<PAGE>

                                   FORM 10-Q

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

      (Mark One)

      (X)  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
           THE SECURITIES EXCHANGE ACT OF 1934
           For the quarterly period ended:  September 30, 2001

                                      OR

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

                       Commission file number:  0-21395

                               ALLIN CORPORATION
            (Exact name of registrant as specified in its charter)

          Delaware                                      25-1795265
(State or other jurisdiction of                     (I. R. S. Employer
 incorporation or organization)                     Identification No.)

                       381 Mansfield Avenue, Suite 400,
                     Pittsburgh, Pennsylvania  15220-2751
         (Address of principal executive offices, including zip code)

                                (412) 928-8800
             (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.

                       (X)    Yes           (_)    No

              Shares Outstanding of the Registrant's Common Stock

                            As of November 6, 2001

                        Common Stock, 6,967,339 Shares

                                      -1-
<PAGE>

                               Allin Corporation

                                   Form 10-Q

                                     Index

<TABLE>
<S>                                                                      <C>
Forward-Looking Information                                              Page  3

Part I  - Financial Information

          Item 1. Financial Statements                                   Page  4

          Item 2. Management's Discussion and Analysis of Financial      Page 17
                  Condition and Results of Operations

          Item 3. Quantitative and Qualitative Disclosure about Market   Page 39
                  Sensitive Instruments


Part II - Other Information

          Item 6. Exhibits and Reports on Form 8-K                       Page 40

Signatures                                                               Page 41
</TABLE>

                                      -2-
<PAGE>

Forward-Looking Information

     Certain matters in this Form 10-Q, including, without limitation, certain
matters discussed under Part I - Item 2 - Management's Discussion and Analysis
of Financial Condition and Results of Operations constitute "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.
Forward-looking statements are typically identified by the words "believes,"
"expects," "anticipates," "intends," "estimates," "will" and similar
expressions. In addition, any statements that refer to expectations or other
characterizations of future events or circumstances are forward-looking
statements. Readers are cautioned that any such forward-looking statements are
not guarantees of performance and that matters referred to in such forward-
looking statements involve known and unknown risks, uncertainties and other
factors which may cause actual results, performance or achievements of Allin
Corporation to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. Such
factors include, among other things, risks and uncertainties discussed
throughout Part I - Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations and under the caption "Risk Factors"
included therein. Allin Corporation undertakes no obligation to update publicly
any forward-looking statements, whether as a result of new information, future
events or otherwise.

                                      -3-
<PAGE>

Part I - Financial Information

Item 1. - Financial Statements

ALLIN CORPORATION & SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

                            (Dollars in thousands)
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                                                 December 31,           September 30,
                                                                                     2000                   2001
                                                                                 ------------           -------------
<S>                                                                              <C>                    <C>
ASSETS

Current assets:
         Cash and cash equivalents                                               $      2,330           $       1,470
         Accounts receivable, net of allowance for
                 doubtful accounts of $116 and $157                                     4,730                   3,884
         Unbilled receivable                                                               42                     462
         Note receivable                                                                   14                     ---
         Inventory                                                                        991                     134
         Prepaid expenses                                                                 274                     161
         Assets held for sale                                                              90                      19
         Costs and estimated gross margins in
                 excess of billings                                                       722                     ---
                                                                                 ------------           -------------
                 Total current assets                                                   9,193                   6,130

Property and equipment, at cost:
Leasehold improvements                                                                    465                     471
Furniture and equipment                                                                 3,089                   2,964
On-board equipment                                                                        951                     ---
                                                                                 ------------           -------------
                                                                                        4,505                   3,435
Less--accumulated depreciation                                                         (3,394)                 (2,808)
                                                                                 ------------           -------------
                                                                                        1,111                     627

Note receivable from employee                                                               3                     ---
Software development costs, net of accumulated
         amortization of $907 and $912                                                      6                     ---
Goodwill, net of accumulated amortization of
         $2,829 and $3,433                                                             11,932                     781
Other assets, net of accumulated amortization of
         $664 and $852                                                                  2,037                   1,849
                                                                                 ------------           -------------

Total assets                                                                     $     24,282           $       9,387
                                                                                 ============           =============

</TABLE>

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

                                      -4-
<PAGE>

ALLIN CORPORATION & SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

                            (Dollars in thousands)
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                                              December 31,             September 30,
                                                                                  2000                      2001
                                                                              ------------             -------------
<S>                                                                           <C>                      <C>
LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
         Current portion of notes payable                                     $         2              $          ---
         Bank lines of credit                                                       2,155                         ---
         Accounts payable                                                           2,783                       1,963
         Accrued liabilities:
                 Compensation and payroll taxes                                       426                         302
                 Dividends on preferred stock                                       1,124                       1,370
                 Other                                                                757                         334
         Billings in excess of costs and
                 estimated gross margins                                              ---                       1,403
         Deferred revenue                                                              47                          36
         Income taxes payable                                                           1                         ---
                                                                              -----------              --------------
                 Total current liabilities                                          7,295                       5,408

Non-current portion of notes payable                                                1,000                       1,000
Commitments and contingencies

Shareholders' equity:
         Preferred stock, par value $.01 per share, authorized
                 100,000 shares:
                 Series C redeemable preferred stock, designated,
                        issued and outstanding 25,000 shares                        2,500                       2,500
                 Series D convertible redeemable preferred stock,
                        designated, issued and outstanding
                        2,750 shares                                                2,152                       2,152
                 Series F convertible redeemable preferred stock,
                        designated, issued and outstanding
                        1,000 shares                                                1,000                       1,000
                 Series G convertible redeemable preferred stock,
                        designated, issued and outstanding
                        150 shares                                                  1,015                       1,025
         Common stock, par value $.01 per share - authorized
                 20,000,000 shares, issued 6,953,114 and
                 6,967,339 shares                                                      70                          70
         Additional paid-in-capital                                                41,642                      41,171
         Warrants                                                                   1,017                       1,017
         Treasury stock at cost, 8,167 common shares                                  (27)                        (27)
         Retained deficit                                                         (33,382)                    (45,929)
                                                                              -----------              --------------
Total shareholders' equity                                                         15,987                       2,979
                                                                              -----------              --------------

Total liabilities and shareholders' equity                                    $    24,282              $        9,387
                                                                              ===========              ==============
</TABLE>

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

                                      -5-
<PAGE>

ALLIN CORPORATION & SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

                 (Dollars in thousands, except per share data)
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                            Three Months     Three Months      Nine Months       Nine Months
                                                               Ended            Ended            Ended             Ended
                                                           September 30,     September 30,    September 30,     September 30,
                                                                2000             2001             2000              2001
                                                           -------------     -------------    -------------     -------------
<S>                                                        <C>               <C>              <C>               <C>
Revenue:
         Solution area consulting services                 $       1,700     $       2,091     $     5,013      $       6,730
         Solution area integration services                          979             1,714           3,329              4,174
         Legacy technology consulting services                     1,564               304           5,602              1,633
         Ancillary services                                          102               126             447                495
         Ancillary product sales                                      36                80             403                184
                                                           -------------     -------------     -----------      -------------

                 Total revenue                                     4,381             4,315          14,794             13,216

Cost of sales                                                      2,650             2,359           8,745              7,105
                                                           -------------     -------------     -----------      -------------

Gross profit                                                       1,731             1,956           6,049              6,111

Selling, general & administrative                                  2,686             1,681           8,021             17,890
                                                           -------------     -------------     -----------      -------------

(Loss) income from operations                                       (955)              275          (1,972)           (11,779)

Interest expense, net                                                 49                19             158                104
                                                           -------------     -------------     -----------      -------------

(Loss) income from continuing operations                          (1,004)              256          (2,130)           (11,883)

Loss from discontinued operations                                    216                85             130                665
                                                           -------------     -------------     -----------      -------------

Net (loss) income                                                 (1,220)              171          (2,260)           (12,548)

Accretion and dividends on preferred stock                           142               167             449                491
                                                           -------------     -------------     -----------      -------------

Net (loss) income attributable to common shareholders      $      (1,362)    $           4     $    (2,709)      $    (13,039)
                                                           =============     =============     ===========      =============

(Loss) earnings per common share from continuing
         operations attributable to common
         shareholders - basic and diluted                  $       (0.18)    $        0.01     $     (0.42)      $      (1.78)
                                                           =============     =============     ===========       ============

Loss per common share from discontinued
         operations - basic and diluted                    $       (0.03)    $       (0.01)    $     (0.02)      $      (0.09)
                                                           =============     =============     ===========       ============

Net loss per common share attributable to common
         shareholders - basic and diluted                  $       (0.21)     $          -     $     (0.44)      $      (1.87)
                                                           =============      ============     ===========       ============

Weighted average shares outstanding - basic and diluted        6,512,765         6,967,339       6,176,651          6,966,036
                                                           -------------      ------------     -----------       ------------
</TABLE>

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


                                      -6-
<PAGE>

ALLIN CORPORATION & SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

     See tab " 4 periods"

ALLIN CORPORATION & SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

                            (Dollars in thousands)
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                                                 Nine Months                    Nine Months
                                                                                    Ended                          Ended
                                                                                September 30,                  September 30,
                                                                                    2000                           2001
                                                                            ----------------------         ----------------------
<S>                                                                         <C>                            <C>
Cash flows from operating activities:
         Net loss                                                                         ( 2,260)                      ( 12,548)
         Adjustments to reconcile net loss to net cash flows
            from operating activities:
                 Depreciation and amortization                                              1,607                          1,333
                 Loss from impairment of assets                                          ---                              11,059
                 (Gain) loss from abandonment or sale of assets                              ( 72)                            24
                 Cost of fixed assets sold                                                    237                       ---
         Changes in certain assets and liabilities:
                 Accounts receivable                                                          901                            847
                 Unbilled receivable                                                     ---                               ( 420)
                 Inventory                                                                  ( 324)                           458
                 Prepaid expenses                                                             153                            112
                 Assets held for sale                                                       ( 109)                            39
                 Other assets                                                                  19                             17
                 Accounts payable                                                             607                          ( 820)
                 Accrued liabilities                                                        ( 338)                         ( 545)
                 Billings in excess of costs and
                        estimated gross margins                                             ( 415)                         2,125
                 Income taxes payable                                                    ---                                  (1)
                 Deferred revenues                                                          ( 923)                          ( 11)
                                                                            ----------------------         ----------------------
            Net cash flows from operating activities                                        ( 917)                         1,669
                                                                            ----------------------         ----------------------

Cash flows from investing activities:
         Proceeds from sale of assets                                                         185                              2
         Additional purchase consideration for
                 acquisition of subsidiary                                               ---                                ( 60)
         Capital expenditures                                                               ( 379)                          ( 78)
                                                                            ----------------------         ----------------------
            Net cash flows from investing activities                                        ( 194)                         ( 136)
                                                                            ----------------------         ----------------------

Cash flows from financing activities:
         Net (repayment) borrowing on lines of credit                                         915                        ( 2,155)
         Payment of dividends on preferred stock                                            ( 247)                         ( 236)
         Repayment of capital lease obligations                                               ( 2)                           ( 2)
                                                                            ----------------------         ----------------------
            Net cash flows from financing activities                                          666                        ( 2,393)
                                                                            ----------------------         ----------------------

Net change in cash and cash equivalents                                                     ( 445)                         ( 860)
Cash and cash equivalents, beginning of period                                              1,888                          2,330
                                                                            ----------------------         ----------------------
Cash and cash equivalents, end of period                                                    1,443                          1,470
                                                                            ======================         ======================
</TABLE>

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

                                      -7-
<PAGE>

                      Allin Corporation and Subsidiaries

                  Notes to Consolidated Financial Statements


1.   Basis of Presentation

     The information contained in these financial statements and notes for the
     three- and nine-month periods ended September 30, 2000 and 2001 should be
     read in conjunction with the audited financial statements and notes for the
     years ended December 31, 1999 and 2000, contained in Allin Corporation's
     (the "Company") Annual Report on Form 10-K for the year ended December 31,
     2000. The accompanying unaudited Consolidated Financial Statements have
     been prepared in accordance with accounting principles generally accepted
     in the United States and the rules and regulations of the Securities and
     Exchange Commission. These interim statements do not include all of the
     information and footnotes required for complete financial statements. It is
     management's opinion that all adjustments (including all normal recurring
     accruals) considered necessary for a fair presentation have been made;
     however, results for these interim periods are not necessarily indicative
     of results to be expected for the full year.

     Discontinued Operations

     During June 2001, the Company elected to discontinue the digital imaging
     systems integration, technical support and product sales activities of
     Allin Digital Imaging Corp. ("Allin Digital"). Allin Digital's activities
     represented all of the Company's revenue and gross profit previously
     reported for two segments, Digital Imaging Systems Integration and Digital
     Imaging Product Sales, as well as a portion of the revenue and gross profit
     previously reported for the segment Other Services. Accordingly, the
     results of operations for Allin Digital for the periods presented in the
     Company's Consolidated Statements of Operations have been reclassified to
     loss from discontinued operations, which is presented after income or loss
     from continuing operations. Also, the information related to the Company's
     revenue and gross profit included in Note 5 - Industry Segment Information
     has been reclassified for the periods presented to exclude the discontinued
     operations.

     Principles of Consolidation

     The consolidated financial statements include the accounts of the Company
     and its subsidiaries. The Company is the sole shareholder of all of its
     subsidiaries. It is the Company's policy to consolidate all majority-owned
     subsidiaries where the Company has control. All significant intercompany
     accounts and transactions have been eliminated.

     Use of Estimates in the Preparation of Financial Statements

     The preparation of financial statements in conformity with accounting
     principles generally accepted in the United States requires management to
     make estimates and assumptions that affect the reported amounts of assets
     and liabilities and disclosure of contingent assets and liabilities at the
     date of the financial statements and the reported amounts of revenue and
     expenses during the reporting period. Actual results could differ from
     those estimates.

     Revenue and Cost of Sales Recognition

     Allin Corporation of California ("Allin Consulting-California") and Allin
     Consulting of Pennsylvania, Inc. ("Allin Consulting-Pennsylvania") charge
     consulting fees for their Technology Infrastructure and E-Business Solution
     Area services. Allin Consulting-Pennsylvania also charges consulting fees
     for its legacy technology services. The majority of engagements are billed
     on an hourly basis, with revenue and related cost of sales recognized as
     services are performed. Engagements are also performed on a fixed-price
     basis, with revenue and cost of sales recognized based on percentage of
     completion or proportional performance. Revenue from Technology
     Infrastructure and E-Business Solution Area services is included in
     "Solution area consulting services" on the accompanying Consolidated
     Statements of Operations.

                                      -8-
<PAGE>

     Allin Interactive Corporation's ("Allin Interactive") recognition method
     for revenue and cost of sales for systems integration services is based on
     the size and expected duration of the project and whether significant
     software modification is required. For systems integration projects in
     excess of $250,000 of revenue and expected to be of greater than 90 days
     duration, Allin Interactive recognizes revenue and cost of sales based on
     percentage of completion (if significant software modification is required)
     or proportional performance. Allin Interactive utilizes the proportion of
     labor incurred to expected total project labor as a quantitative factor in
     determining the percentage of completion or proportional performance
     recognized for projects when the proportion of total project costs incurred
     to expected total project costs is not representative of actual project
     completion status. For all other systems integration projects, revenue and
     cost of sales are recognized upon completion of the project. For consulting
     engagements performed on a fixed-price basis, revenue and related cost of
     sales are recognized on a percentage of completion basis. Time-based
     consulting revenue and cost of sales are recognized as services are
     performed. Interactive television transactional revenue and any associated
     cost of sales are recognized as the services are performed. Allin
     Interactive recognizes revenue and associated cost from the sale of
     products at the time the products are shipped. On the accompanying
     Consolidated Statements of Operations, systems integration revenue is
     included in "Solution area integration services", consulting revenue is
     included in "Solution area consulting services", interactive television
     transactional revenue is included in "Ancillary services" and product sales
     are included in "Ancillary product sales."

     Allin Network Products, Inc. ("Allin Network") recognizes revenue and
     associated cost from the sale of products at the time the products are
     shipped. Allin Network also performs computer network monitoring and
     consulting services for fixed monthly fees. Revenue is recognized when the
     period of service for the fixed monthly fee elapses and associated cost of
     sales is recognized as services are performed. Revenue from product sales
     is included in "Ancillary product sales" and revenue from monitoring and
     consulting services is included in "Solution area consulting services" on
     the accompanying Consolidated Statements of Operations.

     Allin Interactive and Allin Network recognize amounts billed to customers
     for shipping charges as revenue at the time products are shipped.
     Associated shipping costs are recorded as cost of sales.

     Earnings Per Share

     Earnings per share ("EPS") of common stock have been computed in accordance
     with Financial Accounting Standards Board Statement No. 128, "Earnings Per
     Share" ("SFAS No. 128"). The shares used in calculating basic and diluted
     EPS include the weighted average of the outstanding common shares of the
     Company. The Company's outstanding stock options, warrants and the
     Company's Series D, F and G convertible redeemable preferred stock would
     all be considered dilutive securities under SFAS No. 128; however, these
     securities have not been included in the calculation of diluted EPS for the
     periods in which the Company recognized a net loss attributable to common
     shareholders, as their effect would be anti-dilutive. For the three months
     ended September 30, 2001, the Company recognized net income attributable to
     common shareholders. However, none of the Company's outstanding stock
     options and warrants have been included in the calculation of diluted EPS
     since their respective exercise prices were in excess of the market price
     of the common stock as of the beginning of the period. The convertible
     preferred stock was not included in the calculation of diluted EPS since
     the effect would be anti-dilutive under the "if-converted" method. The
     additional options and warrants to purchase shares that would have been
     considered in the calculation of diluted EPS, if their effect was not anti-
     dilutive, were 5,874 and 35,881 for the three- and nine-month periods ended
     September 30, 2000. No additional options or warrants to purchase shares
     would have been considered in the calculation of diluted EPS for the nine-
     month period ended September 30, 2001, if the effect was not anti-dilutive.
     As of September 30, 2000 and 2001, respectively, 759,830 and 797,650
     options to purchase common shares were outstanding for which the option
     exercise prices exceeded the average market price of the common shares for
     the three-month periods then ended. As of September 30, 2000 and 2001,
     respectively, 738,580 and 797,650 options to purchase common shares were
     outstanding for which the option exercise prices exceeded the average
     market price of the common shares for the nine-month periods then ended.

                                      -9-
<PAGE>

  Inventory

  Inventory, consisting principally of digital photography equipment and
  software and computer hardware, software and communications equipment, is
  stated at the lower of cost (determined on the average cost method) or market.

  Costs and Estimated Gross Margins in Excess of Billings and Billings in Excess
  of Costs and Estimated Gross Margins

  Costs and estimated gross margins in excess of billings and billings in excess
  of costs and estimated gross margins relate to Allin Interactive projects for
  which revenue and cost of sales are being recognized on a percentage of
  completion or proportional performance basis.  Costs and estimated gross
  margins in excess of billings consists of costs and estimated gross margins
  associated with these projects recognized on a percentage of completion or
  proportional performance basis, net of amounts billed but not yet recognized
  as revenue.  Billings in excess of costs and estimated gross margins consists
  of amounts billed for projects recognized on a percentage of completion or
  proportional performance basis but not yet recognized as revenue, net of costs
  and estimated gross margins associated with these projects which have not yet
  been recognized as cost of sales.

  Impairment of Long-Lived Assets

  The Company follows the guidelines set forth in Statement of Financial
  Accounting Standards No. 121 "Accounting for the Impairment of Long-Lived
  Assets and for Long-lived Assets to be Disposed Of" ("SFAS No. 121").  In the
  event that facts and circumstances indicate that the carrying value of an
  asset may not be recoverable, fair value, or if not readily available,
  estimated future undiscounted cash flows associated with the asset, would be
  compared to the asset's carrying value to determine if a write-down to market
  value or discounted cash flow is required. During the second quarter of 2001,
  the Company recorded impairment losses of approximately $11,053,000 associated
  with goodwill recorded upon acquisition of technology consulting businesses
  and inventory related to Allin Digital's and Allin Interactive's operations.
  Additional losses of approximately $6,000 were recorded in the third quarter
  of 2001 for adjustments of the previously recognized impairment losses.

  Financial Instruments

  As of September 30, 2001, the Company's Consolidated Balance Sheet includes a
  note payable which relates to the acquisition of Allin Consulting-California.
  The note payable is recorded at the face value of the instrument.  The Company
  accrues interest at fixed rates and makes interest payments in accordance with
  the terms of the note.  All other financial instruments are classified as
  current and will be utilized within the next operating cycle.

  Supplemental Disclosure Of Cash Flow Information

  There were no cash payments for income taxes during either of the three-month
  periods ended September 30, 2000 and 2001.  Cash payments for interest were
  approximately $54,000 and $22,000 during the three months ended September 30,
  2000 and 2001, respectively.  Cash payments for dividends were approximately
  $88,000 and $89,000 during the three months ended September 30, 2000 and 2001,
  respectively.  Dividends on preferred stock of approximately $128,000 and
  $150,000 were accrued but unpaid during the three-month periods ended
  September 30, 2000 and 2001, respectively.

  Cash payments for income taxes were approximately $7,000 and $3,000 during the
  nine months ended September 30, 2000 and 2001, respectively.  Cash payments
  for interest were approximately $497,000 and $113,000 during the nine months
  ended September 30, 2000 and 2001, respectively.  Cash payments for dividends
  were approximately $247,000 and $236,000 during the nine months ended
  September 30, 2000 and 2001, respectively.  Dividends on preferred stock of
  approximately $259,000 and $291,000 were accrued but unpaid during the nine
  months ended September 30, 2000 and 2001, respectively.

                                      -10-
<PAGE>

2. Preferred Stock

   The Company has the authority to issue 100,000 shares of preferred stock with
   a par value of $.01 per share. Of the authorized shares, 40,000 have been
   designated as Series A Convertible Redeemable Preferred Stock, 5,000 as
   Series B Redeemable Preferred Stock, 25,000 as Series C Redeemable Preferred
   Stock, 2,750 as Series D Convertible Redeemable Preferred Stock, 2,000 as
   Series E Convertible Redeemable Preferred Stock, 1,000 as Series F
   Convertible Redeemable Preferred Stock and 150 as Series G Convertible
   Redeemable Preferred Stock. All then outstanding shares of Series A and B
   preferred stock were exchanged for like numbers of shares of Series C and D
   preferred stock, respectively, on May 31, 1999. All then outstanding shares
   of Series E preferred stock were converted to the Company's common stock on
   August 13, 2000. The Company will not issue any additional shares of Series
   A, B or E preferred stock. The order of liquidation preference of the series
   of the Company's outstanding preferred stock, from senior to junior, is
   Series F, Series G, Series D and Series C. As of September 30, 2001, the
   Company has outstanding 25,000, 2,750, 1,000 and 150 shares of Series C, D, F
   and G preferred stock, respectively.

3. Equity Transactions

   During the three months ended September 30, 2001, vested options to purchase
   3,000 shares and non-vested options to purchase 26,000 shares of common stock
   previously awarded under the Company's 2000 Stock Plan were forfeited under
   the terms of the Plan or under the terms of certain employment agreements.
   Options granted under the 2000 Stock Plan to purchase 112,000 shares of
   common stock remain outstanding as of September 30, 2001.

   During the three months ended September 30, 2001, vested options to purchase
   33,080 shares and non-vested options to purchase 57,040 shares of common
   stock previously awarded under the Company's 1998 Stock Plan were forfeited
   under the terms of the Plan or under the terms of certain employment
   agreements. Options granted under the 1998 Stock Plan to purchase 251,100
   shares of common stock remain outstanding as of September 30, 2001.

   During the three months ended September 30, 2001, non-vested options to
   purchase 40,000 shares of common stock previously awarded under the Company's
   1997 Stock Plan were forfeited under the terms of a certain employment
   agreement. Options granted under the 1997 Stock Plan to purchase 224,250
   shares of common stock remain outstanding as of September 30, 2001.

   During the three months ended September 30, 2001, vested options to purchase
   3,500 shares and non-vested options to purchase 8,000 shares of common stock
   previously awarded under the Company's 1996 Stock Plan were forfeited under
   the terms of certain employment agreements. Options granted under the 1996
   Stock Plan to purchase 210,300 shares of common stock remain outstanding as
   of September 30, 2001.

4. Revolving Credit Loan

   On October 1, 1998, the Company and S&T Bank, a Pennsylvania banking
   association, entered into a Loan and Security Agreement, under which S&T Bank
   agreed to extend the Company a revolving credit loan. The original term of
   the revolving credit loan was one year and it has subsequently been renewed
   for three annual periods. The current expiration date of the revolving credit
   loan is September 30, 2002. Borrowings may be made under the S&T Loan
   Agreement for general working capital purposes. The maximum borrowing
   availability under the revolving credit loan is the lesser of $5,000,000 or
   eighty percent of the aggregate gross amount of eligible trade accounts
   receivable aged sixty days or less from the date of invoice. Accounts
   receivable qualifying for inclusion in the borrowing base are net of any
   prepayments, progress payments, deposits or retention and must not be subject
   to any prior assignment, claim, lien, or security interest. As of September
   30, 2001, maximum borrowing availability under the revolving credit loan was
   approximately $2,850,000. There was no outstanding balance as of September
   30, 2001. Loans made under the revolving credit loan bear interest at the
   bank's prime interest rate plus one percent. As of September 30, 2001, the
   rate of interest on the revolving credit loan was 7.00%.

                                      -11-
<PAGE>

     The revolving credit loan includes provisions granting S&T Bank a security
     interest in certain assets of the Company including its accounts
     receivable, equipment, lease rights for real property, and inventory. The
     revolving credit loan also includes reporting requirements regarding annual
     and monthly financial reports, accounts receivable and payable statements,
     weekly borrowing base certificates and audit reports. The revolving credit
     loan also includes various covenants relating to matters affecting the
     Company including insurance coverage, financial accounting practices, audit
     rights, prohibited transactions, dividends and stock purchases. The
     covenants also include a cash flow to interest ratio of not less than 1.0
     to 1.0. Cash flow is defined as operating income before depreciation,
     amortization and interest. The cash flow coverage ratio is measured for
     each of the Company's fiscal quarters. The Company was in compliance with
     the cash flow covenant for the fiscal quarter ended September 30, 2001 and
     was also in compliance with all other covenants as of September 30, 2001.

5.   Industry Segment Information

     Basis for Determining Segments

     The Company follows Financial Accounting Standards Board Statement No. 131,
     "Disclosures about Segments of an Enterprise and Related Information"
     ("SFAS No. 131") as the basis for determining its segments. SFAS No. 131
     introduced a new model for segment reporting called the "management
     approach". The management approach is based on the way the chief operating
     decision maker organizes segments within a company for making decisions and
     assessing performance. Segments to be reported will fall under two groups,
     Solution Area Services and Ancillary Services & Product Sales. The
     Company's operations and management's evaluations are primarily oriented
     around three solution areas meeting customer needs for Microsoft-based
     technology services: Technology Infrastructure, E-Business and Interactive
     Media. Solution area services comprise the substantial majority of the
     Company's current activities and are most closely associated with its
     strategic focus. Grouping the solution area services in segment reporting
     emphasizes their commonality of purpose in meeting the core marketing
     strategy of the Company. Beginning in 2001, the Company changed its
     solution area structure to reflect changes in technology, customers'
     maturing integration of electronic business capabilities with ongoing
     business operations and the Company's desire to simplify its marketing
     message. Accordingly, the Company's E-Business Solution Area now reflects
     the combined consulting activities consistent with the Company's Microsoft-
     based technology focus that would have been reflected as Business
     Operations, Knowledge Management and Electronic Business Solution Areas
     under the previous solution area structure. The Company also performs
     technology consulting services for certain legacy technologies. The
     management of legacy technology consulting services was performed by the
     Business Operations Solutions Area under the previous solution area
     structure, but is not part of the activities falling under the E-Business
     Solution Area in the current solution area structure due to the Company's
     management's desire for E-Business to concentrate on projects more closely
     consistent with the Company's Microsoft-based technology focus.
     Consequently, legacy technology consulting services are shown separately
     under the new solution area structure. This presentation represents a
     change from the segments reported as Solution Area Services prior to
     December 31, 2000. Segment information as of September 30, 2000 and for the
     three- and nine-month periods then ended has been restated to conform to
     the new solution area structure.

     In connection with its solutions-oriented services, clients will request
     that the Company also provide technology-related products necessary for
     implementation or ongoing use of technology solutions recommended and
     implemented by the solution areas. To ensure client satisfaction, the
     Company maintains an ancillary capability to provide sales of information
     system products, equipment and supplies. The Company also continues to
     operate two interactive television systems as a result of a discontinued
     operating model. The segment group Ancillary Services & Product Sales will
     include these activities which are ancillary to or outside of the Company's
     current strategic focus.

     The reportable segments reflect aggregated solution area activity across
     the Company's subsidiaries due to the similarity in nature of services,
     production processes, types of customers and distribution methods for each
     solution area. Segments grouped as Solution Area Services include
     Technology Infrastructure Consulting, E-Business Consulting, Interactive
     Media Consulting, Interactive Media Systems Integration and Legacy
     Technology Consulting. Segments grouped as Ancillary Services & Product
     Sales include Interactive Television Transactional Services, Information
     System Product Sales and Other Services.

                                      -12-
<PAGE>

     During June 2001, the Company elected to discontinue the digital imaging
     systems integration and product sales activities of Allin Digital. Allin
     Digital's activities represented all of the Company's revenue and gross
     profit previously reported for two segments, Digital Imaging Systems
     Integration (under Solution Area Services) and Digital Imaging Product
     Sales (under Ancillary Services and Product Sales), as well as a portion of
     the revenue and gross profit previously reported for the segment Other
     Services. Accordingly, the information related to the Company's revenue and
     gross profit presented has been restated for the periods presented to
     exclude the discontinued operations. Information about assets related to
     Allin Digital's operations previously reported under these segment captions
     has been reclassified to a line item captioned Discontinued Operations-
     Digital Imaging.

     Measurement Method

     The Company's basis for measurement of segment revenue, gross profit and
     assets is consistent with that utilized for the Company's Consolidated
     Statements of Income and Consolidated Balance Sheets. There are no
     differences in measurement method.

     Revenue

     Information on revenue derived from external customers is as follows:

<TABLE>
<CAPTION>
                                                                           Revenue from External Customers
                                                                           -------------------------------

                                                      Three Months      Three Months       Nine Months           Nine Months
                                                          Ended             Ended             Ended                 Ended
                                                      September 30,      September 30,     September 30,         September 30,
(Dollars in thousands)                                    2000               2001              2000                  2001
                                                 -----------------------------------------------------------------------------
<S>                                               <C>                    <C>                    <C>                   <C>
Solution Area Services:
    Technology Infrastructure Consulting                     $  949            $  511           $ 2,531               $ 2,252
    E-Business Consulting                                       453               721             1,680                 1,922
    Interactive Media Consulting                                298               859               802                 2,556
    Interactive Media Systems Integration                       979             1,714             3,329                 4,174
    Legacy Technology Consulting                              1,564               304             5,602                 1,633
                                                 ----------------------------------------------------------------------------
Total Solution Area Services                                 $4,243            $4,109           $13,944               $12,537

Ancillary Services & Product Sales:
    Interactive Television Transactional Services            $   88            $   78           $   346               $   262
    Information System Product Sales                             36                80               403                   184
    Other Services                                               14                48               101                   233
                                                 ----------------------------------------------------------------------------
Total Ancillary Services & Product Sales                     $  138            $  206           $   850               $   679
                                                 ----------------------------------------------------------------------------

Consolidated Revenue from External Customers                 $4,381            $4,315           $14,794               $13,216
                                                 ============================================================================
</TABLE>

                                      -13-
<PAGE>

     Certain of the Company's segments have also performed services for related
     entities in other segments. All revenue recorded for these services is
     eliminated in consolidation. The Company does not break down technology
     consulting services performed for related entities into further segments.
     Information on revenue derived from services for related entities in other
     segments is as follows:

<TABLE>
<CAPTION>
                                                                           Revenue from Related Entities
                                                                           -----------------------------

                                                    Three Months         Three Months       Nine Months       Nine Months
                                                        Ended                Ended             Ended             Ended
                                                    September 30,        September 30,      September 30,     September 30,
(Dollars in thousands)                                   2000                 2001              2000              2001
                                                 ---------------------------------------------------------------------------
<S>                                                <C>                    <C>                <C>               <C>
Solution Area Services                                 $      35           $        ---      $        178      $          1
Ancillary Services & Product Sales                             3                     10               106                44
                                                 ---------------------------------------------------------------------------

Total Revenue from Related Entities in Other
Segments                                               $      38           $         10      $        284      $         45
                                                 ===========================================================================
</TABLE>

     Gross Profit

     Gross profit is the segment profitability measure that the Company's
     management believes is determined in accordance with the measurement
     principles most consistent with those used in measuring the corresponding
     amounts in the Company's consolidated financial statements. Revenue and
     cost of sales for services performed for related entities is eliminated in
     calculating gross profit. Information on gross profit is as follows:

<TABLE>
<CAPTION>
                                                                              Gross Profit
                                                                              ------------

                                                    Three Months      Three Months      Nine Months       Nine Months
                                                        Ended            Ended             Ended              Ended
                                                    September 30,     September 30,      September 30,    September 30,
(Dollars in thousands)                                  2000              2001               2000              2001
                                                 ----------------------------------------------------------------------
<S>                                                <C>                 <C>               <C>               <C>
Solution Area Services:
    Technology Infrastructure Consulting                   $  599          $  301             $1,479           $1,363
    E-Business Consulting                                     139             416                781            1,074
    Interactive Media Consulting                              200             497                504            1,578
    Interactive Media Systems Integration                     255             514              1,328            1,194
    Legacy Technology Consulting                              463              78              1,529              421
                                                 --------------------------------------------------------------------
Total Solution Area Services                               $1,656          $1,806             $5,621           $5,630

Ancillary Services & Product Sales:
    Interactive Television Transactional Services          $   59          $   52             $  234           $  173
    Information System Product Sales                            5              32                105               64
    Other Services                                             11              66                 89              244
                                                 --------------------------------------------------------------------
Total Ancillary Services & Product Sales                   $   75          $  150             $  428           $  481

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

Consolidated Gross Profit                                  $1,731          $1,956             $6,049           $6,111
                                                 ====================================================================
</TABLE>

                                      -14-
<PAGE>

     Assets

     Information on total assets attributable to segments is as follows:

<TABLE>
<CAPTION>
(Dollars in thousands)                                                            Total Assets
 As of September 30                                                            2000             2001
                                                                     ----------------------------------
<S>                                                                    <C>              <C>
Solution Area Services:
    Technology Infrastructure Consulting                                       $ 6,343           $1,674
    E-Business Consulting                                                          875            1,018
    Interactive Media Consulting                                                   231            1,037
    Interactive Media Systems Integration                                          920            2,129
    Legacy Technology Consulting                                                10,069            1,760
                                                                     ----------------------------------
Total Solution Area Services                                                   $18,438           $7,618

Ancillary Services & Product Sales:
    Interactive Television Transactional Services                              $   284           $  155
    Information System Product Sales                                                76              102
    Other Services                                                                 111               70
                                                                     ----------------------------------
Total Ancillary Services & Product Sales                                       $   471           $  327

Corporate                                                                        1,168            1,133
Discontinued Operations - Digital Imaging                                        1,600              309
                                                                     ----------------------------------

Consolidated Total Assets                                                      $21,677           $9,387
                                                                     ==================================
</TABLE>

                                      -15-
<PAGE>

                   Report of Independent Public Accountants


To the Shareholders of Allin Corporation:


We have reviewed the accompanying condensed consolidated balance sheet of Allin
Corporation (a Delaware corporation) and subsidiaries as of September 30, 2001,
the related condensed consolidated statements of income for the three- and nine-
month periods ended September 30, 2001 and 2000, and the condensed consolidated
statements of cash flows for the nine-month periods ended September 30, 2001 and
2000. These financial statements are the responsibility of the Company's
management.

We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with auditing standards generally accepted in the United States, the objective
of which is the expression of an opinion regarding the financial statements
taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should
be made to the financial statements referred to above for them to be in
conformity with accounting principles generally accepted in the United States.

We have previously audited, in accordance with auditing standards generally
accepted in the United States, the consolidated balance sheet of Allin
Corporation and subsidiaries as of December 31, 2000 (not presented herein),
and, in our report dated February 26, 2001, we expressed an unqualified opinion
on that statement. In our opinion, the information set forth in the accompanying
condensed consolidated balance sheet as of December 31, 2000 is fairly stated,
in all material respects, in relation to the consolidated balance sheet from
which it has been derived.



/s/ Arthur Andersen LLP

Pittsburgh, Pennsylvania,
October 23, 2001

                                      -16-
<PAGE>

Item 2.

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


     The following discussion and analysis by management provides information
with respect to the Company's financial condition and results of operations for
the three- and nine-month periods ended September 30, 2001 and 2000. This
discussion should be read in conjunction with the information in the
consolidated financial statements and the notes pertaining thereto contained in
the Company's Annual Report on Form 10-K for the year ended December 31, 2000,
as well as the information discussed herein under "Risk Factors". Unless the
context otherwise requires, all references herein to the "Company" refer to
Allin Corporation and its subsidiaries.

     In the following Management's Discussion and Analysis of Financial
Condition and Results of Operations and elsewhere in this quarterly report on
Form 10-Q, words such as "expects," "anticipates," "believes," "will" and other
similar expressions, are intended to identify forward-looking information that
involves risks and uncertainties. In addition, any statements that refer to
expectations or other characterizations of future events or circumstances are
forward-looking statements. Actual results and outcomes could differ materially
as a result of important factors including, among other things, public market
and trading issues, uncertainty as to the Company's future profitability,
fluctuations in operating results, the Company's history of net losses and
accumulated deficit, liquidity, and risks associated with general economic
conditions, world events,, the decline in demand for legacy technology
consulting services, the Company's discontinuation of digital imaging
operations, dependence on key personnel, competitive market conditions in the
Company's existing and potential future lines of business, rapidly changing
technology and risks of technological obsolescence. See "Risk Factors" below.

Overview of Organization, Products & Markets

     Allin Corporation is an information technology consulting and systems
integration provider that teams with businesses to provide technology-based
solutions through three interrelated solution areas: Technology Infrastructure,
E-Business and Interactive Media. The Company offers technology consulting,
application development and interactive media systems integration services
specializing in Windows 2000-based and Exchange 2000-based software from
Microsoft Corporation ("Microsoft"). The Company's solution area-based
organizational structure is designed to complement the customer-oriented focus
of the Company's marketing strategy. The solution area structure is defined more
by a customer's use of the services rather than technological disciplines.
Solution area sales and operational personnel must understand a customer's
business issues to provide a customized solution to their particular needs. The
ability of customers to manage information has become a prerequisite for their
success. A company's knowledge capital has become increasingly critical in
allowing it to react more quickly to customer needs, bring products to market
with greater speed and respond more completely and competitively to changing
business conditions. The growing influence of the Internet and interactive
technology in the business arena is also fundamentally changing how businesses
interact with customers and suppliers and fulfill customer needs. The Company
believes the customer-based focus of its solution area organizational structure
and marketing strategy promote the effective delivery of customer-oriented
technology solutions and will foster the growth of long-term customer
relationships with ongoing service opportunities.

     The Company was organized under the laws of the State of Delaware in July
1996 to act as a holding company for operating subsidiaries which focus on
particular aspects of the Company's business. As of September 30, 2001, the
organizational legal structure consists of Allin Corporation, five wholly owned
operating subsidiaries and one wholly owned non-operating subsidiary. The
operating subsidiaries are Allin Corporation of California ("Allin Consulting-
California"), Allin Consulting of Pennsylvania, Inc. ("Allin Consulting-
Pennsylvania"), Allin Interactive Corporation ("Allin Interactive"), Allin
Digital Imaging Corp. ("Allin Digital Imaging") and Allin Network Products, Inc.
("Allin Network"). Allin Holdings Corporation ("Allin Holdings") is a non-
operating subsidiary that provides treasury management services to the Company.
Allin Consulting-California and Allin Network are California corporations, Allin
Consulting-Pennsylvania is a Pennsylvania corporation and Allin Interactive,
Allin Digital and Allin Holdings are Delaware corporations. The Company is
headquartered in Pittsburgh, Pennsylvania with additional offices located in San
Jose and Walnut Creek, California and Ft.

                                      -17-
<PAGE>

Lauderdale, Florida. The Company utilizes the trade names Allin Consulting and
Allin Interactive in its operations. All trade and brand names included in this
Report on Form 10-Q are the property of their respective owners.

     During the second quarter of 2001, the Company elected to discontinue the
digital imaging operations of Allin Digital and expects to terminate such
operations prior to June 30, 2002. Information for the three- and nine-month
periods ended September 30, 2000 has been restated to reflect the results of
Allin Digital's operations as losses from discontinued operations. Information
for the three- and nine-month periods ended September 30, 2001 reflect the
results of Allin Digital's operations as losses from discontinued operations.

     The Company changed its solution area structure as of the beginning of 2001
to reflect changes in technology, customers' maturing integration of electronic
business capabilities with ongoing business operations and the Company's desire
to simplify its marketing message. Accordingly, the Company's E-Business
Solution Area now reflects the combined consulting activities consistent with
the Company's Microsoft-based technology focus that would have been reflected as
Business Operations, Knowledge Management and Electronic Business Solution Areas
under the previous solution area structure. The Company also performs technology
consulting services for certain legacy technologies. The management of legacy
technology consulting services was performed by the Business Operations
Solutions Area under the previous solution area structure, but is not part of
the activities falling under the E-Business Solution Area in the current
solution area structure due to the Company's management's desire for E-Business
to concentrate on projects more closely consistent with the Company's Microsoft-
based technology focus. Consequently, legacy technology consulting services are
shown separately under the new solution area structure. This presentation
represents a change from the segments reported as Solution Area Services prior
to December 31, 2000. Information as of September 30, 2000 and for the three-and
nine-month periods then ended has been restated to conform to the new solution
area structure.

     The Technology Infrastructure Solution Area provides solutions focused on
customers' network and application architecture, messaging systems and security
systems. Technology infrastructure is the foundation upon which technology
applications are built. Network and application architecture deals with network
design, local and remote access, Internet connectivity and the design and
implementation of a network operating system including protocol design,
policies, profiles, desktop standards, client installation/imaging and backup
schemas. Effective messaging systems are collaboration tools that enable
development and decision-making teams to reach a shared vision, make sound
decisions and achieve greater productivity. Security solutions provide
combinations of firewalls, virus protection and intrusion detection to protect
Web servers, e-mail servers and other network components. The Technology
Infrastructure Solution Area designs and implements enterprise-quality systems
intended to maximize network availability and efficiency, and to enable
customers to reduce costs and protect vital resources. Technology Infrastructure
solutions provide the underlying platforms and operating systems necessary to
take advantage of the latest technology capabilities. Services include design,
configuration, implementation and evaluation of customer operating systems and
database platforms, messaging systems and information system security solutions.
The Technology Infrastructure Solution Area services maintain a focus on
Microsoft BackOffice technology including Windows 2000, Windows NT Server, SQL
Server, SNA Server, Systems Management Server, Exchange Server and Internet
Information Server. Messaging and collaboration projects focus on technologies
such as Microsoft Exchange 2000 and SharePoint and utilize the Research in
Motion Blackberry products for wireless communication. The Company believes that
Technology Infrastructure enables its customers to incorporate new applications
and new technologies into existing information systems quickly and with minimal
disruption. Technology Infrastructure targets horizontal markets, meaning
businesses across a broad spectrum of industries. The goal of the Technology
Infrastructure Solution Area is to develop and implement solutions solving
business problems, thereby bringing tangible benefits to customers.

     The E-Business Solution Area provides solutions that enable organizations
to evaluate and optimize business processes, streamline workflow and extend
corporate messages, products, services and processes. The impact of the Internet
is moving businesses to seek seamless access of employees, customers and
suppliers to business knowledge capital and transactional systems. E-Business
delivers business intelligence and information management portal solutions that
automate and streamline information creation, storage, sharing and retrieval.
The E-Business Solution Area provides solutions implementing revenue-generating
customer-accessible E-commerce applications, business-to-business extranets and
internally-focused intranets. E-Business solutions can also enable customers to
increase productivity by improving the flow and accessibility of information,
thereby eliminating

                                      -18-
<PAGE>

inefficiencies and reducing costs. Solutions include extranet-based value chains
and electronic commerce sites, data warehousing, work flow, and interfaces with,
or custom development for, business operation transaction systems. These
services provide tools to empower customer personnel with the business
intelligence for fast and effective decision making. E-Business develops
solutions based on Microsoft's Internet Explorer which allows software systems
that support many features of traditional client/server applications while
reducing development and deployment costs. E-Business utilizes the latest
Microsoft Web enabling technology, such as BizTalk, Commerce Server, SQL Server
and .NET to develop cost effective, scalable solutions. Internet Information
Server provides the means of delivering Web-based solutions while assuring data
encryption and security through its support of digital signatures. Using
Microsoft technology such as SharePoint, Digital Dashboard, SQL Server and
Exchange 2000, the E-Business Solution Area enables customers to centralize
information stores, develop security schemes to regulate access to data and
establish personalized points of access to all relevant business information,
regardless of location or format. E-Business also targets horizontal markets.


     The Interactive Media Solution Area focuses on the Company's expertise in
digital media applications by providing interactive television solutions.
Interactive Media enables customers to convert manual and analog processes into
interactive digital solutions. Interactive Media delivers interactive television
applications that management believes enable customers to improve service, and
increase productivity and revenue. Interactive television operations are
currently focused on two vertical markets, the cruise line segment of the travel
and leisure market and the healthcare market. The majority of services are
currently provided to the cruise line segment. Interactive Media applications
help cruise line customers maintain a high level of customer service without
increasing staff requirements. Demand from cruise line customers has resulted in
a significant increase in Interactive Media revenue in the first nine months of
2001 as compared to the first nine months of 2000. Committed services for cruise
line customers also represent a majority of the Company's backlog as of
September 30, 2001. The level of Interactive Media services provided for cruise
industry customers is subject to significant uncertainty, however, as cruise
line passenger levels and revenue have declined since September 2001 following
the recent incidents of terrorism in the United States. Interactive Media's
healthcare industry applications enable customers to decrease costs and increase
efficiency by reducing delivery time for administrative and educational
services. Interactive television solutions are cost-effective because they
leverage a pooled set of advanced head-end equipment to deliver advanced
applications across a radio frequency distribution system to the end-user
televisions. The interactive television system architecture features a
centralized head-end that interfaces with the customer's other information
systems. The open architecture of the head-end operating systems based on
Microsoft BackOffice products such as Windows NT, SQL Server and Internet
Information Server enables customer co-development of applications. The solution
is Internet accessible and supports highly-functional applications and high-end
graphics and MPEG content. Applications developed for, and utilized by,
customers include pay-per-view movies, shore excursion ticketing, in-cabin
gaming, meal service ordering, on-demand viewing of information related to
medical conditions and procedures, on-demand viewing of educational programs and
distribution of activities and informational content.

     The Company has established operating relationships with some of the
leading suppliers of information technology products to complement its solution
area services. Foremost among these is the operating relationship with
Microsoft. Both of the Company's Allin Consulting subsidiaries and Allin
Interactive are certified as Microsoft Solutions Provider Partners. The Allin
Consulting subsidiaries operating in the Northern California and Pittsburgh
offices have also been designated as Microsoft Gold Certified Partners in
recognition of their attainment of rigorous certification criteria and
demonstrated technical competency in complex business solutions. The Allin
Consulting subsidiaries are also members of Microsoft's Infrastructure and
Collaborative Solutions Portal Partner Advisory Councils. Council members are a
select group of Microsoft Solution Providers with a successful history of
implementing Microsoft information technology who work closely with Microsoft to
provide guidance on key issues that ultimately shape Microsoft's channel-based
strategy for delivering customer solutions and services. The Company's role as a
member of these Advisory Councils has positioned it to quickly develop solutions
expertise in new Microsoft technologies. The Company was also recently named to
the Microsoft Project Partner Program, certifying the Company's qualifications
to develop and deploy effective project management solutions. The Company
intends to continue its specialization in Microsoft-based technology products.
The Company has also established operating relationships with other leading
technology providers to enable the development of versatile solutions meeting
customers' unique business needs. These technology providers include NetIQ,
Softmart, Research in Motion, DataReturn, EMC, Cisco and CommVault Systems.

     The Company was a recipient of Pittsburgh Technology 50 awards in 1998,
1999, 2000 and 2001. The award recognizes the highest three-year revenue growth
rates among technology-based businesses in the Pittsburgh region.

                                      -19-
<PAGE>

     The Company's current target market is mid-market to Fortune 1000 companies
seeking to achieve a competitive advantage through technology. The Company
believes that businesses with annual revenue ranging from $250 million to $1
billion afford the Company the best opportunities to offer solutions creating
value for the customers and to foster the development of long-term business
relationships. Management believes customers of this size are more likely to
utilize Microsoft-oriented information technology than larger organizations and
typically have less sophisticated internal technical resources. The Company will
not, however, limit its marketing and sales efforts solely to customers of this
size.

     The Company has developed a solutions framework, the Allin Solutions
Framework, for guiding the planning and conduct of solutions-oriented
engagements. The Allin Solutions Framework also assists customers in aligning
their business and technology objectives thereby maximizing the effectiveness of
the recommended solutions. The Allin Solutions Framework allows solution
planning to draw upon a knowledge base of resources containing iterative
information on technology architecture planning. It also provides a solution
development discipline focused on unique team and process models used for
organizing effective project teams and managing project lifecycles. The Allin
Solutions Framework provides a foundation for planning and controlling results-
oriented projects based on scope, schedule and resources. The adaptable process
includes four phases:

  .  The Solution Vision phase delivers a Vision document that articulates the
     ultimate goals for the solution and provides clear direction to measure
     success as well as defining the scope of the solution and the boundaries of
     the project. The Solution Vision includes a risk/return assessment and a
     project plan for the remaining phases.
  .  The Solution Design phase culminates in the delivery and acceptance of the
     design specifications including functional specifications, system design
     and quality assurance considerations, test plan and the project plan and
     schedule for solution development.
  .  The Solution Development phase culminates in the initial delivery of a
     functionally complete solution, ready for pilot usage.
  .  The Solution Deployment phase begins with a pilot and culminates in the
     production release of the installed system, training and documentation, and
     conversion of, or integration with, existing systems.

     The Company's solution areas deliver consulting services to customers
through three methods: Allin-managed, co-managed and customer-managed. With the
Allin-managed delivery method, the solution area assumes complete control of the
consulting process. Client personnel function as sources of information
concerning the business need for which a solution is sought. Solution area
managers and consultants fully control solution planning, development and
implementation. The Allin-managed delivery method delivers solutions on a
turnkey basis. With the co-managed delivery method, management of the solution
is shared between the solution area and customer personnel. Solution area
managers and consultants and customer technical staff members work on a
collaborative basis in planning, developing and implementing solutions. Project
functions are distributed among both solution area and customer personnel. With
the customer-managed delivery method, the solution area provides technical
resources with specific technical skill sets. The customer utilizes these
resources to complement and assist its technical staff in the execution of tasks
or projects. The customer remains in control of the tasks or projects and
actively manages the work performed by the Company's consultants. The Company
will currently perform services under any of these delivery methods. However,
the Allin-managed and co-managed delivery methods are viewed as offering the
potential for higher billing rates and margins due to the Company's performance
of the high level managerial tasks required with these delivery methods. The
Company seeks to continue to gradually increase the proportion of overall
solution area services delivered on the Allin-managed and co-managed delivery
methods.

     Management views services delivered through the Allin-managed or co-managed
methods as being solutions-oriented services because the Company is fully or
partially responsible for development and implementation of technology-based
solutions to customers' business problems. Services delivered under the Allin-
managed or co-managed methods are viewed as the most consistent with the
Company's overall marketing strategy and business objectives. References in this
report to solutions-oriented services mean services delivered through the Allin-
managed or co-managed methods. Currently, the majority of the services of the
Technology Infrastructure, E-Business and Interactive Media Solution Areas are
solutions-oriented services because they are delivered through

                                      -20-
<PAGE>

the Allin-managed or co-managed methods. The Company's long-term marketing
strategy will seek development of additional solutions-oriented business in all
solutions areas.

     Allin Consulting-Pennsylvania has historically performed technology
consulting services for certain legacy technologies, including application
development, data base development and administration, and data communications
development for IBM proprietary technology.  While such operations will
continue, the level of these services declined significantly in 1999, 2000 and
the first nine months of 2001.  Management expects a continued decline in the
level of legacy technology services performed over the remainder of 2001 and
during 2002.  Historically, virtually all of legacy technology consulting
services have been delivered on a customer-managed basis.  Legacy technology
consulting services are overseen by executive management and support personnel
in the Company's Pittsburgh office who have responsibility for all of the
Pittsburgh-based solution area operations.  From 1998 to the third quarter of
2001, Allin Consulting-Pennsylvania also provided legacy technology consulting
services related to Hogan IBA software applications, which are specialized
products for the banking industry.  Allin Consulting-Pennsylvania is not
currently providing services of this type and does not expect to do so in the
future.

     Ancillary services and product sales are those revenue producing activities
carried out by the Company that, unlike the solution area services previously
described, are not viewed as key to, or completely aligned with, the Company's
overall strategic objectives and marketing plans.  Ancillary services and
product sales are conducted either because they represent continuation of
operating activity that originated under an operating model that was
subsequently abandoned or because they meet client requests for products and
services recommended during the performance of solution area services.
Ancillary services and product sales include the following types of activities:

  .  The Company continues to derive revenue for transactional interactive
     services such as pay-per-view movies and video gaming from interactive
     television operations on two cruise ships. The Company expects this revenue
     stream to be discontinued in the near future upon Carnival Cruise Lines'
     ("Carnival") assumption of operations pursuant to their February 2001
     purchase of these systems.
  .  The Company's information system product sales historically have been
     primarily obtained in connection with engagements carried out by the
     Company's solution areas. The Company views being a source of information
     system products as a complementary service to solution area customers and
     as an aid in maintaining established relationships.
  .  Other services include several types of revenue not included in solution
     area revenue due to a lack of consistency with core solution area
     objectives, but which derive from activities peripheral to solution area
     activity. Examples of this type of revenue are placement fees and residual
     income related to contracts sold to third parties.

Results of Operations

Three Months Ended September 30, 2001 Compared to Three Months Ended September
30, 2000

Revenue

     The Company's total revenue for the three months ended September 30, 2001
was $4,315,000, a decrease of $66,000, or 2%, from total revenue of $4,381,000
for the three months ended September 30, 2000. Revenue from the Company's
Interactive Media Solution Area increased by $1,296,000 from the third quarter
of 2000 to the third quarter of 2001, offsetting a $1,260,000 decline in legacy
technology consulting services revenue.

     The Company's solution area revenue, after elimination of intercompany
sales, was $4,109,000 for the three months ended September 30, 2001, including
$511,000 for Technology Infrastructure, $721,000 for E-Business, $2,573,000 for
Interactive Media and $304,000 for legacy technology consulting services.
Comparable solution area revenue for the three months ended September 30, 2000
was $4,243,000 in total, including $949,000 for Technology Infrastructure,
$453,000 for E-Business, $1,277,000 for Interactive Media and $1,564,000 for
legacy technology consulting services.

     Technology Infrastructure revenue decreased $438,000, or 46%, in the three
months ended September 30, 2001 as compared to the three months ended September
30, 2000. Management attributes the decline in period-to-

                                      -21-
<PAGE>

period Technology Infrastructure revenue to a softening of demand for technology
consulting services due to the downturn in the domestic economy since late 2000.
Technology Infrastructure solutions will frequently recommend or require
significant upgrades in customers' hardware, software and networking equipment.
Such solutions are less likely to be considered during periods of economic
downturn due to constraints on business expenditures. The Company plans to
continue significant marketing efforts to attempt to generate additional sales
for the Technology Infrastructure Solution Area during the remainder of 2001 and
during 2002. There can be no assurance, however, that the Company will realize
revenue equal to or greater than current levels for its Technology
Infrastructure Solution Area in the future or that any increases realized will
result in the desired improvements to the Company's financial condition or
results of operations.

     The E-Business Solution Area recorded a revenue increase of $268,000, or
59%, for the three months ended September 30, 2001 as compared with the three
months ended September 30, 2000. The increase is primarily attributable to
several large E-Business projects carried out in the third quarter of 2001 for
one customer of the Company's Northern California operations. There can be no
assurance, however, that the customer will continue to award projects of similar
size in the future, that the Company will realize revenue equal to or greater
than current levels for its E-Business Solution Area in the future or that any
increases realized will result in the desired improvements to the Company's
financial condition or results of operations.

     Interactive Media Solution Area revenue totaled $2,573,000 for the three
months ended September 30, 2001, including $859,000 for interactive media
consulting and $1,714,000 for interactive media systems integration. Comparable
Interactive Media revenue for the three months ended September 30, 2000 was
$1,277,000 in total, including $298,000 for interactive media consulting and
$979,000 for interactive media systems integration. The increase in Interactive
Media Solution Area revenue from the third quarter of 2000 to the third
quarter of 2001 was 101%. A substantial majority of the Interactive Media
Solution Area's consulting and systems integration services have historically
been provided to customers in the cruise industry. The level of Interactive
Media services provided for cruise lines, however, is subject to significant
uncertainty as cruise line passenger levels and revenue have declined since
September 2001 following the recent incidents of terrorism in the United States.
Accordingly, there can be no assurance that the Company's Interactive Media
Solution Area will continue to realize consulting or systems integration revenue
equal to or greater than the levels realized in the third quarter of 2001 or
that any increases realized will result in the desired improvement to the
Company's financial condition or results of operations.

     Interactive Media consulting revenue increased $561,000, or 188%, for the
three months ended September 30, 2001 as compared with the third quarter of the
prior year. The increase in revenue was primarily attributable to substantial
progress on applications development projects for interactive television systems
to be installed on six Carnival ships in 2001 and 2002 and consulting,
maintenance and trouble-shooting services for a larger number of ship-based
interactive television systems in 2001.

     Revenue for Interactive Media systems integration services increased by
$735,000, or 75%, in the three months ended September 30, 2001 as compared to
the three months ended September 30, 2000. During the third quarter of 2001,
systems integration projects commenced for interactive televisions systems
aboard the Carnival Victory and Pride, and the Celebrity Cruises, Inc.
("Celebrity") Constellation. Integration services also continued on three ships
begun earlier in 2001. In the third quarter of 2000, systems integration
projects included portions of two-ship based systems. The increase in the number
of simultaneously active projects is the primary reason for the increase in
revenue in the third quarter of 2001 as compared to the third quarter of 2000.
Committed backlog from cruise industry customers is expected to result in
Interactive Media systems integration revenue continuing in the fourth quarter
of 2001 and through 2002 at levels in excess of that typically experienced prior
to the third quarter of 2001. There can be no assurance, however, that projects
expected to occur will not be delayed or that revenue will be earned at the same
or higher levels in 2002 or beyond. There can also be no assurance that systems
integration projects to be carried out will result in the desired improvements
to the Company's financial condition or results of operations.

     Revenue from legacy technology consulting services declined $1,260,000, or
81%, for the three months ended September 30, 2001 as compared to the three
months ended September 30, 2000. During 2001, the Company is placing
significantly greater marketing emphasis on the Microsoft-based solutions-
oriented services offered by the Technology Infrastructure, E-Business and
Interactive Media Solution Areas. While the Company actively seeks

                                      -22-
<PAGE>

renewal or extension of current legacy technology engagements, it is not
aggressively seeking new customers for legacy technology services. Management
also attributes the decline in demand for legacy technology consulting services
to a general trend in technology away from mainframe systems toward a
client/server environment. The Company's legacy technology consulting services
are primarily focused on mainframe systems. The Company completed the last of
its legacy technology consulting engagements focused on specialized Hogan IBA
software systems for the banking industry during the third quarter of 2001.
Management does not expect to undertake Hogan IBA systems-related engagements in
the future. Management expects a continued decline in legacy technology
consulting revenue over the remainder of 2001 and during 2002.

     The Company recognized revenue for ancillary services & product sales,
after elimination of intercompany sales, of $206,000 during the three months
ended September 30, 2001, including $78,000 for interactive television
transactional services, $80,000 for information system product sales and $48,000
for other services. Ancillary services & product sales revenue of $138,000 was
recognized during the three months ended September 30, 2000, including $88,000
for interactive television transactional services, $36,000 for information
system product sales and $14,000 for other services.

     Interactive television transactional services revenue decreased by $10,000,
or 11%, in the three months ended September 30, 2001 as compared to the three
months ended September 30, 2000. In February 2001, the Company sold the two
Company-owned and operated interactive television systems yielding transactional
revenue to Carnival. Transactional revenue will be discontinued as a revenue
source to the Company after transfer of systems operation to Carnival, expected
to occur in the near future. Information system product sale revenue increased
by $44,000, or 122%, in the third quarter of 2001 as compared to the third
quarter of 2000, due to several large orders for supplemental equipment for
interactive television systems. Revenue from other services increased by $34,000
from the third quarter of 2000 to the third quarter of 2001. The increase is
attributable to residual income recorded in 2001 related to the sale of certain
contracts for network monitoring services. This was not available as a revenue
source in the third quarter of 2000 as the contracts were not sold until the
fourth quarter of 2000.

Cost of Sales and Gross Profit

     The Company recognized cost of sales of $2,359,000 during the three months
ended September 30, 2001 as compared to $2,650,000 during the three months ended
September 30, 2000. The primary reason for the decrease in cost of sales of
$291,000 was the decline in legacy technology consulting services. Gross profit
of $1,956,000 was recognized for the third quarter of 2001 as compared to
$1,731,000 for the third quarter of 2000, an increase of $225,000, or 13%. The
changing mix of the Company's services toward a greater proportion of higher-
margin solutions-oriented consulting and systems integration services and a
declining proportion of lower-margin legacy technology consulting services
resulted in the 13% increase in gross profit despite a 2% decline in revenue in
the third quarter of 2001 as compared to the third quarter of 2000. Gross profit
as a percentage of revenue increased to 45% in the third quarter of 2001 from
40% in the third quarter of 2000. Management believes the improvement in gross
profit percentage demonstrates the Company's success to date in developing
higher-margin solutions-oriented business, although there can be no assurance
that the Company will realize gross profit percentages in the future at or above
current levels.

     The Company's solution areas recorded a total of $2,303,000 for cost of
sales during the three months ended September 30, 2001, including $210,000 for
Technology Infrastructure, $305,000 for E-Business, $1,562,000 for Interactive
Media and $226,000 for legacy technology consulting services. Comparable cost of
sales for the three months ended September 30, 2000 was $2,587,000 in total,
including $350,000 for Technology Infrastructure, $314,000 for E-Business,
$822,000 for Interactive Media and $1,101,000 for legacy technology consulting
services. Gross profit for the Company's solution areas for the three months
ended September 30, 2001 was $1,806,000, including $301,000 for Technology
Infrastructure, $416,000 for E-Business, $1,011,000 for Interactive Media and
$78,000 for legacy technology consulting services. Comparable gross profit for
the three months ended September 30, 2000 was $1,656,000 in total, including
$599,000 for Technology Infrastructure, $139,000 for E-Business, $455,000 for
Interactive Media and $463,000 for legacy technology consulting services. The
primary factor in the period-to-period increase in gross profit was the increase
in the scope of Interactive Media services, although this was partially offset
by a decline in the level of legacy technology consulting services from the
third quarter of 2000 to the third quarter of 2001.

                                      -23-
<PAGE>

     Technology Infrastructure gross profit decreased $298,000, or 50%, in the
third quarter of 2001 as compared to the third quarter of 2000. The decrease in
gross profit is consistent with the corresponding decrease in Technology
Infrastructure revenue, which management attributes to a softening of demand for
technology consulting services due to the downturn in the domestic economy since
late 2000. Technology Infrastructure solutions will frequently recommend or
require significant upgrades in customers' hardware, software and networking
equipment. Such solutions are less likely to be considered during periods of
economic downturn due to constraints on business expenditures.

     E-Business gross profit increased $277,000, or 199%, in the third quarter
of 2001 as compared to the third quarter of 2000. The increase is primarily
attributable to several large E-Business projects carried out in the third
quarter of 2001 for one customer of the Company's Northern California
operations. There can be no assurance, however, that the customer will continue
to award projects of similar size in the future or that the Company will realize
gross profit equal to or greater than current levels for its E-Business Solution
Area in the future.

     Cost of sales for the Interactive Media Solution Area was $1,562,000 in
total for the three months ended September 30, 2001, including $362,000 for
interactive media consulting and $1,200,000 for interactive media systems
integration. Interactive Media cost of sales for the three months ended
September 30, 2000 was $822,000 in total, including $98,000 for interactive
media consulting and $724,000 for interactive media systems integration.
Interactive Media Solution Area gross profit was $1,011,000 for the three months
ended September 30, 2001, including $497,000 for interactive media consulting
and $514,000 for interactive media systems integration. Interactive Media gross
profit was $455,000 for the three months ended September 30, 2000, including
$200,000 for interactive media consulting and $255,000 for interactive media
systems integration. The increases in consulting cost of sales and gross profit
in the third quarter of 2001 as compared to the third quarter of 2000 are
attributable to the ongoing substantial level of application development
services provided for Carnival in 2001 and consulting, maintenance and trouble-
shooting services for a larger number of ship-based interactive television
systems in 2001. The increases in systems integration cost of sales and gross
profit resulted from an increase in the number of active system installation
projects in the third quarter of 2001 as compared to the third quarter of 2000.

     Cost of sales for the Company's legacy technology consulting services was
$226,000 for the three months ended September 30, 2001 as compared to $1,101,000
for the three months ended September 30, 2000. Gross profit realized on legacy
technology consulting services declined from $463,000 in the third quarter of
2000 to $78,000 in the third quarter of 2001. The declines in legacy technology
consulting cost of sales and gross profit are consistent with the period-to-
period decline in revenue. Management attributes the declines to industry trends
away from mainframe computer systems and the Company's shift in marketing focus
since early 1999 to developing higher-margin solutions-oriented business. The
Company completed the last of its legacy technology consulting engagements
focused on specialized Hogan IBA software systems for the banking industry
during the third quarter of 2001.

     Cost of sales for the Company's ancillary services and product sales was
$56,000 for the three months ended September 30, 2001, including $26,000 for
pay-per-view movies associated with interactive television transactional
revenue, $48,000 for information system product sales and $(18,000) for other
services. Cost of sales for ancillary services and product sales was $63,000 for
the three months ended September 30, 2000, including $29,000 for pay-per-view
movies, $31,000 for information system product sales and $3,000 for other
services. Gross profit on ancillary services and product sales was $150,000 for
the third quarter of 2001, including $52,000 for interactive television
transactional revenue, $32,000 for information system product sales and $66,000
for other services. Gross profit for ancillary services and product sales was
$75,000 for the third quarter of 2000, including $59,000 for interactive
television transactional services, $5,000 for information system product sales
and $11,000 for other services. Significant factors in the period-to-period
increase in gross profit of $75,000 were the inclusion of several large orders
for supplemental equipment for interactive television systems, residual income
recorded in 2001 related to the sale of certain contracts for network monitoring
services and reversal of a previous over-accrual of estimated costs for
completion of customer services.

                                      -24-
<PAGE>

Selling, General & Administrative Expenses

     The Company recorded $1,681,000 in selling, general & administrative
expenses during the three months ended September 30, 2001 as compared to
$2,686,000 during the three months ended September 30, 2000, a decrease of
$1,005,000, or 37%. Several factors have contributed to this expense reduction.
In the first two quarters of 2001, management reduced the cost of personnel
resources in its Technology Infrastructure and E-Business Solution Areas as well
as in its corporate marketing and financial departments. Management has also
moved to reduce non-personnel expenses, and significant expense reductions were
obtained in travel, entertainment, telephone and recruiting expenses when
comparing the third quarter of 2001 to the third quarter of 2000. Amortization
expense recorded in the third quarter of 2001 is also significantly reduced from
prior levels due to significant impairment losses recognized in the second
quarter of 2001 related to goodwill associated with Allin Consulting-
Pennsylvania and Allin-Consulting-California.

     During the third quarter of 2000, the Company recorded an accrual of
approximately $24,000 for severance costs for a sales and managerial executive
associated with the Company's legacy technology consulting services. There was
no comparable expense during the third quarter of 2001.

     Depreciation and amortization were $278,000 for the three months ended
September 30, 2001 as compared to $523,000 for the three months ended September
30, 2000. The decrease of 47% is due to significantly reduced goodwill
amortization in the third quarter of 2001 due to impairment of the asset values,
the discontinuation of depreciation on two ship-based interactive television
systems upon their sale to Carnival in February 2001 and significant levels of
fixed assets reaching full depreciation in December 2000 or June 2001.

Income (Loss) from Continuing Operations

     The Company recorded income from continuing operations of $256,000 during
the three months ended September 30, 2001, as compared to a loss from continuing
operations of $1,004,000 during the three months ended September 30, 2000. The
period-to-period improvement is attributable to a $225,000 increase in gross
profit from operations due to the Company's continued emphasis on higher-margin
solutions-oriented services and a $1,005,000 decrease in selling, general and
administrative expenses due to reduced personnel costs and operating expenses,
goodwill amortization and depreciation.

Loss from Discontinued Operations

     During the three months ended September 30, 2001, the Company recorded a
loss of $85,000 from its discontinued digital imaging operations as compared to
a loss of $216,000 during the three months ended September 30, 2000. The loss
recognized in the third quarter of 2001 was primarily attributable to a
provision of approximately $60,000 to increase the allowance for doubtful
accounts receivable.

Net Income (Loss)

     The Company recorded net income of $171,000 for the three months ended
September 30, 2001 as compared to net loss of $1,220,000 for the three months
ended September 30, 2000. As discussed above, the most significant contributing
factors were the increase in gross profit from operations and the decrease in
selling, general & administrative expenses.

Results of Operations

Nine Months Ended September 30, 2001 Compared to Nine Months Ended September 30,
2000

Revenue

     The Company's total revenue for the nine months ended September 30, 2001
was $13,216,000, a decrease of $1,578,000, or 11%, from total revenue of
$14,794,000 for the nine months ended September 30, 2000. Revenue from the
Company's Technology Infrastructure, E-Business and Interactive Media Solution
Areas increased by $2,562,000 from the first nine months of 2000 to the first
nine months of 2001, partially offsetting a decline in

                                      -25-
<PAGE>

legacy technology consulting services revenue of $3,969,000. Interactive Media
consulting and systems integration services posted the most significant revenue
gains, an aggregate increase of $2,599,000 from the first nine months of 2000 to
the first nine months of 2001.

     The Company's solution area revenue, after elimination of intercompany
sales, was $12,537,000 for the nine months ended September 30, 2001, including
$2,252,000 for Technology Infrastructure, $1,922,000 for E-Business, $6,730,000
for Interactive Media and $1,633,000 for legacy technology consulting services.
Comparable solution area revenue for the nine months ended September 30, 2000
was $13,944,000 in total, including $2,531,000 for Technology Infrastructure,
$1,680,000 for E-Business, $4,131,000 for Interactive Media and $5,602,000 for
legacy technology consulting services.

     Technology Infrastructure revenue decreased $279,000, or 11%, in the nine
months ended September 30, 2001 as compared to the nine months ended September
30, 2000. Management attributes the decline in period-to-period Technology
Infrastructure revenue to a softening of demand for technology consulting
services due to the downturn in the domestic economy since late 2000. Technology
Infrastructure solutions will frequently recommend or require significant
upgrades in customers' hardware, software and networking equipment. Such
solutions are less likely to be considered during periods of economic downturn
due to constraints on business expenditures.

     The E-Business Solution Area recorded a revenue increase of $242,000, or
14%, for the nine months ended September 30, 2001 as compared with the nine
months ended September 30, 2000. The E-Business Solution Area has performed a
number of significant engagements for one customer in Northern California during
the first nine months of 2001. There were no customers for whom a comparable
level of E-Business services were provided during the first nine months of 2000.
There can be no assurance, however, that the customer will continue to award
projects of similar size in the future, that the Company will realize future
revenue equal to or greater than current levels for its E-Business Solution Area
or that any increases realized will result in the desired improvements to the
Company's financial condition or results of operations.

     Interactive Media Solution Area revenue totaled $6,730,000 for the nine
months ended September 30, 2001, including $2,556,000 for interactive media
consulting and $4,174,000 for interactive media systems integration. Comparable
Interactive Media revenue for the nine months ended September 30, 2000 was
$4,131,000 in total, including $802,000 for interactive media consulting and
$3,329,000 for interactive media systems integration. The increase in
Interactive Media Solution Area revenue from the first nine months of 2000 to
the first nine months of 2001 was 63%. A substantial majority of the
Interactive Media Solution Area's consulting and systems integration services
have historically been provided to customers in the cruise industry. The level
of Interactive Media services provided for cruise lines, however, is subject to
significant uncertainty as cruise line passenger levels and revenue have
declined since September 2001 following the recent incidents of terrorism in the
United States. Accordingly, there can be no assurance that the Company's
Interactive Media Solution Area will continue to realize consulting or systems
integration revenue equal to or greater than the levels realized in the first
nine months of 2001 or that any increases realized will result in the desired
improvement to the Company's financial condition or results of operations.

     Interactive Media consulting revenue increased $1,754,000, or 219%, for the
nine months ended September 30, 2001 as compared with the nine months ended
September 30, 2000. The increase in revenue was primarily attributable to the
commencement of applications development projects for interactive television
systems to be installed on six Carnival ships in 2001 and 2002, applications
development for an increased number of ship-based interactive television systems
for other cruise line customers and maintenance and trouble-shooting services
for a larger number of ship-based interactive television systems.

     Revenue for Interactive Media systems integration services increased by
$845,000, or 25%, in the nine months ended September 30, 2001 as compared to the
nine months ended September 30, 2000. Interactive Media systems integration
revenue for the first nine months of 2000 included approximately $980,000
related to the 1999 sale of four interactive television systems to Celebrity.
The interactive television systems had been installed on Celebrity ships from
1995 to 1997 when Allin Interactive was following an owner-operator model for
interactive television operations. Revenue from the system sales was recognized
over the minimum period of an associated maintenance obligation, which ended
March 17, 2000. The Celebrity ship system sales were unusual transactions in
terms of the magnitude of revenue associated with concurrent system sales.
Revenue from the installation of new interactive television systems was
significantly greater in the first nine months of 2001 as compared to the first
nine months of 2000 due to the commencement of installation services for
Carnival. As of September 30, 2001, systems integration services were being
provided concurrently on five new ship-based systems, the largest number of
simultaneously active projects of this magnitude undertaken to date by
Interactive Media.

     Revenue from legacy technology consulting services declined $3,969,000, or
71%, for the nine months ended September 30, 2001 as compared to the nine months
ended September 30, 2000. Management attributes the

                                      -26-
<PAGE>

decline in demand for legacy technology consulting services to a general trend
in technology away from mainframe systems toward a client/server environment and
the Company placing significantly greater marketing emphasis on the Microsoft-
based solutions-oriented services offered by the Technology Infrastructure, E-
Business and Interactive Media Solution Areas. Management expects a continued
decline in legacy technology consulting revenue over the remainder of 2001 and
during 2002. As discussed above, the Company ceased performing legacy technology
services associated with Hogan IBA software products in the third quarter of
2001. These specialized services for banking industry customers represented the
majority of legacy technology consulting revenue for the nine months ended
September 30, 2000.

     The Company recognized revenue for ancillary services & product sales,
after elimination of intercompany sales, of $679,000 during the nine months
ended September 30, 2001, including $262,000 for interactive television
transactional services, $184,000 for information system product sales and
$233,000 for other services. Ancillary services & product sales revenue of
$850,000 was recognized during the nine months ended September 30, 2000,
including $346,000 for interactive television transactional services, $403,000
for information system product sales and $101,000 for other services.

     Interactive television transactional services revenue decreased by $84,000
in the nine months ended September 30, 2001 as compared to the nine months ended
September 30, 2000. Transactional revenue will be discontinued as a revenue
source to the Company after transfer of systems operation on two ships to
Carnival, which is expected to occur in the near future. Information system
product sale revenue decreased by $219,000, or 54%, in the first nine months of
2001 as compared to the first nine months of 2000. Allin Network operated Erie
Computer Company ("Erie Computer") from February to May 2000. Erie Computer's
revenue base included a significant component of information system product
sales. Erie Computer was sold in May 2000 eliminating this revenue stream for
2001. Revenue from other services increased by $132,000 from the first nine
months of 2000 to the first nine months of 2001. The increase is primarily
attributable to significant placement fee revenue of $124,000 being recognized
in April 2001 following collection of litigation settlement proceeds from a
former customer who had hired the Company's consultants in violation of the
customer's agreement.

Cost of Sales and Gross Profit

     The Company recognized cost of sales of $7,105,000 during the nine months
ended September 30, 2001 as compared to $8,745,000 during the nine months ended
September 30, 2000. The primary reason for the decrease in cost of sales of
$1,640,000 was the decline in legacy technology consulting services. Gross
profit of $6,111,000 was recognized for the nine months ended September 30, 2001
as compared to $6,049,000 for the nine months ended September 30, 2000, an
increase of $62,000. The changing mix of the Company's services toward a greater
proportion of higher-margin solutions-oriented consulting and systems
integration services and a declining proportion of lower-margin legacy
technology consulting services resulted in a 1% increase in gross profit despite
an 11% decline in revenue in the first nine months of 2001 as compared to the
first nine months of 2000. Gross profit as a percentage of revenue increased to
46% in the first nine months of 2001 from 41% in the first nine months of 2000.
Management believes the improvement in gross profit percentage demonstrates the
Company's success to date in developing higher-margin solutions-oriented
business, although there can be no assurance that the Company will realize gross
profit percentages in the future at or above current levels.

     The Company's solution areas recorded a total of $6,907,000 for cost of
sales during the nine months ended September 30, 2001, including $889,000 for
Technology Infrastructure, $848,000 for E-Business, $3,958,000 for Interactive
Media and $1,212,000 for legacy technology consulting services. Comparable cost
of sales for the nine months ended September 30, 2000 was $8,323,000 in total,
including $1,052,000 for Technology Infrastructure, $899,000 for E-Business,
$2,299,000 for Interactive Media and $4,073,000 for legacy technology consulting
services. Gross profit for the Company's solution areas for the nine months
ended September 30, 2001 was $5,630,000, including $1,363,000 for Technology
Infrastructure, $1,074,000 for E-Business, $2,772,000 for Interactive Media and
$421,000 for legacy technology consulting services. Comparable gross profit for
the nine months ended September 30, 2000 was $5,621,000 in total, including
$1,479,000 for Technology Infrastructure, $781,000 for E-Business, $1,832,000
for Interactive Media and $1,529,000 for legacy technology consulting services.
Although gross profit from solution area services was stable from period-to-
period, reflecting a $9,000 increase, the underlying components reflect the
shift toward solutions-oriented services and away from legacy

                                      -27-
<PAGE>

technology consulting services. This transition is consistent with the Company's
strategic objectives over the last two years.

     Technology Infrastructure gross profit decreased $116,000, or 8%, for the
nine months ended September 30, 2001 as compared to the nine months ended
September 30, 2000. Management attributes the decline in period-to-period
Technology Infrastructure gross profit to the downturn in the domestic economy
since late 2000, which has curtailed technology spending for consulting services
or the equipment and software upgrades that will frequently accompany
infrastructure solutions. Despite the economic pressures associated with
declining demand for services, the Company realized a 3% period-to-period
increase in gross profit as a percentage of revenue.

     E-Business gross profit increased $293,000, or 38%, in the first nine
months of 2001 as compared to the first nine months of 2000, while the
corresponding increase in revenue was 14%. Gross profit as a percentage of
revenue experienced a 10% period-to-period increase. The improvement in gross
profit as a percentage of revenue resulted from increased average billing rates.
The increase in E-Business gross profit is also attributable to the performance
of a number of significant engagements for one customer in Northern California
during the first nine months of 2001. There were no customers for whom a
comparable level of E-Business services were provided during the first nine
months of 2000. There can be no assurance, however, that the customer will
continue to award projects of similar size in the future or that the Company
will realize gross profit in future periods equal to or greater than current
levels for its E-Business Solution.

     Cost of sales for the Interactive Media Solution Area was $3,958,000 in
total for the nine months ended September 30, 2001, including $978,000 for
interactive media consulting and $2,980,000 for interactive media systems
integration. Interactive Media cost of sales for the nine months ended
September 30, 2000 was $2,299,000 in total, including $298,000 for interactive
media consulting and $2,001,000 for interactive media systems integration.
Interactive Media Solution Area gross profit was $2,772,000 for the nine months
ended September 30, 2001, including $1,578,000 for interactive media consulting
and $1,194,000 for interactive media systems integration. Interactive Media
gross profit was $1,832,000 for the nine months ended September 30, 2000
including $504,000 for interactive media consulting and $1,328,000 for
interactive media systems integration. The period-to-period increases in
consulting cost of sales and gross profit was primarily attributable to the
commencement of applications development projects for interactive television
systems to be installed on six Carnival ships in 2001 and 2002, applications
development for an increased number of ship-based interactive television systems
for other cruise line customers and maintenance and trouble-shooting services
for a larger number of ship-based interactive television systems. With systems
integration services, the period-to-period increase in cost of sales and
decrease in gross profit were impacted by the recognition of a portion of the
cost of sales and gross profit associated with the sale of four Celebrity ship
interactive television systems in the first nine months of 2000. Substantial
portions of the equipment cost associated with these systems had been
depreciated at the time of sale to Celebrity, resulting in the recording of
unusually low cost of sales and unusually high gross profit on the system sales.
All of the significant systems integration projects active in the nine months
ended September 30, 2001 involve the installation of new systems and the higher
cost of sales associated with the purchase of new equipment for the projects,
with the result being a period-to-period decline in gross profit despite a 25%
increase in systems integration revenue. Management believes that gross profit
as a percentage of revenue realized for the nine months ended September 30, 2001
is more likely representative of future potential than the percentage realized
for the nine months ended September 30, 2000. There can be no assurance,
however, that that gross profit from interactive media systems integration
services, either in absolute or percentage terms, will continue to be realized
at levels comparable to or in excess of current levels.

     Cost of sales for the Company's legacy technology consulting services was
$1,212,000 for the nine months ended September 30, 2001 as compared to
$4,073,000 for the nine months ended September 30, 2000. Gross profit realized
on legacy technology consulting services declined from $1,529,000 in the first
nine months of 2000 to $421,000 in the first nine months of 2001. The declines
in legacy technology consulting cost of sales and gross profit are consistent
with the period-to-period decline in revenue. Management attributes the declines
to both industry trends away from mainframe computer systems and the Company's
shift in marketing focus since early 1999 to developing higher-margin
solutions-oriented business.

     Cost of sales for the Company's ancillary services and product sales was
$198,000 for the nine months ended September 30, 2001, including $89,000 for
pay-per-view movies associated with interactive television transactional
revenue, $120,000 for information system product sales and $(11,000) for other
services. Cost of sales

                                      -28-
<PAGE>

for ancillary services and product sales was $422,000 for the nine months ended
September 30, 2000, including $112,000 for pay-per-view movies, $298,000 for
information system product sales and $12,000 for other services. Gross profit on
ancillary services and product sales was $481,000 for the nine months ended
September 30, 2001, including $173,000 for interactive television transactional
revenue, $64,000 for information system product sales and $244,000 for other
services. Gross profit for ancillary services and product sales was $428,000 for
the nine months ended September 30, 2000, including $234,000 for interactive
television transactional services, $105,000 for information system product sales
and $89,000 for other services. The largest factor in the period-to-period
increase in gross profit of $53,000 was the inclusion of significant placement
fee gross profit of $124,000 recognized in 2001 following collection of
litigation settlement proceeds from a former client who hired Company
consultants in violation of the customer agreement. This was partially offset by
a decline in gross profit for information system product sales due to four
months of operating activity during the 2000 for Erie Computer, which included a
significant component of information system product sales.

Selling, General & Administrative Expenses

     The Company recorded $17,890,000 in selling, general & administrative
expenses during the nine months ended September 30, 2001 as compared to
$8,021,000 during the nine months ended September 30, 2000, an increase of
$9,869,000. The increase is attributable to substantial losses totaling
$10,748,000 recorded in the second quarter of 2001 for impairment of certain
assets, including goodwill associated with the acquisitions of Allin Consulting-
Pennsylvania and Allin Consulting-California and inventory maintained by Allin
Interactive.

     Since early 1999, the Company's strategic focus has been on developing
solutions-oriented consulting revenue, including revenue derived from the
activities of its Technology Infrastructure and E-Business Solution Areas.
During 1999 and 2000, the Company was able to successfully grow revenue in these
solution areas. Based on this growth history and industry projections for
continuing significant increases in the demand for e-business and infrastructure
technology consulting services, in late 2000, the Company anticipated
significant revenue and gross profit increases in future periods for its
Technology Infrastructure and E-Business Solution Areas. During this time
period, anticipated results indicated sufficient expected cash flows to support
the net unamortized values of the intangible assets associated with the
acquisitions of Allin Consulting-Pennsylvania and Allin-Consulting-California.
The downturn in the domestic economy experienced since late 2000 has
significantly lowered technology-based spending in the United States, which has
negatively impacted the demand for technology consulting services. While the
Company has experienced only a relatively small decline in the level of revenue
for the Technology Infrastructure and E-Business Solution Areas in the first
nine months of 2001 as compared to the first nine months of 2000, the Company
had previously expected a significant level of growth for 2001. During the
second quarter of 2001, due to the continuing variance in the rate of revenue
and gross profit growth from prior expectations and the growing perception among
industry analysts that the negative impact of the economic downturn on
technology consulting would continue at least until 2002, the Company completed
new projections which indicated the estimated fair values of the intangible
assets associated with the acquisitions of Allin Consulting-Pennsylvania and
Allin Consulting-California were less than the net unamortized values of the
assets. Based on the Company's revised projections, a loss due to impairment of
approximately $10,627,000 was recorded in the second quarter of 2001 to reduce
the net unamortized value of goodwill recorded on Allin Consulting-Pennsylvania
and Allin Consulting-California. There was no comparable loss recognized during
the nine months ended September 30, 2000.

     Allin Interactive maintained an inventory of interactive television
equipment salvaged from ships on which it had previously operated interactive
television systems on an owner-operator model. The inventory values had been
based on estimated salvage values after the equipment was removed from the
ships. Allin Interactive sought to sell its inventory to two cruise lines for
spare parts for similar systems that had been sold to the cruise line and which
continued to be operated. While a portion of the inventory was sold to these
parties, it became apparent during the second quarter of 2001 that neither
cruise line was prepared to purchase significant quantities of the inventoried
equipment. A loss due to impairment of approximately $121,000 was recorded in
the second quarter of 2001 to adjust the recorded value of Allin Interactive's
inventory to the revised estimate of fair value. There was no comparable loss
recognized during the nine months ended September 30, 2000.

     The Company added managerial, marketing and delivery personnel during 2000
and early 2001 to continue the Company's transition toward a solutions-oriented
project focus throughout its solution areas. This was

                                      -29-
<PAGE>

particularly pronounced in the Interactive Media Solution Area in the early
portion of 2001 as it began to augment its personnel in order to have an
appropriately sized and trained staff to handle the expected substantial
increase in project activity resulting from its addition of in excess of
$12,000,000 of committed backlog for consulting and systems integration services
in the first quarter of 2001. The scope of Interactive Media project activity
increased substantially in the second and third quarter of 2001. For the
remainder of 2001, project activity is expected to continue at levels higher
than typical prior to the second quarter of 2001. Through the third quarter of
2000, the Company had been able to offset most of the cost associated with its
investment in solution area managerial, marketing and delivery personnel with
overhead cost reductions associated with legacy technology consulting services.
However, most of the potential for these cost reductions had been realized by
September 2000. Consequently, since late in the first quarter of 2001,
management has moved to reduce the cost of personnel resources in its Technology
Infrastructure and E-Business Solution Areas as well as in its corporate
marketing and financial departments.

     During the nine months ended September 30, 2001, severance accruals of
approximately $118,000 were recorded as a result of the termination of services
of two managerial personnel associated with the Company's Technology
Infrastructure and E-Business Solution Area services. During the nine months
ended September 30, 2000, severance accruals of approximately $104,000 were
recorded due to the Company's termination of services of three managerial
personnel associated with the Company's legacy technology consulting services.

     There were several unusual items impacting selling, general &
administrative expenses in the nine months ended September 30, 2000. The Company
incurred expenses of approximately $111,000 in connection with an abandoned
acquisition candidate. A loss of approximately $67,000 was recorded on the sale
of assets related to Allin Network's Erie Computer operations. There were no
comparable losses recorded in the nine months ended September 30, 2001.

     Depreciation and amortization were $1,296,000 for the nine months ended
September 30, 2001 as compared to $1,558,000 for the nine months ended September
30, 2000. The decrease of 17% is due to significantly reduced goodwill
amortization in 2001 due to impairment of the asset values, the discontinuation
of depreciation on two ship-based interactive television systems upon their sale
to Carnival in February 2001 and significant levels of fixed assets reaching
full depreciation in December 2000 or June 2001.

Loss from Continuing Operations

     The Company recorded a loss from continuing operations of $11,883,000 for
the nine months ended September 30, 2001, as compared to a loss from continuing
operations of $2,130,000 for the nine months ended September 30, 2000. The
increase in loss from continuing operations is primarily attributable to
impairment losses of $10,748,000 recognized in the second quarter of 2001, as
discussed above.

Loss from Discontinued Operations

     During the nine months ended September 30, 2001, the Company recorded a
loss of $665,000 from its discontinued digital imaging operations as compared to
a loss of $130,000 during the nine months ended September 30, 2000. The loss
recognized in the first nine months of 2001 included an impairment loss of
approximately $332,000 related to Allin Digital's inventory of digital imaging
equipment and consumable supplies, assets utilized in certain photography
concessionaire operations and capitalized hardware, software and equipment, as
discussed above. Allin Digital has also recorded provisions of approximately
$88,000 to increase its allowance for doubtful accounts receivable during the
nine months ended September 30, 2001. The remainder of the increased loss was
due to declines in systems integration projects and product sales in the first
nine months of 2001 as compared to the first nine months of 2000.

Net Loss

     The Company's net loss for the nine months ended September 30, 2001 was
$12,548,000 as compared to $2,260,000 for the nine months ended September 30,
2000. The most significant factor in the decrease in profitability was the
inclusion of $10,748,000 of impairment losses for continuing operations in the
second quarter of 2001.

                                      -30-
<PAGE>

Liquidity and Capital Resources

     At September 30, 2001, the Company had cash and liquid cash equivalents of
$1,470,000 available to meet its working capital and operational needs. The net
change in cash from December 31, 2000 was a decrease of $860,000, which resulted
primarily from repayment of the outstanding balance on the Company's line of
credit and cash used for preferred stock dividends and capital expenditures,
partially offset by cash provided by the Company's operations.

     The Company recognized a net loss for the nine months ended September 30,
2001 of $12,548,000. The Company recorded significant non-cash losses of
$11,083,000 due to impairment or abandonment of assets and non-cash expenses of
$1,333,000 for depreciation of property and equipment and amortization of
intangible assets, resulting in a net cash use of $132,000 related to the income
statement. Working capital adjustments resulted in net cash provided of
$1,801,000. Among the working capital adjustments resulting in cash provided
were an increase in billings in excess of costs and estimated gross margins of
$2,125,000 and decreases in accounts receivable and inventory of $847,000 and
$458,000, respectively. These were substantially offset by working capital
adjustments using cash, including decreases in accounts payable and accrued
liabilities of $820,000 and $545,000, respectively, and an increase in unbilled
receivables of $420,000. The net result of the income statement activity and
working capital adjustments was net cash provided of $1,669,000 related to
operating activities.

     Investing activities resulted in a net cash use of $136,000 for the nine
months ended September 30, 2001 due primarily to capital expenditures of $78,000
for build-out costs, furniture and equipment related to the expansion of the
Company's Ft. Lauderdale office and the periodic upgrading of the Company's
computer hardware, software and communications equipment, and a cash payment of
$60,000 as a portion of additional purchase consideration pursuant to the
January 2001 settlement of litigation related to the Company's 1998 acquisition
of MEGAbase.

     Financing activities resulted in a net cash use of $2,393,000 during the
nine months ended September 30, 2001, due primarily to repayment of the
outstanding balance on the Company's line of credit of $2,155,000 and payments
for preferred stock dividends of $236,000.

     The Company's common stock has been quoted on the OTC Bulletin Board since
May 9, 2001. The Company's common stock was previously listed on The Nasdaq
Stock Market's ("Nasdaq") National Market from the time of the Company's initial
public offering of its common stock in November 1996 until the common stock was
delisted from the National Market as of the opening of business on May 9, 2001.
The Company was unable to maintain compliance with Nasdaq's criteria for
continued designation of the common stock as a National Market security. At the
time of the delisting, the common stock was not eligible for listing on Nasdaq's
SmallCap Market. Should quotation of the common stock on the OTC Bulletin Board
cease for any reason, the liquidity of the common stock and the Company's
ability to raise equity capital would likely decrease.

     On October 1, 1998, the Company and S&T Bank, a Pennsylvania banking
association, entered into a Loan and Security Agreement (the "S&T Loan
Agreement"), under which S&T Bank agreed to extend the Company a revolving
credit loan. The S&T Loan Agreement has subsequently been renewed as of October
1, 1999, 2000 and 2001 for additional annual periods. The expiration date of the
S&T Loan Agreement is September 30, 2002. The maximum borrowing availability
under the S&T Loan Agreement is the lesser of $5,000,000 or eighty percent of
the aggregate gross amount of eligible trade accounts receivable aged sixty days
or less from the date of invoice. The percentage of trade accounts receivable
qualifying for borrowing availability was reduced in conjunction with the recent
credit facility renewal. The applicable percentage had been eighty-five percent
prior to October 1, 2001. See Exhibit 4.1 - Third Amendment to Loan and Security
Agreement filed as part of this Report on Form 10-Q. Accounts receivable
qualifying for inclusion in the borrowing base are net of any prepayments,
progress payments, deposits or retention and must not be subject to any prior
assignment, claim, lien, or security interest. As of September 30, 2001, maximum
borrowing availability under the S&T Loan Agreement was approximately
$2,850,000. There was no outstanding balance as of September 30, 2001 and there
have been no borrowings under the S&T Loan Agreement subsequent to that date. As
of November 2, 2001, maximum borrowing availability under the S&T Loan Agreement
was approximately $1,066,000. The significant reduction in availability since
September 30 was due to significant accounts receivable

                                      -31-
<PAGE>

collections in October, the majority of the October month-end billing remaining
in process as of November 2 and some significant invoices aging beyond sixty
days.

     Borrowings may be made under the S&T Loan Agreement for general working
capital purposes. Loans made under the S&T Loan Agreement bear interest at the
bank's prime interest rate plus one percent. To date during 2001, the applicable
interest rate has ranged from 6.50% to 10.50%. The interest rate in effect at
September 30, 2001 was 7.00%. As of November 6, 2001, the interest rate in
effect was 6.50%. The interest rate increases or decreases from time to time as
S&T Bank's prime rate changes. Interest payments on any outstanding loan
balances are due monthly on the first day of the month. The Company recorded
approximately $3,000 in interest expense related to this revolving credit loan
for the three months ended September 30, 2001. If additional borrowings are made
under the revolving credit loan, the principal will be due at maturity, although
any outstanding principal balances may be repaid in whole or part at any time
without penalty.

     The S&T Loan Agreement includes provisions granting S&T Bank a security
interest in certain assets of the Company including its accounts receivable,
equipment, lease rights for real property, and inventory. The Company and its
subsidiaries, except for Allin Consulting-California and Allin Holdings, are
required to maintain depository accounts with S&T Bank, in which accounts the
bank has a collateral interest.

     The S&T Loan Agreement includes various covenants relating to matters
affecting the Company including insurance coverage, financial accounting
practices, audit rights, prohibited transactions, dividends and stock purchases,
which are disclosed in their entirety in the text of the S&T Loan Agreement
filed as an exhibit to the Company's Current Report on Form 8-K filed on October
9, 1998 and the Second Amendment to Note and Loan and Security Agreement filed
as Exhibit 4.1 to the Company's Report on Form 10-Q for the quarterly period
ended September 30, 1999. The covenant concerning dividends and purchases of
stock prohibits the Company from declaring or paying cash dividends or
redeeming, purchasing or otherwise acquiring outstanding shares of any class of
the Company's stock, except for dividends payable in the ordinary course of
business on the Company's Series D, F and G preferred shares. The covenants also
include a cash flow to interest ratio of not less than 1.0 to 1.0. Cash flow is
defined as operating income before depreciation, amortization and interest. The
cash flow coverage ratio is measured for each of the Company's fiscal quarters.
The Company was in compliance with the cash flow coverage covenant as of
September 30, 2001. The Company was in compliance with all other covenants as of
September 30, 2001 and currently remains in compliance with all other covenants.
The S&T Loan Agreement also includes reporting requirements regarding annual and
monthly financial reports, accounts receivable and payable statements, weekly
borrowing base certificates and audit reports.

     As of September 30, 2001, the Company had outstanding 2,500 shares of the
Company's Series C Redeemable Preferred Stock, having a liquidation preference
of $1,000 per share. There is no mandatory redemption date for the Series C
preferred stock. There are no sinking fund provisions applicable to the Series C
preferred stock. Accrued but unpaid dividends on the Series C preferred stock
were approximately $1,253,000 as of September 30, 2001 and approximately
$1,289,000 as of November 13, 2001. Series C preferred stock earns dividends at
the rate of 8% of the liquidation value thereof per annum, compounded quarterly,
until June 30, 2006, when the Company will be obligated to pay accrued
dividends, subject to legally available funds. Any accrued dividends on the
Series C preferred stock not paid by this date will compound thereafter at a
rate of 12% of the liquidation value thereof per annum. After June 30, 2006,
dividends on the Series C preferred stock will accrue and compound at a rate of
12% per annum and will be payable quarterly, subject to legally available funds.
The Company's current credit agreement with S&T Bank prohibits payment of
dividends on Series C preferred stock during the term of the agreement.

     As of September 30, 2001, the Company had outstanding 2,750 shares of the
Company's Series D Convertible Redeemable Preferred Stock having a liquidation
preference of $1,000 per share. There is no mandatory redemption date for the
Series D preferred stock. There are no sinking fund provisions applicable to the
Series D preferred stock. Series D preferred stock is convertible into the
Company's common stock until August 13, 2003. Each share of Series D preferred
stock is convertible into 276 shares of common stock, the number of shares
determined by dividing 1,000 by $3.6125, which is 85% of the $4.25 per share
price on the last trading day prior to the date of closing of the acquisition of
Allin Consulting-Pennsylvania. Series D preferred stock earns dividends at the
rate of 6% of the liquidation value thereof per annum, compounded quarterly if
unpaid. Dividends on Series D

                                      -32-
<PAGE>

preferred stock are payable quarterly in arrears as of the last day of October,
January, April and July, subject to legally available funds. Accrued but unpaid
dividends on Series D preferred stock were approximately $28,000 as of September
30, 2001 and approximately $6,000 as of November 13, 2001. Holders of the Series
D preferred stock who exercise the conversion right will have the right to
receive any accrued and unpaid dividends through the date of conversion.

     As of September 30, 2001, the Company had outstanding 1,000 shares of the
Company's Series F Convertible Redeemable Preferred Stock having a liquidation
preference of $1,000 per share. There is no mandatory redemption date for the
Series F preferred stock. There are no sinking fund provisions applicable to the
Series F preferred stock. Series F preferred stock is convertible to the
Company's common stock until the earlier of May 31, 2004 or the Company's
redemption of the Series F preferred shares. Until and including May 31, 2004,
the outstanding shares of Series F preferred stock are convertible into a total
of 508,647 shares of the Company's common stock, the number of shares obtained
by dividing 1,000 per preferred share by $1.966, 85% of the closing price of the
common stock as reported by Nasdaq on the last trading date prior to the first
anniversary of the date of issuance of the Series F preferred stock. Series F
preferred stock earns dividends at the rate of 7% of the liquidation value
thereof per annum. Dividends are payable quarterly on the 15th of the first
month of each calendar quarter, subject to legally available funds. Dividends
accrued for seven months during 1999 of approximately $41,000 are not required
to be paid prior to redemption or conversion, if any. Dividends not paid at
scheduled dates will compound quarterly thereafter. Accrued but unpaid dividends
on Series F preferred stock were approximately $59,000 as of September 30, 2001
and approximately $49,000 as of November 13, 2001. Holders of the Series F
preferred stock who exercise the conversion right will have the right to receive
any accrued and unpaid dividends through the date of conversion.

     As of September 30, 2001, the Company had outstanding 150 shares of the
Company's Series G Convertible Redeemable Preferred Stock having a liquidation
preference of $10,000 per share. There is no mandatory redemption date for the
Series G preferred stock, although the Company may redeem Series G shares after
December 29, 2005. The redemption price for each share of Series G preferred
stock will be the liquidation value of such share, plus an amount that would
result in an aggregate 25% compounded annual return on such liquidation value to
the date of redemption after giving effect to all dividends paid on such share
through the date of redemption. There are no sinking fund provisions applicable
to the Series G preferred stock. Unless redeemed or converted to common stock
sooner, Series G preferred earns cumulative quarterly dividends at the rate of
eight percent of the liquidation value thereof per annum until December 29,
2005. Thereafter, the dividend rate will increase to 12% of the liquidation
value until the earlier of the date of any redemption or the date of conversion
into common stock. Dividends are payable quarterly in arrears on the first day
of each calendar quarter, subject to legally available funds. Accrued but unpaid
dividends on the Series G preferred stock were approximately $30,000 as of
September 30, 2001 and approximately $14,000 as of November 13, 2001.

     Series G preferred stock is convertible into common stock at any time prior
to redemption by the Company, if any. Each share of Series G preferred stock is
convertible into at least 8,594 shares of common stock (determined by dividing
10,000 by $1.16348, which was 85% of the average closing price of the common
stock as reported by Nasdaq over the last five trading days prior to December
29, 2000, the date of issuance of the Series G preferred stock). Depending on
the market price of the common stock and the timing of any conversion, each
share of Series G preferred stock could be convertible into as many as 28,571
shares of common stock. Holders of the Series G preferred stock who exercise the
conversion right will have the right to receive any accrued and unpaid dividends
through the date of conversion. Any shares of Series G preferred stock which are
not converted to common stock will remain outstanding until converted or until
redeemed.

     The order of liquidation preference of the Company's outstanding preferred
stock, from senior to junior, is Series F, Series G, Series D and Series C. The
S&T Loan Agreement prohibits the Company from declaring or paying dividends on
any shares of its capital stock, except for current dividends payable in the
ordinary course of business on the Company's Series D, F and G preferred stock.
Each of the Certificates of Designation governing the Series C, D, F and G
preferred stock prohibits the Company from declaring or paying dividends or any
other distribution on the common stock or any other class of stock ranking
junior as to dividends and upon liquidation unless all dividends on the senior
series of preferred stock for the dividend payment date immediately prior to or
concurrent with the dividend or distribution as to the junior securities are
paid or are declared and funds are set aside for payment. In the event that the
number of shares of outstanding common stock is changed by any stock dividend,

                                      -33-
<PAGE>

stock split or combination of shares at any time shares of Series D, F or G
preferred stock are outstanding, the number of shares of common stock that may
be acquired upon conversion will be proportionately adjusted.

     In connection with the Company's December 29, 2000 sale of Series G
Convertible Redeemable Preferred Stock, the purchasers of Series G preferred
stock also received warrants to purchase an aggregate of 857,138 shares of
common stock which have an exercise price of $1.75 per share. The exercise price
may be paid in cash or by delivery of a like value, including accrued but unpaid
dividends, of Series C Redeemable Preferred Stock or Series D Convertible
Redeemable Preferred Stock.

     In connection with the Company's original sale of Series B Redeemable
Preferred Stock in August 1998, which was subsequently exchanged for Series D
Convertible Redeemable Preferred Stock, the purchasers of Series B preferred
stock also received warrants to purchase an aggregate of 647,059 shares of
common stock which have an exercise price of $4.25 per share, the price of the
common stock as of the last trading day prior to the closing for the acquisition
of Allin Consulting-Pennsylvania. The exercise price may be paid in cash or by
delivery of a like value, including accrued but unpaid dividends, of Series C
Redeemable Preferred Stock.

     The Company has an outstanding amended note payable to Les D. Kent related
to the November 1996 acquisition of Allin Consulting-California. After the May
1999 conversion of a portion of the note principal to the Company's Series F
Convertible Redeemable Preferred Stock, the outstanding principal balance of the
note is $1,000,000. The principal balance of the note is due April 15, 2005. The
note provides for interest at the rate of 7% per annum. Interest is payable
quarterly on the 15th of the first month of each calendar quarter. Any unpaid
interest is compounded quarterly. Accrued interest of approximately $58,000
applicable to the period June 1, 1999 to December 31, 1999 is not due prior to
the maturity of the loan principal. Accrued but unpaid interest was
approximately $76,000 as of September 30, 2001 and approximately $66,000 as of
November 12, 2001.

     Capital expenditures during the nine months ended September 30, 2001 were
approximately $78,000 and included build-out costs, furniture and equipment for
expansion of the Company's Ft. Lauderdale office and computer hardware, software
and communications equipment for the Company's periodic upgrading of technology.
Capital expenditures of approximately $95,000 are forecast for the remainder of
2001 and during 2002, primarily for computer hardware, software and
communications equipment for the Company's periodic upgrading of technology.
Business conditions and management's plans may change during the remainder of
2001 and during 2002, so there can be no assurance that the Company's actual
amount of capital expenditures will not exceed the planned amount.

     The Company believes that available funds and cash flows expected to be
generated by current operations will be sufficient to meet its anticipated cash
needs for working capital and capital expenditures for its existing operations
for at least the next twelve months. As discussed above, the S&T Loan Agreement
expires September 30, 2002. The Company believes it will be able to refinance
its existing credit facility or obtain another credit facility on similar terms
upon the expiration of the current credit facility. If currently available funds
and cash generated by operations were insufficient to satisfy the Company's
ongoing cash requirements or if the Company was unable to renew or replace the
current credit facility, the Company would be required to consider other
financing alternatives, such as selling additional equity or debt securities,
obtaining long or short-term credit facilities, or selling other operating
assets, although no assurance can be given that the Company could obtain such
financing on terms favorable to the Company or at all. Any sale of additional
common or convertible equity securities or convertible debt securities would
result in additional dilution to the Company's shareholders.

Risk Factors

     This Management's Discussion and Analysis and other sections of this Report
on Form 10-Q contain forward-looking statements that are based on current
expectations, estimates and projections about the industries in which the
Company operates, management's beliefs and assumptions made by management. Words
such as "expects," "anticipates," "intends," "plans," "believes," "estimates,"
"will" and variations of such words and similar expressions are intended to
identify such forward-looking statements. These statements constitute "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, and are subject to the safe harbors created thereby. These statements
are based on a number of assumptions that could ultimately prove inaccurate and,
therefore, there can be no assurance that they will prove to be accurate.
Factors that could affect performance include those listed below,

                                      -34-
<PAGE>

which are representative of factors which could affect the outcome of the
forward-looking statements. In addition, such statements could be affected by
general industry and market conditions and growth rates, and general domestic
and international economic conditions. The Company undertakes no obligation to
update publicly any forward-looking statements, whether as a result of new
information, future events or otherwise.

     Stock Market Requirements. The Company's common stock was delisted from
Nasdaq's National Market as of the opening of business on May 9, 2001. At the
time of the delisting, the common stock was not eligible for listing on Nasdaq's
SmallCap Market. Losing the designation of the common stock as a Nasdaq listed
security will likely reduce the liquidity of the common stock and could limit
the Company's ability to raise equity capital. Quotation of the common stock on
the OTC Bulletin Board commenced on May 9, 2001. Should quotation of the common
stock on the OTC Bulletin Board cease for any reason, the liquidity of the
common stock and the Company's ability to raise equity capital would likely
decrease further.

     Public Market and Trading Issues. Following the Company's initial public
offering in November 1996, a public market for the Company's common stock did
develop. However, trading of the common stock has been sporadic and the trading
volume has generally been low. Since the delisting of the Company's common stock
from Nasdaq's National Market, trading volume has been further reduced. Even a
small trading volume on a particular day or over a few days may affect the
market price of the common stock. The market price of the common stock could
also be subject to fluctuations in response to variations in results of
operations, changes in earnings estimates by securities analysts, announcements
by competitors, general economic and market conditions and other factors. These
market fluctuations may adversely affect the market price of the common stock.

     General Economic Conditions. A number of customers or potential customers
have postponed projects or delayed consideration of new technology initiatives
pending further assessment of the expected magnitude and duration of the
domestic economic downturn. Management attributes the shortfalls in Technology
Infrastructure and E-Business revenue growth from the Company's original
expectations for 2001 to the downturn in the domestic economy beginning late in
2000. Management believes the economic uncertainty will likely negatively impact
the Technology Infrastructure and E-Business Solution Areas for at least the
remainder of 2001 and a portion of 2002. There can be no assurance that the
effects of the economic uncertainty will not worsen or extend beyond 2001, which
would negatively impact the Company's results of operations and financial
condition.

     World Events. Interactive Media consulting and systems integration services
accounted for approximately 51% of the Company's revenue and 45% of the
Company's gross profit for the nine months ended September 30, 2001. Interactive
Media projects also represent a substantial majority of the Company's committed
backlog for 2002. Interactive Media services are provided predominantly to
customers in the cruise industry. Following the terrorist attacks which occurred
in the United States in September 2001, the cruise industry experienced
decreases in passenger occupancy and revenue. Should these recent events or any
future world events cause further negative economic impact to the cruise
industry, customers may seek to delay or cancel projects. Any such delays or
cancellations could have a negative impact on the Company's future results of
operations. Any world events which negatively impact the cruise industry may
also negatively impact the Interactive Media Solution Area's ability to obtain
additional future business.

     Decline in Legacy Technology Consulting Services. The Company has
experienced a substantial decline in demand for legacy technology consulting
services related to mainframe systems and specialized Hogan IBA software
products for the banking industry. The Company completed its final Hogan IBA-
based project in July 2001 and does not anticipate further provision of services
related to this legacy technology. Revenue and gross profit derived from legacy
technology services have declined steadily during 1999, 2000 and the first nine
months of 2001 and are expected to continue to do so over the remainder of 2001
and during 2002. The decline is attributable to both industry trends and the
Company's marketing focus on solutions-oriented services. Legacy technology
consulting services were formerly a significant source of cash flow to the
Company. There can be no assurance that the Company will be successful on an
ongoing basis in developing a sufficient level of solutions-oriented consulting
services to offset the declines in revenue and gross profit from legacy
technology consulting services.

     Discontinuation of Digital Imaging Operations. During the second quarter of
2001, the Company determined to discontinue the digital imaging systems
integration operations previously carried out by the Interactive Media Solution
Area and the ancillary sales of digital imaging products. The Company had
implemented

                                      -35-
<PAGE>

changes to the marketing strategy for digital imaging systems integration
services in the third quarter of 2000 to more closely focus on high value-added
integration projects in order to more closely meet the Company's gross profit
percentage objectives. While the projects undertaken thereafter generally
resulted in a higher gross margin percentage, the market for high value-added
systems integration services was smaller with the result that aggregate digital
imaging systems integration revenue and gross profit were reduced from previous
levels. The decline in results from operations and the loss of key managerial
and sales personnel in the second quarter of 2001 led to the determination to
discontinue operations. The Company recognized impairment losses related to
Allin Digital's inventory, certain assets related to photography concessionaire
operations, and certain capitalized assets and recorded additional provisions to
increase Allin Digital's allowance for doubtful accounts receivable in the
second and third quarters of 2001. The Company is currently attempting to sell
the remaining inventory and assets and to collect remaining accounts receivable
from its digital imaging operations. If the Company is unable to sell the
remaining inventory or other assets at the estimates of fair value presently
recorded or if the Company is unable to collect accounts receivable exceeding
the presently recorded allowance for doubtful accounts, the Company's future
profitability will be adversely impacted.

     Dependence on Key Personnel. The Company's success is dependent on a number
of key management, technical and operational personnel for the management of
consulting and systems integration operations, development of new markets and
timely installation of its systems. The loss of one or more of these individuals
could have an adverse effect on the Company's business and results of
operations. The Company depends on its continued ability to attract and retain
highly skilled and qualified personnel. There can be no assurance that the
Company will be successful in attracting and retaining such personnel.

     Competitive Market Conditions. The technology consulting industry is
fragmented with a large number of smaller-sized participants due to historical
growth of the overall market for services and low capital barriers to entry.
There are also large national or multinational firms competing in this market.
Rapid rates of change in the development and usage of computer hardware,
software, Internet applications and networking capabilities will require
continuing education and training of the Company's technical consultants and a
sustained effort to monitor developments in the technology industry to maintain
services that provide value to the Company's customers. The Company's
competitors may have resources to develop training and industry monitoring
programs that are superior to the Company's. There can also be no assurance that
the Company will be able to compete effectively with current or future
competitors or that the competitive pressures faced by the Company will not have
a material adverse effect on the Company's business, financial condition and
results of operations. The market for interactive media consulting and systems
integration services is new and rapidly evolving. The types of interactive
television systems and applications offered by the Company are significant
capital expenditures for potential customers and do not have proven markets.
Some of the Company's current and potential competitors have longer operating
histories and significantly greater financial, technical, marketing and other
resources than the Company and, therefore, may be able to respond more quickly
to new or changing opportunities, technologies and customer requirements. The
Company has developed software interfaces and modifications for end-user
operating components from On Command Corporation to be utilized in interactive
television system installations. The Company believes its application
development expertise and the On Command hardware platform offer cost-effective,
flexible solutions with a broad range of functionality. There can also be no
assurance, however, that competitors will not develop systems and products with
superior functionality or cost advantages over the Company's products and
applications.

     Fluctuations in Operating Results.  The Company expects to experience
significant fluctuations in its future quarterly operating results that may be
caused by many factors, including the addition or conclusion of significant
consulting or systems integration engagements.  Accordingly, quarterly revenue
and operating results will be difficult to forecast, and the Company believes
that period-to-period comparisons of its operating results will not necessarily
be meaningful and should not be relied upon as an indication of future
performance.

     Recent Net Losses and Accumulated Deficit. The Company sustained
substantial net losses during the years from 1996 through 2000 and the first
nine months of 2001. As of September 30, 2001, the Company had a retained
deficit of $45,929,000. Although net income was recognized for the third quarter
of 2001, the Company anticipates that net losses may continue to be incurred in
future periods. There can be no assurance that the Company will be able to
achieve revenue growth or improvements to profitability on an ongoing basis in
the future.

                                      -36-
<PAGE>

     Liquidity Risk.  The Company's cash resources and cash flow generated from
operations have been adequate to meet its needs to date, but there can be no
assurance that a prolonged downturn in operations or business setbacks to the
Company's operating entities will not result in working capital shortages which
may adversely impact the Company's operations.  The liquidity risk is mitigated
somewhat by the Company's current revolving credit facility, which permits
borrowings for short term working capital needs.  The Company's revolving credit
facility expires September 30, 2002.  Failure of the Company to renew its
existing credit facility beyond September 30, 2002 or replace it with another
facility with similar terms may adversely impact the Company's operations in the
future.

     Proprietary Technology; Absence of Patents. The Company does not have
patents on any of its system configurations, designs or applications and relies
on a combination of copyright and trade secret laws and contractual restrictions
for protection. It is the Company's policy to require employees, consultants and
clients to execute nondisclosure agreements upon commencement of a relationship
with the Company, and to limit access to and distribution of its software,
documentation and other proprietary information. Nonetheless, it may be possible
for third parties to misappropriate the Company's system configurations, designs
or applications and proprietary information or independently to develop similar
or superior technology. There can be no assurance that the legal protections
afforded to the Company and the measures taken by the Company will be adequate
to protect its system configurations, designs or applications. Any
misappropriation of the Company's system configurations, designs or applications
or proprietary information could have a material adverse effect on the Company's
business, financial condition and results of operations.

     There can be no assurance that other parties will not assert technology
infringement claims against the Company, or that, if asserted, such claims will
not prevail. In such event, the Company may be required to engage in protracted
and costly litigation, regardless of the merits of such claims; discontinue the
use of certain software codes or processes; develop non-infringing technology;
or enter into license arrangements with respect to the disputed intellectual
property. There can be no assurance that the Company would be able to develop
alternative technology or that any necessary licenses would be available or
that, if available, such licenses could be obtained on commercially reasonable
terms. Responding to and defending against any of these claims could have a
material adverse effect on the Company's business, financial condition and
results of operations.

     Risk of Technological Obsolescence. The ability of the Company to maintain
a standard of technological competitiveness is a significant factor in the
Company's strategy to maintain and expand its customer base, enter new markets
and generate revenue. The Company's success will depend in part upon its ability
to develop, refine and introduce high quality improvements in the functionality
and features of its system configurations, designs and applications in a timely
manner and on competitive terms. There can be no assurance that future
technological advances by direct competitors or other providers will not result
in improved technology systems and applications that could adversely affect the
Company's business, financial condition and results of operations.

     Government Regulation and Legal Uncertainties. The Company is subject, both
directly and indirectly, to various laws and governmental regulations relating
to its business. As a result of rapid technology growth and other related
factors, laws and regulations may be adopted which significantly impact the
Company's business.

Effect of Recently Issued Accounting Standards

     In July 2001, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 141, Business Combinations ("SFAS No. 141")
and No. 142, Goodwill and Other Intangible Assets ("SFAS No. 142"). SFAS No. 141
requires all business combinations initiated after June 30, 2001 to be accounted
for using the purchase method. Under SFAS No. 142, goodwill and intangible
assets with indefinite lives are no longer amortized but are reviewed annually
(or more frequently if impairment indicators arise) for impairment. Separable
intangible assets that are not deemed to have indefinite lives will continue to
be amortized over their useful lives (but with no maximum life). The
amortization provisions of SFAS No. 142 apply to goodwill and intangible assets
acquired after June 30, 2001. With respect to goodwill and intangible assets
acquired prior to July 1, 2001, the Company is required to adopt SFAS No. 142
effective January 1, 2002. The Company is currently evaluating the effect that
adoption of the goodwill impairment provisions of SFAS No. 142 that become
effective January 1, 2002 will have on its operations and financial position.
Goodwill amortization of approximately $69,000 per quarter will no longer be
recorded effective January 1, 2002.

                                      -37-
<PAGE>


     In August 2001, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets ("SFAS No. 144"). SFAS No. 144 addresses financial
accounting and reporting for the impairment or disposal of long-lived assets.
This statement supersedes Statement of Financial Accounting Standards No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of, Accounting Principles Board Opinion No. 30, Reporting the
Results of Operations - Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions and Committee on Accounting Procedure Accounting Research Bulletin
No. 51, Consolidated Financial Statements. SFAS No. 144 is effective for fiscal
years beginning after December 15, 2001 and interim periods within those fiscal
years. The Company will be required to adopt SFAS No. 144 effective January 1,
2002. The Company is currently evaluating the effect that adoption of SFAS No.
144 will have on its operations and financial position.


                                      38
<PAGE>

Item 3.  Quantitative and Qualitative Disclosure about Market Risk Sensitive
Instruments

         The Company currently does not invest excess funds in derivative
financial instruments or other market rate sensitive instruments for the purpose
of managing its foreign currency exchange rate risk or for any other purpose.

                                      -39-
<PAGE>

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

         (a)  Exhibits.

Exhibit
Number                           Description of Exhibit
------                           ----------------------


4.1           Third Amendment to Loan and Security Agreement by and between
              Allin Corporation, each of its subsidiaries and S&T Bank, a
              Pennsylvania banking association

11            Computation of Earnings per Share.



         (b)  Reports on Form 8-K.

              On September 6, 2001, Allin Corporation filed with the Securities
              and Exchange Commission a Current Report of Form 8-K (date of
              earliest event reported - August 28, 2001) to report that Timothy
              P. O'Shea had stepped down as President of Allin Corporation to
              become the Managing Director of Allin Consulting of Pennsylvania,
              Inc.

                                      -40-
<PAGE>

                                  Signatures


     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.


                              ALLIN CORPORATION
                              (Registrant)

Date: November 13, 2001       By: /s/ Richard W. Talarico
                                  -----------------------
                                  Richard W. Talarico
                                  Chairman and Chief Executive Officer


Date: November 13, 2001       By: /s/ Dean C. Praskach
                                  --------------------
                                  Dean C. Praskach
                                  Chief Financial Officer and Chief
                                  Accounting Officer

                                      -41-
<PAGE>

Allin Corporation
Form 10-Q
September 30, 2001
Exhibit Index



Exhibit
Number               Description of Exhibit
------               ----------------------


4.1       Third Amendment to Loan and Security Agreement by and between Allin
          Corporation, each of its subsidiaries and S&T Bank, a Pennsylvania
          banking association

11        Computation of Earnings per Share

                                      -42-