<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 October 3, 1999

                                       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

                            FIELDWORKS, INCORPORATED
             (Exact name of registrant as specified in its charter)

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


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

                                 (612) 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 9, 1999 was 8,894,426.

--------------------------------------------------------------------------------
<PAGE>

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

                            FIELDWORKS, INCORPORATED
                           Consolidated Balance Sheets

<TABLE>
<CAPTION>
                                                                                            October 3,      January 3,
                                                                                               1999            1999
                                                                                          -------------     ----------
                                                                                          (Unaudited)
<S>                                                                                       <C>             <C>
                                     ASSETS
CURRENT ASSETS:
   Cash and cash equivalents..........................................................    $  1,175,253    $  1,690,469
   Accounts receivable, net of allowance for doubtful accounts of $250,100 and
     $269,800, respectively...........................................................       3,756,684       3,930,366
   Inventories........................................................................       4,091,459       3,400,744
   Prepaid expenses and other.........................................................         489,922         121,780
                                                                                          ------------    ------------
         Total current assets.........................................................       9,513,318       9,143,359
                                                                                          ------------    ------------
PROPERTY AND EQUIPMENT:
   Computers and equipment............................................................       2,163,600       1,620,455
   Furniture and fixtures.............................................................       1,093,099       1,109,895
   Leasehold improvements.............................................................         435,813         458,216
   Less: Accumulated depreciation.....................................................      (1,888,993)     (1,393,342)
                                                                                          ------------    ------------
         Property and equipment, net..................................................       1,803,519       1,795,224
OTHER LONG TERM ASSETS, net...........................................................         133,879          17,385
                                                                                          ------------    ------------
                                                                                          $ 11,450,716    $ 10,955,968
                                                                                          ============    ============

                          LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
   Line of credit.....................................................................     $ 1,009,631        $681,981
   Accounts payable...................................................................       2,974,894       1,804,186
   Accrued warranty and product upgrade...............................................         825,689       1,102,798
   Accrued compensation and benefits..................................................         518,969         376,932
   Other accrued liabilities..........................................................         322,857         321,532
   Deferred revenue...................................................................         850,164         765,184
   Current maturities of capitalized lease obligations................................          40,226          13,548
                                                                                          ------------    ------------
         Total current liabilities....................................................       6,542,430       5,066,161
NOTES PAYABLE:
   Notes payable......................................................................       3,000,000              --
   Less:  Discount on notes payable...................................................         882,000              --
                                                                                          ------------    ------------
         Notes payable, net...........................................................       2,118,000              --
CAPITALIZED LEASE OBLIGATIONS, less current maturities................................          49,070          96,868
                                                                                          ------------    ------------
         Total liabilities............................................................       8,709,500       5,163,029
                                                                                          ------------    ------------
SHAREHOLDERS' EQUITY:
   Common stock, $.001 par value, 30,000,000 shares authorized; 8,894,426 and
     8,823,926 issued and outstanding, respectively...................................           8,894           8,824
   Common stock warrants..............................................................       1,010,922         150,640
   Additional paid-in capital.........................................................      20,186,658      20,085,011
   Accumulated deficit................................................................     (18,465,258)    (14,451,536)
                                                                                          ------------    ------------
         Total shareholders' equity...................................................       2,741,216       5,792,939
                                                                                          ------------    ------------
                                                                                          $ 11,450,716    $ 10,955,968
                                                                                          ============    ============
</TABLE>



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


                                       -2-
<PAGE>

                            FIELDWORKS, INCORPORATED
                      Consolidated Statements of Operations
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                For the Three Months Ended      For the Nine Months Ended
                                                                ---------------------------     --------------------------
                                                                 October 3,      October 4,      October 3,    October 4,
                                                                    1999            1998            1999          1998
                                                                -----------     -----------     -----------    -----------
<S>                                                             <C>             <C>             <C>            <C>
NET SALES ..................................................    $ 4,784,431     $ 4,412,312     $18,312,977    $13,632,083
COST OF SALES...............................................      3,538,376       2,969,855      13,095,256      9,945,144
                                                                -----------     -----------     -----------    -----------
         Gross profit.......................................      1,246,055       1,442,457       5,217,721      3,686,939
                                                                -----------     -----------     -----------    -----------
OPERATING EXPENSES:
     Sales and marketing....................................      1,561,435       1,290,331       4,033,387      4,154,229
     General and administrative.............................        704,016         647,101       2,258,160      2,229,629
     Research and development...............................        818,526         813,435       2,485,641      2,379,811
     Restructuring and product upgrade costs................        399,978         187,720         399,978      1,472,530
                                                                -----------     -----------     -----------    -----------
         Total operating expenses...........................      3,483,955       2,938,587       9,177,166     10,236,199
                                                                -----------     -----------     -----------    -----------
         Operating loss.....................................     (2,237,900)     (1,496,130)     (3,959,445)    (6,549,260)
INTEREST INCOME (EXPENSE) AND OTHER, net....................        (35,821)         33,927         (54,277)       136,863
                                                                -----------     -----------     -----------    -----------
NET LOSS....................................................    $(2,273,721)    $(1,462,203)    $(4,013,722)   $(6,412,397)
                                                                ===========     ===========     ===========    ===========

BASIC AND DILUTED EARNINGS (LOSS) PER SHARE:
   Net loss per common share................................    $      (.26)    $      (.17)    $      (.45)   $      (.73)
                                                                ===========     ===========     ===========    ===========
   Weighted average common shares outstanding...............      8,894,426       8,809,497       8,867,821      8,791,513
                                                                ===========     ===========     ===========    ===========
</TABLE>

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


                                       -3-
<PAGE>

                            FIELDWORKS, INCORPORATED
                      Consolidated Statements of Cash Flows
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                            For the Nine Months Ended
                                                                          ------------------------------
                                                                          October 3,         October 4,
                                                                             1999               1998
                                                                          -----------        -----------
<S>                                                                       <C>                <C>
OPERATING ACTIVITIES:
     Net loss....................................................         $(4,013,722)       $(6,412,397)
     Adjustments to reconcile net loss to net cash used for
        operating activities-
          Depreciation and amortization..........................             495,734            517,516
          Accrued product upgrade and restructuring costs........             399,978          1,010,001
          Non-cash consulting expense............................               9,500                 --
          Change in operating items:
               Accounts receivable...............................             173,682          3,513,723
               Inventories.......................................            (690,715)         1,063,111
               Prepaid expenses and other........................            (484,719)            50,265
               Accounts payable..................................           1,170,708           (182,012)
               Accrued expenses..................................            (533,725)          (313,269)
               Deferred revenue..................................              84,980            200,739
                                                                          -----------        -----------
               Net cash used for operating activities............          (3,388,299)          (552,323)
                                                                          -----------        -----------
INVESTING ACTIVITIES:
     Net purchases of property and equipment.....................            (503,946)        (1,044,948)
                                                                          -----------        -----------
          Net cash used for investing activities.................            (503,946)        (1,044,948)
                                                                          -----------        -----------
FINANCING ACTIVITIES:
       Proceeds from issuance of notes...........................           3,000,000                 --
     Proceeds from issuance of common stock......................              70,499            115,508
     Net line of credit borrowings (repayments)..................             327,650                 --
     Payment of capitalized lease obligations....................             (21,120)           (39,556)
                                                                          -----------        -----------
          Net cash provided by financing activities..............           3,377,029             75,952
                                                                          -----------        -----------
CHANGE IN CASH AND CASH EQUIVALENTS..............................            (515,216)        (1,521,319)
CASH AND CASH EQUIVALENTS, beginning of period...................           1,690,469          3,218,759
                                                                          -----------        -----------
CASH AND CASH EQUIVALENTS, end of period.........................         $ 1,175,253        $ 1,697,440
                                                                          ===========        ===========

SUPPLEMENTAL CASH FLOW DISCLOSURE:
     Cash paid for interest......................................         $    85,162        $     5,962
                                                                          ===========        ===========

NON CASH FINANCING ACTIVITIES:
     Issuance of warrants........................................         $   882,000        $        --
                                                                          ===========        ===========
     Expiration of warrants......................................         $    31,218        $        --
                                                                          ===========        ===========
     Non-cash consulting expense.................................         $     9,500        $        --
                                                                          ===========        ===========
</TABLE>

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


                                       -4-
<PAGE>

                            FIELDWORKS, INCORPORATED
                   Notes to Consolidated Financial Statements
                                   (Unaudited)

1.   Basis of Presentation:

     The accompanying unaudited consolidated financial statements of FieldWorks,
Incorporated (FieldWorks or the Company), should be read in conjunction with the
consolidated 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 January 3, 1999. In the opinion of management, the
accompanying consolidated 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.

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:

                                                October 3,      January 3,
                                                   1999            1999
                                                ----------      ----------
Raw materials..............................     $2,873,011      $2,478,662
Work in process............................        499,253         173,791
Finished goods.............................        719,195         748,291
                                                ----------      ----------
     Total.................................     $4,091,459      $3,400,744
                                                ==========      ==========

3.   Earnings (Loss) Per Share:

     The Company presents earnings (loss) per share (EPS) data in accordance
with the requirements of the Statement of Financial Accounting Standards No.
128. Under SFAS No. 128, basic EPS is computed by dividing net income by the
weighted average number of shares of common stock outstanding during the period.
No dilution for potentially dilutive securities is included. Diluted EPS is
calculated using the treasury stock method and reflects the dilutive effect of
outstanding options, warrants and other securities. In the Company's
calculations, the impact of common stock equivalents has been excluded from the
computation of weighted average common shares outstanding as the effect would be
antidilutive. As a result, basic and diluted EPS are equal for all periods
presented in the accompanying Consolidated Statements of Operations.

4.   Restructuring and Product Upgrade Costs:

     In 1999, the Company incurred restructuring costs due to severance charges
from reorganizational efforts related to outsourcing certain aspects of the
manufacturing and design of products. In 1998, these costs related to the
discontinuation of the 5000 Series I Workstation, as well as other internal
reorganization efforts.

5.   Issuance of Notes:

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

                                       -5-
<PAGE>

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, 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 January 3, 1999.

                                       -6-
<PAGE>

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
                                               --------------------------      -------------------------
                                                 October 3,    October 4,      October 3,    October 4,
                                                    1999           1998           1999          1998
                                                 ----------    ----------      ----------    ----------
<S>                                              <C>            <C>             <C>           <C>
Net sales.....................................       100%           100%          100%          100%
Cost of sales.................................        74             67            72            73
                                                     ---            ---           ---           ---
     Gross profit.............................        26             33            28            27
Operating expenses:
     Sales and marketing......................        33             29            22            30
     General and administrative...............        15             15            12            16
     Research and development.................        17             19            14            18
     Restructuring and product upgrade costs..         8              4             2            11
                                                     ---            ---           ---           ---
          Total operating expenses............        73             67            50            75
                                                     ---            ---           ---           ---
Operating loss................................       (47)           (34)          (22)          (48)
Interest income (expense) and other, net......        (1)             1            *              1
                                                     ---            ---           ---           ---
Net loss......................................       (48)%          (33)%         (22)%         (47)%
                                                     ===            ===           ===           ===
</TABLE>

*Less than .5%.

     Net Sales. The Company's net sales increased 8% from $4.4 million in the
third quarter of fiscal 1998 to $4.8 million for the third quarter of fiscal
1999 and increased 34% from $13.6 million in the first nine months of 1998 to
$18.3 million for the comparable period in 1999. The year-to-date increase was
partially due to significant customer contracts in the first six months of 1999
for the 5000 Series Workstation, offset by a decrease in sales of the 7000
Series Workstation due to customer anticipation of the 8000 Series Workstation,
a technologically enhanced and updated product. Unit volumes of the 5000 Series
Workstation decreased 16% from the third quarter of 1998 to the third quarter of
1999; however, the volumes increased 84% from the first nine months of 1998 to
the comparable period in 1999 due to significant customer sales in the trucking
industry. Unit volumes of the 7000 Series Workstation decreased 29% from the
third quarter of 1998 to the third quarter of 1999 and 19% from the first nine
months of 1998 to the first nine months of 1999. Sales of the 5000 Series
Workstations represented 35% and 52% of net sales for the nine months ended
October 4, 1998 and October 3, 1999, respectively. Sales of the FW2000 Series
Embedded Vehicle Server were $0.8 million for the nine months ended October 3,
1999. Revenue of $0.7 million for the FW2000 Series during the third quarter of
1999 was less than anticipated due to initial production delays and supplier
constraints. Production of the FW2000 began in mid-1999; therefore, there were
no comparable sales in 1998. Professional Services revenue, including product
upgrades, technical support and non-standard product sales accounted for $1.0
million, or 20% of net sales, for the third quarter of 1999 and $2.7 million, or
15% of net sales, for the first nine months of 1999. Professional services
revenue was not significant in 1998.

     The Company has focused its marketing efforts on the transportation, public
services and government/military markets with emphasis on service bay, mobile
communications and test measurement/data acquisition applications. Two
customers, John Deere Information Systems and Ryder Transportation Services,
represented over 10% of the Company's net sales or $0.8 million and $0.7
million, respectively for the third quarter of 1999 and one customer, Navistar
International, represented revenues of $0.5 million in the third quarter of
1998.

     International sales decreased from $3.5 million, or 26% of net sales, for
the first nine months of 1998 to $2.7 million, or 15% of net sales, for the
comparable period in 1999. The decrease in international sales for the first
nine months of 1999 as compared to the same period in 1998 was due to the level
of significant contracts with domestic customers and order acceleration by
international customers in late 1998. Additionally, international customers are
waiting for the enhanced 8000 Series Workstation which is currently in the
pre-production testing phase. The majority of international sales, approximately
69%, are in Europe. The Company believes that international sales, as a
percentage of net sales, will be in the mid-teen to 20% range for the remainder
of 1999, with little impact on the Company's results of operations or liquidity.

                                       -7-
<PAGE>

     Gross Profit. Gross profit decreased from $1.4 million, or 33% of net
sales, for the third quarter of 1998 to $1.2 million, or 26% of net sales, for
the third quarter of 1999. Gross profit increased from $3.7 million, or 27% of
net sales, for the first nine months of 1998 to $5.2 million, or 28% of net
sales, for the first nine months of 1999. Gross margin for the first nine months
in 1998 was negatively impacted by an inventory writedown of $1.0 million in the
second quarter. This writedown related to excess and obsolete inventory due to
product changes in response to technological developments and market needs. In
1999, sales under high volume contracts, which include volume discounts,
comprised a significant portion of sales for the first nine months.
Additionally, gross margin was negatively impacted by disposition of previously
identified obsolete inventory during the first nine months of 1999. Recovery on
this inventory has been less than anticipated resulting in additional write-off
of $264,000. Gross margin was also negatively impacted by start-up costs
associated with the introduction of the FW2000 Series. 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,
utilization of manufacturing capacity, large customer contracts (with the
associated volume discounts) and outsourcing expenses.

     The Company has identified contract manufacturers for outsourcing of
certain manufacturing activities and expects complete implementation in the
first quarter of 2000. The Company will initially outsource the final assembly
process with the intent of improving design for manufacturability. Final
integration work will remain at the Company, as appropriate. The Company
anticipates outsourcing will moderately reduce future material costs, inventory
write-offs and operating expenses. The Company anticipates gross profit margins
in the low 30% range in the near future.

     Sales and Marketing. Sales and marketing expenses include salaries, sales
commissions, travel, technical support and professional services personnel,
advertising, promotions and trade shows. In addition, these expenses include the
labor and material costs related to maintaining the Company's standard one-year
warranty on its products. Sales and marketing expenses increased from $1.3
million, or 29% of net sales, for the third quarter of 1998 to $1.6 million, or
33% of net sales, for the comparable period in 1999. This increase is a result
of establishing the Professional Services organization and the writedown of
demonstration equipment in 1999. In the first nine months of 1998, sales and
marketing expenses were $4.2 million and 30% of net sales as compared to $4.0
million and 22% of net sales in the first nine months of 1999. The decrease in
the nine-month period was due to a reduction in promotion and advertising
expenses as vertical market strategies were developed, as well as other cost
control initiatives. In addition, warranty expense decreased due to enhanced
performance and specific component level repair. The Company plans to expand its
sales force and resale channels and moderately increase its promotion and
marketing efforts through 1999 within its target markets of transportation,
public services and government/military. Accordingly, the Company anticipates an
increase in sales and marketing expenditures in future periods.

     General and Administrative. General and administrative expenses include the
Company's executive, finance and administration, human resources, and
information services departments. These expenses increased from $0.6 million for
the quarter ended October 4, 1998, to $0.7 million for the quarter ended October
3, 1999. As a percentage of net sales, general and administrative expenses
remained constant at 15% for the quarters ended October 4, 1998 and October 3,
1999. General and administrative expenses increased slightly from $2.2 million
for the first nine months of 1998 as compared to $2.3 million for the first nine
months and 1999 and represented 16% and 12% of net sales, respectively. The
increase is partially due to organizational changes resulting from outsourcing
activities. 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. These costs are expensed as incurred. Research
and development expenses remained constant at $0.8 million for the third
quarters of 1998 and 1999. As a percentage of net sales, research and
development costs were 19% and 17% for the third quarter of 1998 and 1999,
respectively. Research and development expenses increased slightly from $2.4
million for the first nine months of 1998 to $2.5 million for the comparable
period in 1999. As a percentage of net sales, research and development expenses
decreased from 18% for the first nine months of 1998 to 14% for the first nine
months of 1999. The $0.1 million increase was primarily due to the development
of new products, including the FieldWorks 2000 Series Mobile Embedded Vehicle
System and engineering support of customer-specific applications. The Company
expects research and development expenses to remain constant or slightly
increase in dollar amounts through the end of 1999 due to finalizing the 8000
Series Workstation and to remain stable in 2000 as product outsourcing is
completed.

                                      -8-
<PAGE>

     Restructuring and Product Upgrade Costs. Restructuring and product upgrade
costs were $0.2 million, or 4% of net sales, for the third quarter of 1998 as
compared to $0.4 million, or 8% of net sales for the third quarter of 1999.
Restructuring and product upgrade costs decreased from $1.5 million, or 11% of
net sales, for the first nine months of 1998 to $0.4 million, or 2% of net
sales, for the first nine months of 1999. In 1999, the costs were due to
severance charges from reorganizational efforts related to outsourcing the
manufacturing and design of products. In 1998, these costs related to the
discontinuation of the 5000 Series I Workstation, as well as other internal
reorganization efforts.

     Interest Income (Expense) and Other, Net. Net interest income was
approximately $34,000 for the third quarter of 1998 compared to net interest
expense of $36,000 for the comparable period in 1999. Net interest income for
the first nine months of 1998 was $137,000 compared to net interest expense of
$54,000 for the comparable period in 1999. The increase in interest expense is
due to borrowings on the Company's line of credit. The Company will continue
recording interest expense from both its line of credit and interest payments on
its subordinated notes issued in September 1999. Additionally, financing costs
of $882,000 related to warrants issued in September 1999 will be amortized over
the next two years. The Company anticipates recording net interest expense for
the foreseeable future.

Liquidity and Capital Resources

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

     In November 1998, the Company entered into a two-year, $3.0 million line of
credit agreement. Borrowings bear interest at the greater of 4% over prime or
9%. The interest rate changed from 3% over prime to 4% over prime in the third
quarter of 1999 due to default on the Company's profitability covenant. At
October 3, 1999, the interest rate was 12.25%. The line of credit balance was
$1.0 million as of October 3, 1999, as compared to $0.7 million at January 3,
1999. The borrowing base consists of 75% of eligible receivables plus the lesser
of $600,000 or 30% of eligible inventory as defined in the agreement.
Availability based on the borrowing base calculation, including accounts
receivable and inventory, was $2.5 million as of October 3, 1999 and was $1.7
million, including only accounts receivable, as of January 3, 1999. The
agreement contains a covenant requiring cumulative year-to-date profit on a
quarterly basis. The Company was out of compliance with the covenant as of
October 3, 1999, and has received a written waiver of default. Failure to comply
with this covenant in the future could result in default, interest rate
increases and immediate repayment requirements.

     Cash used for operating activities totaled $3.4 million for the first nine
months of 1999. The Company's accounts receivable decreased $0.1 million from
$3.9 million at January 3, 1999 to $3.8 million at October 3, 1999 due to timing
of payments received. Inventories increased $0.7 million to $4.1 million at
October 3, 1999 due to purchases for anticipated sales and backlog on the FW2000
Series product.

     The Company purchased $0.5 million of property, plant and equipment during
the first nine months of 1999. The expenditures related primarily to
manufacturing tooling for vendors of the Company's FW2000 Series Mobile Embedded
Vehicle System. The Company anticipates maintaining this level of expenditures
in the foreseeable future, as new product line developments are completed and
existing platforms are enhanced. However, the Company's overall property, plant
and equipment expenditures are expected to decrease slightly as compared to
prior years due to no additional planned leasehold improvements.

                                       -9-
<PAGE>

The Company anticipates that the proceeds from its issuance of
 subordinated notes, together with its line of credit, and anticipated operating
cash flows, should be sufficient to fund its cash flow needs through the year
2000. Although to accelerate the Company's growth and enhance its product
offering and market position, additional cash sources may be pursued. Cash
requirements for future periods depend on demand for the Company's products,
cash management operations, growth rate, and acquisition strategies, among other
factors. There can be no assurances that additional financing, if needed, will
be available, or if it is available, that it would be on terms favorable to the
Company and would not be dilutive to existing shareholders.

Year 2000

     The year 2000 issue is the result of computer programs using only the last
two digits to identify the year. These programs may not be able to interpret
dates beyond the year 1999, which could cause computer system failure or other
errors disrupting operations. The Company is aware of the potential computing
difficulties that the issue presents for the Company's operations in the year
2000 and as a result, has established an internal team, reporting to upper
management, to address the issue. This team's focus includes the functioning of
the Company's products, internal computer systems and non-computer operations,
production processes, key vendors, vital business partners and critical
customers.

     The Company's major internal information systems software was upgraded
during the first quarter of 1998 to ensure year 2000 compliance and provide
enhanced systems capabilities. The total cost of the implementation was
$110,000. The Company plans to perform other minor upgrades to its software and
hardware. Approximately 95% of the expected costs associated with internal
systems software alterations have been incurred to date. The Company's internal
production processes and non-information systems software have been assessed and
the Company believes these items are year 2000 compliant.

     Management believes its current products are year 2000 compliant and is
offering updated configuration software for products shipped in prior periods.
Notification to customers of the availability of updated software has occurred.
Associated costs are expected to be under $100,000. Approximately 95% of the
expected costs associated with ensuring that the Company's products are year
2000 compliant have been incurred to date.

     The source of funds for upgrades to internal software, production processes
and previously sold products is existing operating cash flows. There are
currently no other projects within the Company that are affected by the outlay
of significant resources to ensure year 2000 compliance.

     The Company's operations with respect to the year 2000 may also be affected
by the readiness of other entities with which the Company transacts business.
The Company has requested documentation from its vendors regarding compliance,
and will evaluate alternative courses of action for vendors who are not or will
not be year 2000 compliant. The Company has identified its critical vendors and
is in the process of verifying which are currently year 2000 compliant.
Contingency plans for all critical vendors have not yet been completed.

     The year 2000 issue creates risk for the Company from unforeseen problems
in its own computer systems and from the Company's vendors. Although the Company
does not believe that the year 2000 issue will have a material impact on its
business, financial position, results of operations or liquidity, it is
uncertain what effect any failure of the Company's systems or its vendors'
systems might have on its operations.

     Although the Company intends to fully address the year 2000 issue, without
further assessment or resources assigned, the Company can give no assurance that
the year 2000 issue will not cause significant business disruption, including
delays in parts availability resulting in potential shipping delays and/or lost
revenues.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The Company does not utilize derivative or other financial instruments for
hedging or speculative purposes, and accordingly, is not exposed to these types
of market risk.

                                      -10-
<PAGE>

     The Company is subject to interest rate risk related to its outstanding
line of credit and note borrowings and any existing money market or other
investment amounts. The Company's line of credit bears interest at a rate based
on the prime lending rate, and any money market investments also earn interest
based on market rates. The Company's long-term notes bear interest at a fixed
rate. Based on current interest rate conditions, the Company does not believe
that it is exposed to significant associated market risk.

     All of the Company's transactions are conducted and accounts are
denominated in United States dollars and as such, the Company does not currently
have exposure to foreign currency risk.

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

     In September 1999, the Company completed a private placement of $3.0
million in subordinated notes. The subordinated notes were sold to accredited
investors through the placement agent Dougherty Summit Securities LLC. The
Company received $3.0 million in cash, less $240,000 in commission.
Additionally, the Company granted 150,000 warrants to Dougherty Summit
Securities LLC. The Company relied on an exemption from registration under
Section 4(2) of the Securities Act of 1933, as amended. 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.

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.

                                      -11-
<PAGE>

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits

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

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

         Exhibit 10.1   Compensation agreement with David C. Malmberg (filed
                        herewith)

         Exhibit 10.2   Consulting agreement with Robert W. Heller (filed
                        herewith)

         Exhibit 10.3   Form of Subscription and Note Purchase Agreement, Form
                        of Subordinated Promissory Note, Form of Warrant to
                        Purchase Shares of Common Stock (filed herewith)

         Exhibit 10.4   Common Stock Warrant Agreements with Dougherty Summit
                        Securities LLC dated September 7, 1999; September 23,
                        1999; and September 30, 1999 (filed herewith)

         Exhibit 10.5   First Amendment to General Credit and Security Agreement
                        with Spectrum Commercial Services, dated August 20, 1999
                        (filed herewith)

         Exhibit 27.1   Financial Data Schedule (filed herewith)

(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.

FIELDWORKS, INCORPORATED


Date: November 16, 1999                /s/ Karen L. Engebretson
                                       ----------------------------------------
                                       Karen L. Engebretson, Vice President
                                       of Finance and CFO (as authorized
                                       officer and principal financial officer)

                                      -12-
[{"type": "10-Q", "sequence": "1", "description": "FORM 10-Q", "secsgml_size_bytes": 47645}]
{"company-data": {"conformed-name": "FIELDWORKS 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": "99758347"}, "business-address": {"street1": "7631 ANAGRAM DRIVE", "city": "EDEN PRAIRIE", "state": "MN", "zip": "55344", "phone": "6129747000"}, "mail-address": {"street1": "9961 VALLEY VIEW RD", "city": "EDEN PRAIRIE", "state": "MN", "zip": "55344"}}
--------------------------------------------------------------------------------

                                  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 October 3, 1999

                                       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

                            FIELDWORKS, INCORPORATED
             (Exact name of registrant as specified in its charter)

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

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

                                 (612) 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 9, 1999 was 8,894,426.

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

                            FIELDWORKS, INCORPORATED
                           Consolidated Balance Sheets
October 3,      January 3,
                                                                                               1999            1999
                                                                                          -------------     ----------
                                                                                          (Unaudited)
ASSETS
CURRENT ASSETS:
   Cash and cash equivalents..........................................................    $  1,175,253    $  1,690,469
   Accounts receivable, net of allowance for doubtful accounts of $250,100 and
     $269,800, respectively...........................................................       3,756,684       3,930,366
   Inventories........................................................................       4,091,459       3,400,744
   Prepaid expenses and other.........................................................         489,922         121,780
                                                                                          ------------    ------------
         Total current assets.........................................................       9,513,318       9,143,359
                                                                                          ------------    ------------
PROPERTY AND EQUIPMENT:
   Computers and equipment............................................................       2,163,600       1,620,455
   Furniture and fixtures.............................................................       1,093,099       1,109,895
   Leasehold improvements.............................................................         435,813         458,216
   Less: Accumulated depreciation.....................................................      (1,888,993)     (1,393,342)
                                                                                          ------------    ------------
         Property and equipment, net..................................................       1,803,519       1,795,224
OTHER LONG TERM ASSETS, net...........................................................         133,879          17,385
                                                                                          ------------    ------------
                                                                                          $ 11,450,716    $ 10,955,968
                                                                                          ============    ============

                          LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
   Line of credit.....................................................................     $ 1,009,631        $681,981
   Accounts payable...................................................................       2,974,894       1,804,186
   Accrued warranty and product upgrade...............................................         825,689       1,102,798
   Accrued compensation and benefits..................................................         518,969         376,932
   Other accrued liabilities..........................................................         322,857         321,532
   Deferred revenue...................................................................         850,164         765,184
   Current maturities of capitalized lease obligations................................          40,226          13,548
                                                                                          ------------    ------------
         Total current liabilities....................................................       6,542,430       5,066,161
NOTES PAYABLE:
   Notes payable......................................................................       3,000,000              --
   Less:  Discount on notes payable...................................................         882,000              --
                                                                                          ------------    ------------
         Notes payable, net...........................................................       2,118,000              --
CAPITALIZED LEASE OBLIGATIONS, less current maturities................................          49,070          96,868
                                                                                          ------------    ------------
         Total liabilities............................................................       8,709,500       5,163,029
                                                                                          ------------    ------------
SHAREHOLDERS' EQUITY:
   Common stock, $.001 par value, 30,000,000 shares authorized; 8,894,426 and
     8,823,926 issued and outstanding, respectively...................................           8,894           8,824
   Common stock warrants..............................................................       1,010,922         150,640
   Additional paid-in capital.........................................................      20,186,658      20,085,011
   Accumulated deficit................................................................     (18,465,258)    (14,451,536)
                                                                                          ------------    ------------
         Total shareholders' equity...................................................       2,741,216       5,792,939
                                                                                          ------------    ------------
                                                                                          $ 11,450,716    $ 10,955,968
                                                                                          ============    ============
The accompanying notes are an integral part
                  of these consolidated financial statements.

                                       -2-
FIELDWORKS, INCORPORATED
                      Consolidated Statements of Operations
                                   (Unaudited)
For the Three Months Ended      For the Nine Months Ended
                                                                ---------------------------     --------------------------
                                                                 October 3,      October 4,      October 3,    October 4,
                                                                    1999            1998            1999          1998
                                                                -----------     -----------     -----------    -----------
NET SALES ..................................................    $ 4,784,431     $ 4,412,312     $18,312,977    $13,632,083
COST OF SALES...............................................      3,538,376       2,969,855      13,095,256      9,945,144
                                                                -----------     -----------     -----------    -----------
         Gross profit.......................................      1,246,055       1,442,457       5,217,721      3,686,939
                                                                -----------     -----------     -----------    -----------
OPERATING EXPENSES:
     Sales and marketing....................................      1,561,435       1,290,331       4,033,387      4,154,229
     General and administrative.............................        704,016         647,101       2,258,160      2,229,629
     Research and development...............................        818,526         813,435       2,485,641      2,379,811
     Restructuring and product upgrade costs................        399,978         187,720         399,978      1,472,530
                                                                -----------     -----------     -----------    -----------
         Total operating expenses...........................      3,483,955       2,938,587       9,177,166     10,236,199
                                                                -----------     -----------     -----------    -----------
         Operating loss.....................................     (2,237,900)     (1,496,130)     (3,959,445)    (6,549,260)
INTEREST INCOME (EXPENSE) AND OTHER, net....................        (35,821)         33,927         (54,277)       136,863
                                                                -----------     -----------     -----------    -----------
NET LOSS....................................................    $(2,273,721)    $(1,462,203)    $(4,013,722)   $(6,412,397)
                                                                ===========     ===========     ===========    ===========

BASIC AND DILUTED EARNINGS (LOSS) PER SHARE:
   Net loss per common share................................    $      (.26)    $      (.17)    $      (.45)   $      (.73)
                                                                ===========     ===========     ===========    ===========
   Weighted average common shares outstanding...............      8,894,426       8,809,497       8,867,821      8,791,513
                                                                ===========     ===========     ===========    ===========
The accompanying notes are an integral part
                   of these consolidated financial statements.

                                       -3-
FIELDWORKS, INCORPORATED
                      Consolidated Statements of Cash Flows
                                   (Unaudited)
For the Nine Months Ended
                                                                          ------------------------------
                                                                          October 3,         October 4,
                                                                             1999               1998
                                                                          -----------        -----------
OPERATING ACTIVITIES:
     Net loss....................................................         $(4,013,722)       $(6,412,397)
     Adjustments to reconcile net loss to net cash used for
        operating activities-
          Depreciation and amortization..........................             495,734            517,516
          Accrued product upgrade and restructuring costs........             399,978          1,010,001
          Non-cash consulting expense............................               9,500                 --
          Change in operating items:
               Accounts receivable...............................             173,682          3,513,723
               Inventories.......................................            (690,715)         1,063,111
               Prepaid expenses and other........................            (484,719)            50,265
               Accounts payable..................................           1,170,708           (182,012)
               Accrued expenses..................................            (533,725)          (313,269)
               Deferred revenue..................................              84,980            200,739
                                                                          -----------        -----------
               Net cash used for operating activities............          (3,388,299)          (552,323)
                                                                          -----------        -----------
INVESTING ACTIVITIES:
     Net purchases of property and equipment.....................            (503,946)        (1,044,948)
                                                                          -----------        -----------
          Net cash used for investing activities.................            (503,946)        (1,044,948)
                                                                          -----------        -----------
FINANCING ACTIVITIES:
       Proceeds from issuance of notes...........................           3,000,000                 --
     Proceeds from issuance of common stock......................              70,499            115,508
     Net line of credit borrowings (repayments)..................             327,650                 --
     Payment of capitalized lease obligations....................             (21,120)           (39,556)
                                                                          -----------        -----------
          Net cash provided by financing activities..............           3,377,029             75,952
                                                                          -----------        -----------
CHANGE IN CASH AND CASH EQUIVALENTS..............................            (515,216)        (1,521,319)
CASH AND CASH EQUIVALENTS, beginning of period...................           1,690,469          3,218,759
                                                                          -----------        -----------
CASH AND CASH EQUIVALENTS, end of period.........................         $ 1,175,253        $ 1,697,440
                                                                          ===========        ===========

SUPPLEMENTAL CASH FLOW DISCLOSURE:
     Cash paid for interest......................................         $    85,162        $     5,962
                                                                          ===========        ===========

NON CASH FINANCING ACTIVITIES:
     Issuance of warrants........................................         $   882,000        $        --
                                                                          ===========        ===========
     Expiration of warrants......................................         $    31,218        $        --
                                                                          ===========        ===========
     Non-cash consulting expense.................................         $     9,500        $        --
                                                                          ===========        ===========
The accompanying notes are an integral part
                  of these consolidated financial statements.

                                       -4-
FIELDWORKS, INCORPORATED
                   Notes to Consolidated Financial Statements
                                   (Unaudited)

1.   Basis of Presentation:

     The accompanying unaudited consolidated financial statements of FieldWorks,
Incorporated (FieldWorks or the Company), should be read in conjunction with the
consolidated 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 January 3, 1999. In the opinion of management, the
accompanying consolidated 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.

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:

                                                October 3,      January 3,
                                                   1999            1999
                                                ----------      ----------
Raw materials..............................     $2,873,011      $2,478,662
Work in process............................        499,253         173,791
Finished goods.............................        719,195         748,291
                                                ----------      ----------
     Total.................................     $4,091,459      $3,400,744
                                                ==========      ==========

3.   Earnings (Loss) Per Share:

     The Company presents earnings (loss) per share (EPS) data in accordance
with the requirements of the Statement of Financial Accounting Standards No.
128. Under SFAS No. 128, basic EPS is computed by dividing net income by the
weighted average number of shares of common stock outstanding during the period.
No dilution for potentially dilutive securities is included. Diluted EPS is
calculated using the treasury stock method and reflects the dilutive effect of
outstanding options, warrants and other securities. In the Company's
calculations, the impact of common stock equivalents has been excluded from the
computation of weighted average common shares outstanding as the effect would be
antidilutive. As a result, basic and diluted EPS are equal for all periods
presented in the accompanying Consolidated Statements of Operations.

4.   Restructuring and Product Upgrade Costs:

     In 1999, the Company incurred restructuring costs due to severance charges
from reorganizational efforts related to outsourcing certain aspects of the
manufacturing and design of products. In 1998, these costs related to the
discontinuation of the 5000 Series I Workstation, as well as other internal
reorganization efforts.

5.   Issuance of Notes:

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

                                       -5-
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, 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 January 3, 1999.

                                       -6-
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
                                               --------------------------      -------------------------
                                                 October 3,    October 4,      October 3,    October 4,
                                                    1999           1998           1999          1998
                                                 ----------    ----------      ----------    ----------
Net sales.....................................       100%           100%          100%          100%
Cost of sales.................................        74             67            72            73
                                                     ---            ---           ---           ---
     Gross profit.............................        26             33            28            27
Operating expenses:
     Sales and marketing......................        33             29            22            30
     General and administrative...............        15             15            12            16
     Research and development.................        17             19            14            18
     Restructuring and product upgrade costs..         8              4             2            11
                                                     ---            ---           ---           ---
          Total operating expenses............        73             67            50            75
                                                     ---            ---           ---           ---
Operating loss................................       (47)           (34)          (22)          (48)
Interest income (expense) and other, net......        (1)             1            *              1
                                                     ---            ---           ---           ---
Net loss......................................       (48)%          (33)%         (22)%         (47)%
                                                     ===            ===           ===           ===
*Less than .5%.

     Net Sales. The Company's net sales increased 8% from $4.4 million in the
third quarter of fiscal 1998 to $4.8 million for the third quarter of fiscal
1999 and increased 34% from $13.6 million in the first nine months of 1998 to
$18.3 million for the comparable period in 1999. The year-to-date increase was
partially due to significant customer contracts in the first six months of 1999
for the 5000 Series Workstation, offset by a decrease in sales of the 7000
Series Workstation due to customer anticipation of the 8000 Series Workstation,
a technologically enhanced and updated product. Unit volumes of the 5000 Series
Workstation decreased 16% from the third quarter of 1998 to the third quarter of
1999; however, the volumes increased 84% from the first nine months of 1998 to
the comparable period in 1999 due to significant customer sales in the trucking
industry. Unit volumes of the 7000 Series Workstation decreased 29% from the
third quarter of 1998 to the third quarter of 1999 and 19% from the first nine
months of 1998 to the first nine months of 1999. Sales of the 5000 Series
Workstations represented 35% and 52% of net sales for the nine months ended
October 4, 1998 and October 3, 1999, respectively. Sales of the FW2000 Series
Embedded Vehicle Server were $0.8 million for the nine months ended October 3,
1999. Revenue of $0.7 million for the FW2000 Series during the third quarter of
1999 was less than anticipated due to initial production delays and supplier
constraints. Production of the FW2000 began in mid-1999; therefore, there were
no comparable sales in 1998. Professional Services revenue, including product
upgrades, technical support and non-standard product sales accounted for $1.0
million, or 20% of net sales, for the third quarter of 1999 and $2.7 million, or
15% of net sales, for the first nine months of 1999. Professional services
revenue was not significant in 1998.

     The Company has focused its marketing efforts on the transportation, public
services and government/military markets with emphasis on service bay, mobile
communications and test measurement/data acquisition applications. Two
customers, John Deere Information Systems and Ryder Transportation Services,
represented over 10% of the Company's net sales or $0.8 million and $0.7
million, respectively for the third quarter of 1999 and one customer, Navistar
International, represented revenues of $0.5 million in the third quarter of
1998.

     International sales decreased from $3.5 million, or 26% of net sales, for
the first nine months of 1998 to $2.7 million, or 15% of net sales, for the
comparable period in 1999. The decrease in international sales for the first
nine months of 1999 as compared to the same period in 1998 was due to the level
of significant contracts with domestic customers and order acceleration by
international customers in late 1998. Additionally, international customers are
waiting for the enhanced 8000 Series Workstation which is currently in the
pre-production testing phase. The majority of international sales, approximately
69%, are in Europe. The Company believes that international sales, as a
percentage of net sales, will be in the mid-teen to 20% range for the remainder
of 1999, with little impact on the Company's results of operations or liquidity.

                                       -7-
Gross Profit. Gross profit decreased from $1.4 million, or 33% of net
sales, for the third quarter of 1998 to $1.2 million, or 26% of net sales, for
the third quarter of 1999. Gross profit increased from $3.7 million, or 27% of
net sales, for the first nine months of 1998 to $5.2 million, or 28% of net
sales, for the first nine months of 1999. Gross margin for the first nine months
in 1998 was negatively impacted by an inventory writedown of $1.0 million in the
second quarter. This writedown related to excess and obsolete inventory due to
product changes in response to technological developments and market needs. In
1999, sales under high volume contracts, which include volume discounts,
comprised a significant portion of sales for the first nine months.
Additionally, gross margin was negatively impacted by disposition of previously
identified obsolete inventory during the first nine months of 1999. Recovery on
this inventory has been less than anticipated resulting in additional write-off
of $264,000. Gross margin was also negatively impacted by start-up costs
associated with the introduction of the FW2000 Series. 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,
utilization of manufacturing capacity, large customer contracts (with the
associated volume discounts) and outsourcing expenses.

     The Company has identified contract manufacturers for outsourcing of
certain manufacturing activities and expects complete implementation in the
first quarter of 2000. The Company will initially outsource the final assembly
process with the intent of improving design for manufacturability. Final
integration work will remain at the Company, as appropriate. The Company
anticipates outsourcing will moderately reduce future material costs, inventory
write-offs and operating expenses. The Company anticipates gross profit margins
in the low 30% range in the near future.

     Sales and Marketing. Sales and marketing expenses include salaries, sales
commissions, travel, technical support and professional services personnel,
advertising, promotions and trade shows. In addition, these expenses include the
labor and material costs related to maintaining the Company's standard one-year
warranty on its products. Sales and marketing expenses increased from $1.3
million, or 29% of net sales, for the third quarter of 1998 to $1.6 million, or
33% of net sales, for the comparable period in 1999. This increase is a result
of establishing the Professional Services organization and the writedown of
demonstration equipment in 1999. In the first nine months of 1998, sales and
marketing expenses were $4.2 million and 30% of net sales as compared to $4.0
million and 22% of net sales in the first nine months of 1999. The decrease in
the nine-month period was due to a reduction in promotion and advertising
expenses as vertical market strategies were developed, as well as other cost
control initiatives. In addition, warranty expense decreased due to enhanced
performance and specific component level repair. The Company plans to expand its
sales force and resale channels and moderately increase its promotion and
marketing efforts through 1999 within its target markets of transportation,
public services and government/military. Accordingly, the Company anticipates an
increase in sales and marketing expenditures in future periods.

     General and Administrative. General and administrative expenses include the
Company's executive, finance and administration, human resources, and
information services departments. These expenses increased from $0.6 million for
the quarter ended October 4, 1998, to $0.7 million for the quarter ended October
3, 1999. As a percentage of net sales, general and administrative expenses
remained constant at 15% for the quarters ended October 4, 1998 and October 3,
1999. General and administrative expenses increased slightly from $2.2 million
for the first nine months of 1998 as compared to $2.3 million for the first nine
months and 1999 and represented 16% and 12% of net sales, respectively. The
increase is partially due to organizational changes resulting from outsourcing
activities. 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. These costs are expensed as incurred. Research
and development expenses remained constant at $0.8 million for the third
quarters of 1998 and 1999. As a percentage of net sales, research and
development costs were 19% and 17% for the third quarter of 1998 and 1999,
respectively. Research and development expenses increased slightly from $2.4
million for the first nine months of 1998 to $2.5 million for the comparable
period in 1999. As a percentage of net sales, research and development expenses
decreased from 18% for the first nine months of 1998 to 14% for the first nine
months of 1999. The $0.1 million increase was primarily due to the development
of new products, including the FieldWorks 2000 Series Mobile Embedded Vehicle
System and engineering support of customer-specific applications. The Company
expects research and development expenses to remain constant or slightly
increase in dollar amounts through the end of 1999 due to finalizing the 8000
Series Workstation and to remain stable in 2000 as product outsourcing is
completed.

                                      -8-
Restructuring and Product Upgrade Costs. Restructuring and product upgrade
costs were $0.2 million, or 4% of net sales, for the third quarter of 1998 as
compared to $0.4 million, or 8% of net sales for the third quarter of 1999.
Restructuring and product upgrade costs decreased from $1.5 million, or 11% of
net sales, for the first nine months of 1998 to $0.4 million, or 2% of net
sales, for the first nine months of 1999. In 1999, the costs were due to
severance charges from reorganizational efforts related to outsourcing the
manufacturing and design of products. In 1998, these costs related to the
discontinuation of the 5000 Series I Workstation, as well as other internal
reorganization efforts.

     Interest Income (Expense) and Other, Net. Net interest income was
approximately $34,000 for the third quarter of 1998 compared to net interest
expense of $36,000 for the comparable period in 1999. Net interest income for
the first nine months of 1998 was $137,000 compared to net interest expense of
$54,000 for the comparable period in 1999. The increase in interest expense is
due to borrowings on the Company's line of credit. The Company will continue
recording interest expense from both its line of credit and interest payments on
its subordinated notes issued in September 1999. Additionally, financing costs
of $882,000 related to warrants issued in September 1999 will be amortized over
the next two years. The Company anticipates recording net interest expense for
the foreseeable future.

Liquidity and Capital Resources

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

     In November 1998, the Company entered into a two-year, $3.0 million line of
credit agreement. Borrowings bear interest at the greater of 4% over prime or
9%. The interest rate changed from 3% over prime to 4% over prime in the third
quarter of 1999 due to default on the Company's profitability covenant. At
October 3, 1999, the interest rate was 12.25%. The line of credit balance was
$1.0 million as of October 3, 1999, as compared to $0.7 million at January 3,
1999. The borrowing base consists of 75% of eligible receivables plus the lesser
of $600,000 or 30% of eligible inventory as defined in the agreement.
Availability based on the borrowing base calculation, including accounts
receivable and inventory, was $2.5 million as of October 3, 1999 and was $1.7
million, including only accounts receivable, as of January 3, 1999. The
agreement contains a covenant requiring cumulative year-to-date profit on a
quarterly basis. The Company was out of compliance with the covenant as of
October 3, 1999, and has received a written waiver of default. Failure to comply
with this covenant in the future could result in default, interest rate
increases and immediate repayment requirements.

     Cash used for operating activities totaled $3.4 million for the first nine
months of 1999. The Company's accounts receivable decreased $0.1 million from
$3.9 million at January 3, 1999 to $3.8 million at October 3, 1999 due to timing
of payments received. Inventories increased $0.7 million to $4.1 million at
October 3, 1999 due to purchases for anticipated sales and backlog on the FW2000
Series product.

     The Company purchased $0.5 million of property, plant and equipment during
the first nine months of 1999. The expenditures related primarily to
manufacturing tooling for vendors of the Company's FW2000 Series Mobile Embedded
Vehicle System. The Company anticipates maintaining this level of expenditures
in the foreseeable future, as new product line developments are completed and
existing platforms are enhanced. However, the Company's overall property, plant
and equipment expenditures are expected to decrease slightly as compared to
prior years due to no additional planned leasehold improvements.

                                       -9-
The Company anticipates that the proceeds from its issuance of
 subordinated notes, together with its line of credit, and anticipated operating
cash flows, should be sufficient to fund its cash flow needs through the year
2000. Although to accelerate the Company's growth and enhance its product
offering and market position, additional cash sources may be pursued. Cash
requirements for future periods depend on demand for the Company's products,
cash management operations, growth rate, and acquisition strategies, among other
factors. There can be no assurances that additional financing, if needed, will
be available, or if it is available, that it would be on terms favorable to the
Company and would not be dilutive to existing shareholders.

Year 2000

     The year 2000 issue is the result of computer programs using only the last
two digits to identify the year. These programs may not be able to interpret
dates beyond the year 1999, which could cause computer system failure or other
errors disrupting operations. The Company is aware of the potential computing
difficulties that the issue presents for the Company's operations in the year
2000 and as a result, has established an internal team, reporting to upper
management, to address the issue. This team's focus includes the functioning of
the Company's products, internal computer systems and non-computer operations,
production processes, key vendors, vital business partners and critical
customers.

     The Company's major internal information systems software was upgraded
during the first quarter of 1998 to ensure year 2000 compliance and provide
enhanced systems capabilities. The total cost of the implementation was
$110,000. The Company plans to perform other minor upgrades to its software and
hardware. Approximately 95% of the expected costs associated with internal
systems software alterations have been incurred to date. The Company's internal
production processes and non-information systems software have been assessed and
the Company believes these items are year 2000 compliant.

     Management believes its current products are year 2000 compliant and is
offering updated configuration software for products shipped in prior periods.
Notification to customers of the availability of updated software has occurred.
Associated costs are expected to be under $100,000. Approximately 95% of the
expected costs associated with ensuring that the Company's products are year
2000 compliant have been incurred to date.

     The source of funds for upgrades to internal software, production processes
and previously sold products is existing operating cash flows. There are
currently no other projects within the Company that are affected by the outlay
of significant resources to ensure year 2000 compliance.

     The Company's operations with respect to the year 2000 may also be affected
by the readiness of other entities with which the Company transacts business.
The Company has requested documentation from its vendors regarding compliance,
and will evaluate alternative courses of action for vendors who are not or will
not be year 2000 compliant. The Company has identified its critical vendors and
is in the process of verifying which are currently year 2000 compliant.
Contingency plans for all critical vendors have not yet been completed.

     The year 2000 issue creates risk for the Company from unforeseen problems
in its own computer systems and from the Company's vendors. Although the Company
does not believe that the year 2000 issue will have a material impact on its
business, financial position, results of operations or liquidity, it is
uncertain what effect any failure of the Company's systems or its vendors'
systems might have on its operations.

     Although the Company intends to fully address the year 2000 issue, without
further assessment or resources assigned, the Company can give no assurance that
the year 2000 issue will not cause significant business disruption, including
delays in parts availability resulting in potential shipping delays and/or lost
revenues.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The Company does not utilize derivative or other financial instruments for
hedging or speculative purposes, and accordingly, is not exposed to these types
of market risk.

                                      -10-
The Company is subject to interest rate risk related to its outstanding
line of credit and note borrowings and any existing money market or other
investment amounts. The Company's line of credit bears interest at a rate based
on the prime lending rate, and any money market investments also earn interest
based on market rates. The Company's long-term notes bear interest at a fixed
rate. Based on current interest rate conditions, the Company does not believe
that it is exposed to significant associated market risk.

     All of the Company's transactions are conducted and accounts are
denominated in United States dollars and as such, the Company does not currently
have exposure to foreign currency risk.

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

     In September 1999, the Company completed a private placement of $3.0
million in subordinated notes. The subordinated notes were sold to accredited
investors through the placement agent Dougherty Summit Securities LLC. The
Company received $3.0 million in cash, less $240,000 in commission.
Additionally, the Company granted 150,000 warrants to Dougherty Summit
Securities LLC. The Company relied on an exemption from registration under
Section 4(2) of the Securities Act of 1933, as amended. 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.

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.

                                      -11-
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits

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

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

         Exhibit 10.1   Compensation agreement with David C. Malmberg (filed
                        herewith)

         Exhibit 10.2   Consulting agreement with Robert W. Heller (filed
                        herewith)

         Exhibit 10.3   Form of Subscription and Note Purchase Agreement, Form
                        of Subordinated Promissory Note, Form of Warrant to
                        Purchase Shares of Common Stock (filed herewith)

         Exhibit 10.4   Common Stock Warrant Agreements with Dougherty Summit
                        Securities LLC dated September 7, 1999; September 23,
                        1999; and September 30, 1999 (filed herewith)

         Exhibit 10.5   First Amendment to General Credit and Security Agreement
                        with Spectrum Commercial Services, dated August 20, 1999
                        (filed herewith)

         Exhibit 27.1   Financial Data Schedule (filed herewith)

(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.

FIELDWORKS, INCORPORATED

Date: November 16, 1999                /s/ Karen L. Engebretson
                                       ----------------------------------------
                                       Karen L. Engebretson, Vice President
                                       of Finance and CFO (as authorized
                                       officer and principal financial officer)

                                      -12-