<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 September 30, 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 November 2, 2001 was 14,952,926.

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

                                       1
<PAGE>

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

                        KONTRON MOBILE COMPUTING, INC.
                                BALANCE SHEETS


<TABLE>
<CAPTION>
                                                                                                     September 30,   December 31,
                                                                                                          2001           2000
                                                                                                                         ----
                                                                                                      (Unaudited)
                                                                                                      -----------
<S>                                                                                                  <C>             <C>
                                            ASSETS
Current Assets:
Cash and cash equivalents.........................................................................   $  2,266,072    $    552,887
Accounts receivable, net of allowance for doubtful accounts of $263,900 and $334,100..............      2,483,729       3,096,451
Inventories.......................................................................................      1,684,088       2,487,643
Prepaid expenses and other........................................................................        322,577         472,287
                                                                                                     ------------    ------------
           Total current assets...................................................................      6,756,466       6,609,268
                                                                                                     ------------    ------------
Property and equipment:
   Computers and equipment........................................................................      1,108,227       1,699,278
   Furniture and fixtures.........................................................................        795,387         943,795
   Leasehold improvements.........................................................................        346,099         331,736
   Less: Accumulated depreciation and amortization................................................     (1,832,782)     (2,116,720)
                                                                                                     ------------    ------------
       Property and equipment, net................................................................        416,931         858,089
Deposits and other assets, net....................................................................         15,176           7,774
                                                                                                     ------------    ------------
Total Assets......................................................................................   $  7,188,573    $  7,475,131
                                                                                                     ============    ============

                             LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities:
Accounts payable..................................................................................   $  1,597,223    $  3,192,823
Accrued warranty expenses.........................................................................        332,169         507,099
Accrued compensation and benefits.................................................................         88,864         285,893
Other accrued liabilities.........................................................................        972,264       1,816,182
Deferred revenue..................................................................................      1,261,586         738,994
Current maturities of capitalized lease obligations...............................................         10,225          38,598
Notes payable:
       Subordinated note, due September 2001......................................................             --       3,000,000
       Less: Discount on notes payable............................................................             --        (330,750)
       Note to Kontron for operating line.........................................................      7,173,808       3,211,583
                                                                                                     ------------    ------------
Notes payable, net................................................................................      7,173,808       5,880,833
                                                                                                     ------------    ------------
       Total current liabilities..................................................................     11,436,139      12,460,422
                                                                                                     ------------    ------------
Total Liabilities.................................................................................     11,436,139      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; 14,952,926 and
   14,894,426 issued and outstanding..............................................................         14,953          14,894
Additional paid-in capital........................................................................     32,551,972      32,524,911
Accumulated deficit...............................................................................    (36,819,241)    (37,529,846)
                                                                                                     ------------    ------------
           Total shareholders' equity (deficit)...................................................     (4,247,566)     (4,985,291)
                                                                                                     ------------    ------------
Total Liabilities and Shareholders' Equity (Deficit)..............................................   $  7,188,573    $  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 Nine Months Ended
                                                                -------------------------------------------------------------------
                                                                  September 30,      October 1,      September 30,      October 1,
                                                                      2001              2000             2001              2000
                                                                      ----              ----             ----              ----
<S>                                                              <C>               <C>               <C>               <C>
Net Sales ..................................................     $  3,248,416      $  3,435,695      $ 13,119,656      $ 11,832,756
Cost of Sales ..............................................        1,688,787         6,150,130         7,108,346        12,901,196
                                                                 ------------      ------------      ------------      ------------
     Gross profit ..........................................        1,559,629        (2,714,435)        6,011,310        (1,068,440)
                                                                 ------------      ------------      ------------      ------------
Operating Expenses:
     Sales and marketing ...................................          667,573         1,341,415         2,098,829         3,623,717
     General and administrative ............................          405,111         1,468,863         1,289,095         3,570,433
     Research and development ..............................          236,892         1,052,685           902,287         3,597,784
                                                                 ------------      ------------      ------------      ------------
          Total operating expenses .........................        1,309,576         3,862,963         4,290,211        10,791,934
                                                                 ------------      ------------      ------------      ------------
          Operating profit (loss) ..........................          250,053        (6,577,398)        1,721,099       (11,860,374)
Gain (loss) on currency conversion .........................          (60,302)               --           190,154                --
Interest income (expense), net .............................         (374,606)         (407,954)       (1,080,948)         (898,977)
Other income (expense), net ................................         (119,448)               --          (119,700)          (30,615)
                                                                 ------------      ------------      ------------      ------------
Net income (loss) ..........................................         (304,303)       (6,985,352)          710,605       (12,789,966)
Beneficial conversion feature applicable to preferred
   shareholders ............................................               --          (270,833)               --          (520,833)
                                                                 ------------      ------------      ------------      ------------
Net income (loss) applicable to common shareholders ........     $   (304,303)     $ (7,256,185)     $    710,605      $(13,310,799)
                                                                 ============      ============      ============      ============


Basic and Diluted Income (Loss) Per Common Share:
Net income (loss) per common share .........................     $       (.02)     $       (.82)     $        .05      $      (1.50)
                                                                 ------------      ------------      ------------      ------------
Basic weighted average common shares outstanding ...........       14,952,926         8,894,426        14,942,748         8,894,426
                                                                 ============      ============      ============      ============
Diluted weighted average common shares outstanding .........       14,952,926         8,894,426        15,028,311         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 Nine Months Ended
                                                                                       September 30,          October 1,
                                                                                            2001                 2000
                                                                                            ----                 ----
<S>                                                                                    <C>                   <C>
Operating Activities:
Net income (loss)..................................................................    $    710,605          $(12,789,966)
Adjustments to reconcile net income (loss) to net cash provided by (used for)
operating activities--
     Depreciation and amortization.................................................         428,977               643,490
     Gain on currency conversion...................................................        (190,154)                   --
     Non-cash financing expense....................................................         330,750               418,251
     Loss on disposal of property and equipment....................................          30,144               159,213
     Changes in operating items:
          Accounts receivable......................................................         612,722             2,234,150
          Inventories..............................................................         803,555             1,432,553
          Prepaid expenses and other...............................................         142,308                24,465
          Accounts payable.........................................................      (1,595,600)             (348,159)
          Accrued expenses.........................................................      (1,215,877)              913,621
          Deferred revenue.........................................................         522,592              (243,485)
                                                                                       ------------          ------------
     Net cash provided by (used for) operating activities..........................         580,022            (7,555,867)
                                                                                       ------------          ------------
Investing Activities:
     Purchases of property and equipment...........................................         (17,963)             (302,250)
     Cash received from sales of property and equipment............................              --                33,700
                                                                                       ------------          ------------
     Net cash provided by (used for) investing activities..........................         (17,963)             (268,550)
                                                                                       ------------          ------------
Financing Activities:
     Proceeds from notes to Kontron................................................       4,152,379             3,614,721
     Payment of subordinated note..................................................      (3,000,000)                   --
     Proceeds from issuance of preferred stock.....................................              --             5,073,924
     Proceeds from issuance of common stock........................................          27,120                    --
     Net line of credit borrowings (repayments)....................................              --              (920,331)
     Payment of capitalized lease obligations......................................         (28,373)              (30,683)
                                                                                       ------------          ------------
     Net cash provided by financing activities.....................................       1,151,126             7,737,631
                                                                                       ------------          ------------
Change in Cash and Cash Equivalents................................................       1,713,185               (86,786)
Cash and Cash Equivalents, beginning of period.....................................         552,887                86,786
                                                                                       ------------          ------------
Cash and Cash Equivalents, end of period...........................................    $  2,266,072          $         --
                                                                                       ============          ============

Supplemental Cash Flow Disclosure:
Cash paid for interest.............................................................    $  1,137,605          $    341,592
                                                                                       ============          ============
</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:

<TABLE>
<CAPTION>
                                                          September 30,    December 31,
                                                              2001            2000
                                                              ----            ----
          <S>                                             <C>             <C>
          Raw materials................................   $   592,545     $ 1,026,833
          Work in process..............................       179,926         259,485
          Finished goods...............................       911,617       1,201,325
                                                          -----------     -----------
               Total...................................   $ 1,684,088     $ 2,487,643
                                                          ===========     ===========
</TABLE>

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 Deutschmarks (DM) 10 million
and further revised on April 1, 2001 to provide up to DM 14 million for
operations. On September 1, 2001, the agreement was revised to provide up to 8.5
million Euros for operations ($7.9 million based on September 30, 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 $7.2 million at September 30, 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.

                                       5
<PAGE>

     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 with
an original maturity date of 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 and the subordinated notes were forgiven 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. The
notes were repaid at the September 2001 maturity date. Noteholders also received
warrants to purchase 1.5 million shares of common stock exercisable at $1.00 per
share in September 1999. 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 September 30, 2001, the
Company recorded a loss of $60,302 related to the Company's borrowings under its
credit line with Kontron, which is payable in Euros. For the nine months ended
September 30, 2001, the Company recorded a net gain of $190,154.

     The Company utilizes foreign currency forward contracts to protect against
significant fluctuations in income (loss) caused by changes in exchange rates.
Currently, the Company's practice is to enter into a forward contract at the
beginning of each quarter and settle the contract at the end of the quarter. The
Company records gains and losses on these derivative contracts in net income
(loss) in accordance with the requirements of Statement of Financial Accounting
Standards (SFAS) No. 133, "Derivatives and Hedging Activities," and also marks
the related debt instrument to market under SFAS No. 52, "Foreign Currency
Translation." All of these gain (loss) amounts are reflected in the foreign
currency gain (loss) amounts described above. As of September 30, 2001, the
Company's forward contract arrangements allowed the Company to hedge up to 8.0
million Euros.

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


5.  Legal Proceedings:

     On April 28, 2000, the Company entered into an Engagement Agreement with
Goldsmith, Agio, Helms & Lynner, Ltd. ("GAH") to act as our agent to assist with
a merger, sale or similar transaction for the Company, for a minimum period of
six months. The Company cancelled the agreement with GAH after being approached
by Kontron about the transaction that eventually closed in December 2000. GAH
pursued legal proceedings against the

                                       6
<PAGE>

Company and in September 2001, an arbitrator found that the Company was required
to pay damages of $792,000 to GAH. These costs have been classified as other
expense. For comparison purposes, payments made to GAH prior to the date of the
award by the arbitrator have been reclassified to reflect this change.


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 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 Nine Months Ended
                                                                      ---------------------------------------------------------
                                                                       September 30,  October 1,  September 30,   October 1,
                                                                           2001          2000          2001          2000
                                                                           ----          ----          ----          ----
<S>                                                                    <C>             <C>         <C>            <C>
Net sales .............................................................       100 %       100 %          100 %        100 %
Cost of sales .........................................................        52         179             54          109
                                                                             ----        ----           ----         ----
     Gross profit .....................................................        48         (79)            46           (9)
Operating expenses:
     Sales and marketing ..............................................        21          39             16           31
     General and administrative .......................................        12          43             10           30
     Research and development .........................................         7          30              7           30
                                                                             ----        ----           ----         ----
          Total operating expenses ....................................        40         112             33           91
                                                                             ----        ----           ----         ----
Operating profit (loss) ...............................................         8        (191)            13         (100)
Gain (loss) on currency conversion ....................................        (2)         --              1           --
Interest income (expense), net ........................................       (11)        (12)            (8)          (8)
Other income (expense), net ...........................................        (4)         --             (1)           *
                                                                             ----        ----           ----         ----
Net income (loss) .....................................................        (9)%      (203)%            5%        (108)%
Beneficial conversion feature applicable to preferred shareholders ....        --          (8)            --           (4)
                                                                             ----        ----           ----         ----
Net income (loss) applicable to common shareholders ...................        (9)%      (211)%            5%        (112)%
                                                                             ====        ====           ====         ====
</TABLE>

   * Less than .5%

                                       7
<PAGE>

     Net Sales. The Company's net sales decreased $0.2 million, or 5%, to $3.2
million in the third quarter of 2001 from $3.4 million in the third quarter of
fiscal year 2000 and increased 11% to $13.1 million in the first nine months of
2001 from $11.8 million in the first nine 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, Hyundai, accounted for greater than 10% of net sales in the third
quarter of 2001, representing $0.4 million of the Company's net sales. In the
third quarter of fiscal year 2000, Equitable Gas Company and Franklin County,
Ohio, represented $0.4 million and $0.3 million of the Company's net sales,
respectively.

     International sales increased to $0.6 million, or 17% of net sales, for the
third quarter of 2001 from $0.4 million, or 12% of net sales, for the comparable
period in fiscal year 2000. The majority of international sales, 51% and 73% of
net sales for the third 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.

     Gross Profit. Gross profit increased to $1.6 million, or 48% of net sales,
for the third quarter of 2001 from ($2.7) million, or (79)% of net sales for the
third quarter of fiscal year 2000. Gross profit increased to $6.0 million, or
46% of net sales for the first nine months of year 2001 from ($1.1) million, or
(9)% of net sales for the first nine months of fiscal year 2000. The increased
gross profit is due to a $3.1 million write-down related to excess and obsolete
inventory parts taken in the third quarter of fiscal year 2000, offset by a
higher margin on the sales mix for the first nine months 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 $0.7 million for the third quarter of 2001 compared to $1.3 million
for the third quarter of fiscal year 2000. As a percentage of net sales, sales
and marketing expenses decreased to 21% for the third quarter of 2001 from 39%
for the third quarter of fiscal year 2000. In the first nine months of 2001,
sales and marketing expenses were $2.1 million and 16% of net sales as compared
to $3.6 million and 31% of net sales in the first nine months of fiscal year
2000. The decrease is due to a workforce reduction in fiscal year 2000. 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
September 30, 2001, from $1.5 million for the quarter ended October 1, 2000. As
a percentage of net sales, general and administrative expenses decreased to 12%
for the quarter ended September 30, 2001, from 43% for the quarter ended October
1, 2001. General and administrative expenses were $1.3 million, or 10% of net
sales for the first nine months of 2001 as compared to $3.6 million, or 30% 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 $0.2 million in the
third quarter of 2001 from $1.1 million for the third quarter of fiscal year
2000. As a percentage of net sales, research and development costs were 7% and
30% for the third quarter of 2001 and 2000, respectively. Research and
development expenses decreased to $0.9 million for the first nine months of 2001
from $3.6 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
nine months of 2001 from 30% for the first nine months of fiscal year 2000. The
decrease is due

                                       8
<PAGE>

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 Euros. For the quarter ended
September 30, 2001, the Company recorded a loss of $60,302 related to the
Company's borrowings under this line of credit. For the nine months ended
September 30, 2001, the Company recorded a net gain of $190,154.

     The Company utilizes foreign currency forward contracts to protect against
significant fluctuations in income (loss) caused by changes in exchange rates.
Currently, the Company's practice is to enter into a forward contract at the
beginning of each quarter and settle the contract at the end of the quarter. The
Company records gains and losses on these derivative contracts in net income
(loss) in accordance with the requirements of Statement of Financial Accounting
Standards (SFAS) No. 133, "Derivatives and Hedging Activities," and also marks
the related debt instrument to market under SFAS No. 52, "Foreign Currency
Translation." All of these gain (loss) amounts are reflected in the foreign
currency gain (loss) amounts described above. As of September 30, 2001, the
Company's forward contract arrangements allowed the Company to hedge up to 8.0
million Euros.

     Interest Income (Expense), Net. Net interest expense was approximately
$374,600 for the third quarter of 2001 compared to net interest expense of
$408,000 for the comparable period in fiscal year 2000. Net interest expense for
the first nine months of 2001 was $1,080,900 compared to net interest expense of
$899,000 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.

     Other Income (Expense), Net. Net other expense was approximately $119,400
for the third quarter of 2001 compared to net other expense of zero for the
comparable period in fiscal year 2000. Net other expense for the first nine
months of 2001 was $119,700 compared to net other expense of $30,600 for the
comparable period in fiscal year 2000. The majority of the 2001 costs are
related to the payments that were required to be made to GAH.


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 achieved profitability in the first and second
quarters in 2001, the Company had a net loss in the third quarter and could
incur additional 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.

                                       9
<PAGE>

     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. On
September 1, 2001, the agreement was revised to provide up to 8.5 million Euros
for operations ($7.9 million based on September 30, 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 $7.2 million at September 30, 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 with
an original maturity date of 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 and the subordinated notes were forgiven 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. The
notes were repaid at the September 2001 maturity date. 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 $580,022 for the first nine
months of 2001, relative to $7.6 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 $1.7 million at September 30, 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 $1.0 million at September 30, 2001, from $1.8
million at December 31, 2000 due to a large vendor payment made in the first
quarter.

                                       10
<PAGE>

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     As of September 30, 2001 the Company had $7.2 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 Euros. 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 September 30, 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 $2.3 million in
cash and cash equivalents at September 30, 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.


ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

     Not applicable.


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

     Not applicable.


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)

                                       11
<PAGE>

     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:

     None.






                                   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:  November 9, 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": "1781988"}, "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 September 30, 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 November 2, 2001 was 14,952,926.

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

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

                        KONTRON MOBILE COMPUTING, INC.
                                BALANCE SHEETS
September 30,   December 31,
                                                                                                          2001           2000
                                                                                                                         ----
                                                                                                      (Unaudited)
                                                                                                      -----------
ASSETS
Current Assets:
Cash and cash equivalents.........................................................................   $  2,266,072    $    552,887
Accounts receivable, net of allowance for doubtful accounts of $263,900 and $334,100..............      2,483,729       3,096,451
Inventories.......................................................................................      1,684,088       2,487,643
Prepaid expenses and other........................................................................        322,577         472,287
                                                                                                     ------------    ------------
           Total current assets...................................................................      6,756,466       6,609,268
                                                                                                     ------------    ------------
Property and equipment:
   Computers and equipment........................................................................      1,108,227       1,699,278
   Furniture and fixtures.........................................................................        795,387         943,795
   Leasehold improvements.........................................................................        346,099         331,736
   Less: Accumulated depreciation and amortization................................................     (1,832,782)     (2,116,720)
                                                                                                     ------------    ------------
       Property and equipment, net................................................................        416,931         858,089
Deposits and other assets, net....................................................................         15,176           7,774
                                                                                                     ------------    ------------
Total Assets......................................................................................   $  7,188,573    $  7,475,131
                                                                                                     ============    ============

                             LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities:
Accounts payable..................................................................................   $  1,597,223    $  3,192,823
Accrued warranty expenses.........................................................................        332,169         507,099
Accrued compensation and benefits.................................................................         88,864         285,893
Other accrued liabilities.........................................................................        972,264       1,816,182
Deferred revenue..................................................................................      1,261,586         738,994
Current maturities of capitalized lease obligations...............................................         10,225          38,598
Notes payable:
       Subordinated note, due September 2001......................................................             --       3,000,000
       Less: Discount on notes payable............................................................             --        (330,750)
       Note to Kontron for operating line.........................................................      7,173,808       3,211,583
                                                                                                     ------------    ------------
Notes payable, net................................................................................      7,173,808       5,880,833
                                                                                                     ------------    ------------
       Total current liabilities..................................................................     11,436,139      12,460,422
                                                                                                     ------------    ------------
Total Liabilities.................................................................................     11,436,139      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; 14,952,926 and
   14,894,426 issued and outstanding..............................................................         14,953          14,894
Additional paid-in capital........................................................................     32,551,972      32,524,911
Accumulated deficit...............................................................................    (36,819,241)    (37,529,846)
                                                                                                     ------------    ------------
           Total shareholders' equity (deficit)...................................................     (4,247,566)     (4,985,291)
                                                                                                     ------------    ------------
Total Liabilities and Shareholders' Equity (Deficit)..............................................   $  7,188,573    $  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 Nine Months Ended
                                                                -------------------------------------------------------------------
                                                                  September 30,      October 1,      September 30,      October 1,
                                                                      2001              2000             2001              2000
                                                                      ----              ----             ----              ----
Net Sales ..................................................     $  3,248,416      $  3,435,695      $ 13,119,656      $ 11,832,756
Cost of Sales ..............................................        1,688,787         6,150,130         7,108,346        12,901,196
                                                                 ------------      ------------      ------------      ------------
     Gross profit ..........................................        1,559,629        (2,714,435)        6,011,310        (1,068,440)
                                                                 ------------      ------------      ------------      ------------
Operating Expenses:
     Sales and marketing ...................................          667,573         1,341,415         2,098,829         3,623,717
     General and administrative ............................          405,111         1,468,863         1,289,095         3,570,433
     Research and development ..............................          236,892         1,052,685           902,287         3,597,784
                                                                 ------------      ------------      ------------      ------------
          Total operating expenses .........................        1,309,576         3,862,963         4,290,211        10,791,934
                                                                 ------------      ------------      ------------      ------------
          Operating profit (loss) ..........................          250,053        (6,577,398)        1,721,099       (11,860,374)
Gain (loss) on currency conversion .........................          (60,302)               --           190,154                --
Interest income (expense), net .............................         (374,606)         (407,954)       (1,080,948)         (898,977)
Other income (expense), net ................................         (119,448)               --          (119,700)          (30,615)
                                                                 ------------      ------------      ------------      ------------
Net income (loss) ..........................................         (304,303)       (6,985,352)          710,605       (12,789,966)
Beneficial conversion feature applicable to preferred
   shareholders ............................................               --          (270,833)               --          (520,833)
                                                                 ------------      ------------      ------------      ------------
Net income (loss) applicable to common shareholders ........     $   (304,303)     $ (7,256,185)     $    710,605      $(13,310,799)
                                                                 ============      ============      ============      ============

Basic and Diluted Income (Loss) Per Common Share:
Net income (loss) per common share .........................     $       (.02)     $       (.82)     $        .05      $      (1.50)
                                                                 ------------      ------------      ------------      ------------
Basic weighted average common shares outstanding ...........       14,952,926         8,894,426        14,942,748         8,894,426
                                                                 ============      ============      ============      ============
Diluted weighted average common shares outstanding .........       14,952,926         8,894,426        15,028,311         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 Nine Months Ended
                                                                                       September 30,          October 1,
                                                                                            2001                 2000
                                                                                            ----                 ----
Operating Activities:
Net income (loss)..................................................................    $    710,605          $(12,789,966)
Adjustments to reconcile net income (loss) to net cash provided by (used for)
operating activities--
     Depreciation and amortization.................................................         428,977               643,490
     Gain on currency conversion...................................................        (190,154)                   --
     Non-cash financing expense....................................................         330,750               418,251
     Loss on disposal of property and equipment....................................          30,144               159,213
     Changes in operating items:
          Accounts receivable......................................................         612,722             2,234,150
          Inventories..............................................................         803,555             1,432,553
          Prepaid expenses and other...............................................         142,308                24,465
          Accounts payable.........................................................      (1,595,600)             (348,159)
          Accrued expenses.........................................................      (1,215,877)              913,621
          Deferred revenue.........................................................         522,592              (243,485)
                                                                                       ------------          ------------
     Net cash provided by (used for) operating activities..........................         580,022            (7,555,867)
                                                                                       ------------          ------------
Investing Activities:
     Purchases of property and equipment...........................................         (17,963)             (302,250)
     Cash received from sales of property and equipment............................              --                33,700
                                                                                       ------------          ------------
     Net cash provided by (used for) investing activities..........................         (17,963)             (268,550)
                                                                                       ------------          ------------
Financing Activities:
     Proceeds from notes to Kontron................................................       4,152,379             3,614,721
     Payment of subordinated note..................................................      (3,000,000)                   --
     Proceeds from issuance of preferred stock.....................................              --             5,073,924
     Proceeds from issuance of common stock........................................          27,120                    --
     Net line of credit borrowings (repayments)....................................              --              (920,331)
     Payment of capitalized lease obligations......................................         (28,373)              (30,683)
                                                                                       ------------          ------------
     Net cash provided by financing activities.....................................       1,151,126             7,737,631
                                                                                       ------------          ------------
Change in Cash and Cash Equivalents................................................       1,713,185               (86,786)
Cash and Cash Equivalents, beginning of period.....................................         552,887                86,786
                                                                                       ------------          ------------
Cash and Cash Equivalents, end of period...........................................    $  2,266,072          $         --
                                                                                       ============          ============

Supplemental Cash Flow Disclosure:
Cash paid for interest.............................................................    $  1,137,605          $    341,592
                                                                                       ============          ============
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:
September 30,    December 31,
                                                              2001            2000
                                                              ----            ----
Raw materials................................   $   592,545     $ 1,026,833
          Work in process..............................       179,926         259,485
          Finished goods...............................       911,617       1,201,325
                                                          -----------     -----------
               Total...................................   $ 1,684,088     $ 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 Deutschmarks (DM) 10 million
and further revised on April 1, 2001 to provide up to DM 14 million for
operations. On September 1, 2001, the agreement was revised to provide up to 8.5
million Euros for operations ($7.9 million based on September 30, 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 $7.2 million at September 30, 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.

                                       5
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 with
an original maturity date of 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 and the subordinated notes were forgiven 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. The
notes were repaid at the September 2001 maturity date. Noteholders also received
warrants to purchase 1.5 million shares of common stock exercisable at $1.00 per
share in September 1999. 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 September 30, 2001, the
Company recorded a loss of $60,302 related to the Company's borrowings under its
credit line with Kontron, which is payable in Euros. For the nine months ended
September 30, 2001, the Company recorded a net gain of $190,154.

     The Company utilizes foreign currency forward contracts to protect against
significant fluctuations in income (loss) caused by changes in exchange rates.
Currently, the Company's practice is to enter into a forward contract at the
beginning of each quarter and settle the contract at the end of the quarter. The
Company records gains and losses on these derivative contracts in net income
(loss) in accordance with the requirements of Statement of Financial Accounting
Standards (SFAS) No. 133, "Derivatives and Hedging Activities," and also marks
the related debt instrument to market under SFAS No. 52, "Foreign Currency
Translation." All of these gain (loss) amounts are reflected in the foreign
currency gain (loss) amounts described above. As of September 30, 2001, the
Company's forward contract arrangements allowed the Company to hedge up to 8.0
million Euros.

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

5.  Legal Proceedings:

     On April 28, 2000, the Company entered into an Engagement Agreement with
Goldsmith, Agio, Helms & Lynner, Ltd. ("GAH") to act as our agent to assist with
a merger, sale or similar transaction for the Company, for a minimum period of
six months. The Company cancelled the agreement with GAH after being approached
by Kontron about the transaction that eventually closed in December 2000. GAH
pursued legal proceedings against the

                                       6
Company and in September 2001, an arbitrator found that the Company was required
to pay damages of $792,000 to GAH. These costs have been classified as other
expense. For comparison purposes, payments made to GAH prior to the date of the
award by the arbitrator have been reclassified to reflect this change.

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 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 Nine Months Ended
                                                                      ---------------------------------------------------------
                                                                       September 30,  October 1,  September 30,   October 1,
                                                                           2001          2000          2001          2000
                                                                           ----          ----          ----          ----
Net sales .............................................................       100 %       100 %          100 %        100 %
Cost of sales .........................................................        52         179             54          109
                                                                             ----        ----           ----         ----
     Gross profit .....................................................        48         (79)            46           (9)
Operating expenses:
     Sales and marketing ..............................................        21          39             16           31
     General and administrative .......................................        12          43             10           30
     Research and development .........................................         7          30              7           30
                                                                             ----        ----           ----         ----
          Total operating expenses ....................................        40         112             33           91
                                                                             ----        ----           ----         ----
Operating profit (loss) ...............................................         8        (191)            13         (100)
Gain (loss) on currency conversion ....................................        (2)         --              1           --
Interest income (expense), net ........................................       (11)        (12)            (8)          (8)
Other income (expense), net ...........................................        (4)         --             (1)           *
                                                                             ----        ----           ----         ----
Net income (loss) .....................................................        (9)%      (203)%            5%        (108)%
Beneficial conversion feature applicable to preferred shareholders ....        --          (8)            --           (4)
                                                                             ----        ----           ----         ----
Net income (loss) applicable to common shareholders ...................        (9)%      (211)%            5%        (112)%
                                                                             ====        ====           ====         ====
* Less than .5%

                                       7
Net Sales. The Company's net sales decreased $0.2 million, or 5%, to $3.2
million in the third quarter of 2001 from $3.4 million in the third quarter of
fiscal year 2000 and increased 11% to $13.1 million in the first nine months of
2001 from $11.8 million in the first nine 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, Hyundai, accounted for greater than 10% of net sales in the third
quarter of 2001, representing $0.4 million of the Company's net sales. In the
third quarter of fiscal year 2000, Equitable Gas Company and Franklin County,
Ohio, represented $0.4 million and $0.3 million of the Company's net sales,
respectively.

     International sales increased to $0.6 million, or 17% of net sales, for the
third quarter of 2001 from $0.4 million, or 12% of net sales, for the comparable
period in fiscal year 2000. The majority of international sales, 51% and 73% of
net sales for the third 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.

     Gross Profit. Gross profit increased to $1.6 million, or 48% of net sales,
for the third quarter of 2001 from ($2.7) million, or (79)% of net sales for the
third quarter of fiscal year 2000. Gross profit increased to $6.0 million, or
46% of net sales for the first nine months of year 2001 from ($1.1) million, or
(9)% of net sales for the first nine months of fiscal year 2000. The increased
gross profit is due to a $3.1 million write-down related to excess and obsolete
inventory parts taken in the third quarter of fiscal year 2000, offset by a
higher margin on the sales mix for the first nine months 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 $0.7 million for the third quarter of 2001 compared to $1.3 million
for the third quarter of fiscal year 2000. As a percentage of net sales, sales
and marketing expenses decreased to 21% for the third quarter of 2001 from 39%
for the third quarter of fiscal year 2000. In the first nine months of 2001,
sales and marketing expenses were $2.1 million and 16% of net sales as compared
to $3.6 million and 31% of net sales in the first nine months of fiscal year
2000. The decrease is due to a workforce reduction in fiscal year 2000. 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
September 30, 2001, from $1.5 million for the quarter ended October 1, 2000. As
a percentage of net sales, general and administrative expenses decreased to 12%
for the quarter ended September 30, 2001, from 43% for the quarter ended October
1, 2001. General and administrative expenses were $1.3 million, or 10% of net
sales for the first nine months of 2001 as compared to $3.6 million, or 30% 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 $0.2 million in the
third quarter of 2001 from $1.1 million for the third quarter of fiscal year
2000. As a percentage of net sales, research and development costs were 7% and
30% for the third quarter of 2001 and 2000, respectively. Research and
development expenses decreased to $0.9 million for the first nine months of 2001
from $3.6 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
nine months of 2001 from 30% for the first nine months of fiscal year 2000. The
decrease is due

                                       8
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 Euros. For the quarter ended
September 30, 2001, the Company recorded a loss of $60,302 related to the
Company's borrowings under this line of credit. For the nine months ended
September 30, 2001, the Company recorded a net gain of $190,154.

     The Company utilizes foreign currency forward contracts to protect against
significant fluctuations in income (loss) caused by changes in exchange rates.
Currently, the Company's practice is to enter into a forward contract at the
beginning of each quarter and settle the contract at the end of the quarter. The
Company records gains and losses on these derivative contracts in net income
(loss) in accordance with the requirements of Statement of Financial Accounting
Standards (SFAS) No. 133, "Derivatives and Hedging Activities," and also marks
the related debt instrument to market under SFAS No. 52, "Foreign Currency
Translation." All of these gain (loss) amounts are reflected in the foreign
currency gain (loss) amounts described above. As of September 30, 2001, the
Company's forward contract arrangements allowed the Company to hedge up to 8.0
million Euros.

     Interest Income (Expense), Net. Net interest expense was approximately
$374,600 for the third quarter of 2001 compared to net interest expense of
$408,000 for the comparable period in fiscal year 2000. Net interest expense for
the first nine months of 2001 was $1,080,900 compared to net interest expense of
$899,000 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.

     Other Income (Expense), Net. Net other expense was approximately $119,400
for the third quarter of 2001 compared to net other expense of zero for the
comparable period in fiscal year 2000. Net other expense for the first nine
months of 2001 was $119,700 compared to net other expense of $30,600 for the
comparable period in fiscal year 2000. The majority of the 2001 costs are
related to the payments that were required to be made to GAH.

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 achieved profitability in the first and second
quarters in 2001, the Company had a net loss in the third quarter and could
incur additional 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.

                                       9
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. On
September 1, 2001, the agreement was revised to provide up to 8.5 million Euros
for operations ($7.9 million based on September 30, 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 $7.2 million at September 30, 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 with
an original maturity date of 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 and the subordinated notes were forgiven 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. The
notes were repaid at the September 2001 maturity date. 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 $580,022 for the first nine
months of 2001, relative to $7.6 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 $1.7 million at September 30, 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 $1.0 million at September 30, 2001, from $1.8
million at December 31, 2000 due to a large vendor payment made in the first
quarter.

                                       10
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     As of September 30, 2001 the Company had $7.2 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 Euros. 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 September 30, 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 $2.3 million in
cash and cash equivalents at September 30, 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.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

     Not applicable.

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

     Not applicable.

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)

                                       11
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:

     None.

                                   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:  November 9, 2001
                                      /s/ Thomas Sparrvik
                                      ------------------------------------------
                                      Thomas Sparrvik, President and Chief
                                      Executive Officer (as authorized officer)

                                       12