IWHC
received 500,000 warrants exercisable at $1.00 per share. The transaction was
approved at a special shareholders' meeting on February 7, 2000. The Company
used the net proceeds for market expansion and new product development as well
as for working capital and general corporate purposes. In December 2000, IWHC
exchanged all of its shares of Series B and Series C Convertible Preferred Stock
with Kontron for shares of Kontron Common Stock.

     In September 1999, the Company completed a private placement of $3.0
million in subordinated notes. The notes bear interest at 11% per annum and
mature in September 2001. Noteholders also received warrants to purchase 1.5
million shares of common stock exercisable at $1.00 per share. The warrants are
exercisable for five years, and were recorded at their estimated fair value of
$882,000 at the date of issuance.

     Cash provided by operating activities was $21,206 for the first six months
of 2001, relative to $4.7 million used for operating activities in the
comparable period in fiscal year 2000. The primary reasons for the improvement
relate to net income generated in 2001, as well as reduced inventory levels,
partially offset by changes in other working capital items. Inventories
decreased to $1.8 million at July 1, 2001, from $2.5 million at December 31,
2000 due to further improvements in arrangements with outsource suppliers,
partially offset by purchases in preparation for the United States Army order.
Accrued liabilities decreased to $0.8 million at July 1, 2001, from $1.8 million
at December 31, 2000 due to a large vendor payment made in the first quarter.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     As of July 1, 2001 the Company had $5.6 million outstanding on its line of
credit from Kontron. This loan bears interest at 11% per annum, payable monthly.
Both the principal amount borrowed under the line of credit and interest payable
thereunder are payable in German Deutschmarks. See the earlier discussion under
"Foreign Currency Transactions" for a description of the foreign currency
forward contract in effect. All remaining transactions of the Company are
conducted and accounts are denominated in United States dollars. Based on our
overall foreign currency rate exposure at July 1, 2001, the Company does not
believe that a hypothetical 10% change in foreign currency rates would
materially adversely affect our financial position.

     The Company has no derivative financial instruments or derivative commodity
instruments in its cash and cash equivalents. The Company had $3.2 million in
cash and cash equivalents at July 1, 2001. Based on analysis, shifts in money
market rates would have an immaterial impact on the Company.

PART II. OTHER INFORMATION
--------------------------
ITEM 1. LEGAL PROCEEDINGS

     The Company is involved in legal actions in the ordinary course of its
business. Although the Company cannot predict the outcome of any such legal
actions, management believes that there is no pending legal proceeding against
or involving the Company for which the outcome is likely to have a material
adverse effect upon the Company's financial position, results of operations or
cash flows.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

     See the discussion under "Liquidity and Capital Resources" above for a
description of securities sold by the Company within the past three years which
were not registered under the Securities Act.

                                       10
ITEM 3. DEFAULTS UPON SENIOR SECURITIES

     Not applicable.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     An Annual Meeting of Shareholders was held on May 17, 2001. The
shareholders voted to elect six directors, each of whom will serve until such
director's successor shall have been elected and shall qualify or until such
director's earlier death, resignation, removal or disqualification. Management's
entire slate of six directors was elected to serve until the next Annual Meeting
of Shareholders by the following vote tallies:

                                                            Authority
                                           For               Withheld
                                        ----------          ----------
      David C. Malmberg                 13,270,062            40,801
      Pierre McMaster                   13,270,062            40,801
      William P. Perron                 13,270,062            40,801
      Richard L. Poss                   13,270,062            40,801
      Thomas Sparrvik                   13,270,062            40,801
      Rudolf Wieczorek                  13,270,062            40,801

ITEM 5. OTHER INFORMATION

     None.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

   (a)    Exhibits

          Exhibit 3.1      Second Amended and Restated Articles of Incorporation
                           of the Company (incorporated by reference to Exhibit
                           3.2 to the Company's Registration Statement filed on
                           Form S-1, File No. 333-18335)

          Exhibit 3.2      Second Amended and Restated Bylaws of the Company
                           (incorporated by reference to Exhibit 3.4 to the
                           Company's Registration Statement filed on Form S-1,
                           File No. 333-18335)

          Exhibit 3.3      Articles of Merger amending the Company's Articles of
                           Incorporation effective June 4, 2001 (incorporated by
                           reference to the exhibit 3.1 filed with the Company's
                           Report on Form 8-K filed June 4, 2001)

   (b)    Reports on Form 8-K: One report on Form 8-K was filed by the Company
          during the fiscal quarter ended July 1, 2001. The report, dated and
          effective June 4, 2001, stated that the Company filed Articles of
          Merger with the Minnesota Secretary of State's office to change its
          name from FieldWorks, Incorporated to Kontron Mobile Computing, Inc.

                                       11
SIGNATURE

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

KONTRON MOBILE COMPUTING, INC.

Date:  August 13, 2001
                                   /s/ Thomas Sparrvik
                                   -----------------------------------------
                                   Thomas Sparrvik, President and Chief
                                   Executive Officer (as authorized officer)

                                       12