<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: March 31, 2002

                                      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 May 1, 2002

                        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  18
                    Condition and Results of Operations

           Item 3.  Quantitative and Qualitative Disclosure about Market          Page  36
                    Sensitive Instruments


Part II -  Other Information

           Item 6.  Exhibits and Reports on Form 8-K                              Page  37

Signatures                                                                        Page  38
</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)

                                                     December 31,   March 31,
                                                         2001          2002
                                                     ------------  ------------
ASSETS

Current assets:
        Cash and cash equivalents                    $      2,226  $      2,641
        Accounts receivable, net of allowance for
               doubtful accounts of $124 and $109           3,359         1,664
        Unbilled receivable                                   211           200
        Inventory                                              75            46
        Prepaid expenses                                      196           176
        Assets held for sale                                    8           ---
                                                     ------------  ------------
               Total current assets                         6,075         4,727

Property and equipment, at cost:
        Leasehold improvements                                471           471
        Furniture and equipment                             2,964         2,968
                                                     ------------  ------------
                                                            3,435         3,439
Less--accumulated depreciation                             (2,953)       (3,060)
                                                     ------------  ------------
                                                              482           379

Goodwill, net of accumulated amortization of
        $3,502 and $3,742                                     712           817
Other assets, net of accumulated amortization of
        $912 and $717                                       1,789         1,639
                                                     ------------  ------------

Total assets                                         $      9,058  $      7,562
                                                     ============  ============

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,          March 31,
                                                                                      2001                 2002
                                                                                  ------------         ------------
<S>                                                                               <C>                  <C>
LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
        Accounts payable                                                          $      2,329         $      1,014
        Accrued liabilities:
               Compensation and payroll taxes                                              298                  155
               Dividends on preferred stock                                              1,445                1,519
               Other                                                                       307                  241
        Billings in excess of costs and
               estimated gross margins                                                     212                  555
        Deferred revenue                                                                    53                   28
                                                                                  ------------         ------------
               Total current liabilities                                                 4,644                3,512

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                                                          1,028                1,031
        Common stock, par value $.01 per share, authorized
               20,000,000 shares, outstanding 6,967,339 shares                              70                   70
        Additional paid-in-capital                                                      41,002               40,836
        Warrants                                                                         1,017                1,017
        Treasury stock at cost, 8,167 common shares                                        (27)                 (27)
        Retained deficit                                                               (45,328)             (45,529)
                                                                                  ------------         ------------
               Total shareholders' equity                                                3,414                3,050
                                                                                  ------------         ------------

Total liabilities and shareholders' equity                                        $      9,058         $      7,562
                                                                                  ============         ============
</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
                                                                                 Ended                      Ended
                                                                               March 31,                  March 31,
                                                                                 2001                       2002
                                                                         ---------------------      ---------------------
<S>                                                                      <C>                       <C>
Revenue:
        Solution area consulting services                                $               2,285      $               1,364
        Solution area integration services                                               1,528                        952
        Legacy technology consulting services                                              770                        356
        Ancillary services                                                                 138                         19
        Ancillary product sales                                                             83                        126
                                                                         ---------------------      ---------------------

               Total revenue                                                             4,804                      2,817

Cost of sales                                                                            2,585                      1,475
                                                                         ---------------------      ---------------------

Gross profit                                                                             2,219                      1,342

Selling, general & administrative expenses:
        Depreciation and amortization                                                      514                        149
        Other selling, general & administrative expenses                                 2,548                      1,403
                                                                         ---------------------      ---------------------

               Total selling, general & administrative expenses                          3,062                      1,552
                                                                         ---------------------      ---------------------

Loss from operations                                                                      (843)                      (210)

Interest expense (income), net                                                              47                         (1)
                                                                         ---------------------      ---------------------

Loss from continuing operations                                                           (890)                      (209)

(Loss) income from discontinued operations                                                (107)                         8
                                                                         ---------------------      ---------------------

Net loss                                                                                  (997)                      (201)

Dividends and accretion on preferred stock                                                 161                        166
                                                                         ---------------------      ---------------------

Net loss attributable to common shareholders                             $              (1,158)     $                (367)
                                                                         =====================      =====================

Loss per common share from continuing
        operations - basic and diluted                                   $               (0.15)     $               (0.05)
                                                                         ---------------------      ---------------------

(Loss) income per common share from
        discontinued operations - basic and diluted                      $               (0.02)     $                0.00
                                                                         ---------------------      ---------------------

Net loss per common share - basic and diluted                            $               (0.17)     $               (0.05)
                                                                         ---------------------      ---------------------

Weighted average shares outstanding - basic and diluted                              6,963,388                  6,967,339
                                                                         ---------------------      ---------------------
</TABLE>

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

                                      -6-
<PAGE>

ALLIN CORPORATION & SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

                           (Dollars in thousands)
                                (Unaudited)

<TABLE>
<CAPTION>
                                                                                   Three Months               Three Months
                                                                                       Ended                      Ended
                                                                                     March 31,                  March 31,
                                                                                       2001                       2002
                                                                               ----------------------     ----------------------
<S>                                                                                <C>                        <C>
Cash flows from operating activities:
        Net loss                                                                                (997)                      (201)
        Adjustments to reconcile net loss to net
           cash flows from operating activities:
               Depreciation and amortization                                                     531                        153
        Changes in certain assets and liabilities:
               Accounts receivable                                                               256                      1,695
               Unbilled receivable                                                                 7                         11
               Inventory                                                                         145                         29
               Prepaid expenses                                                                  (51)                        20
               Assets held for sale                                                               18                          8
               Other assets                                                                        3                        ---
               Accounts payable                                                               (1,864)                    (1,315)
               Accrued liabilities                                                              (462)                      (210)
               Billings in excess of costs and
                     estimated gross margins                                                   1,460                        343
               Income taxes payable                                                               (1)                       ---
               Deferred revenue                                                                  115                        (25)
                                                                               ----------------------     ----------------------
           Net cash flows (used for) provided by operating activities                           (840)                       508
                                                                               ----------------------     ----------------------

Cash flows from investing activities:
        Proceeds from sale of assets                                                               1                        ---
        Additional purchase consideration for
               acquisition of subsidiary                                                         (60)                       ---
        Capital expenditures                                                                     (47)                        (4)
                                                                               ----------------------     ----------------------
           Net cash flows used for investing activities                                         (106)                        (4)
                                                                               ----------------------     ----------------------

Cash flows from financing activities:
        Payment of dividends on preferred stock                                                  (59)                       (89)
        Repayment of line of credit                                                             (160)                       ---
        Repayment of note payable                                                                 (1)                       ---
                                                                               ----------------------     ----------------------
           Net cash flows used for financing activities                                         (220)                       (89)
                                                                               ----------------------     ----------------------

Net change in cash and cash equivalents                                                       (1,166)                       415
Cash and cash equivalents, beginning of period                                                 2,330                      2,226
                                                                               ----------------------     ----------------------
Cash and cash equivalents, end of period                                                       1,164                      2,641
                                                                               ======================     ======================
</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-month periods ended March 31, 2001 and 2002 should be read in conjunction
with the audited financial statements and notes for the years ended December 31,
2000 and 2001, contained in Allin Corporation's (the "Company") Annual Report on
Form 10-K for the year ended December 31, 2001. 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 nec essarily
indicative of results to be expected for the full year.

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.

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 or income from discontinued operations, which is
presented after loss from continuing operations. Also, the information related
to the Company's revenue and gross profit included in Note 6 - Industry Segment
Information - has been reclassified for the periods presented to exclude the
discontinued operations.

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 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 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. Allin Interactive recognizes revenue and associated cost
from the sale of products at the time the products are shipped. Interactive
television transactional revenue and associated cost of sales were recognized as
the services were performed prior to cessation of these activities in December
2001. 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

                                      -8-
<PAGE>

                      Allin Corporation and Subsidiaries
           Notes to Consolidated Financial Statements - (Continued)

television transactional revenue is included in "Ancillary services" and product
sales are included in "Ancillary product sales."

       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.

       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 could all be considered dilutive
securities under SFAS No. 128. However, since the Company recognized net losses
attributable to common shareholders in the three-month periods ended March 31,
2001 and 2002, these securities have not been included in the calculation of
diluted EPS, as their effect would be anti-dilutive. Furthermore, no stock
options or warrants to purchase shares would have been considered in the
calculation of diluted EPS in either of the three-month periods ended March 31,
2001 and 2002 since the market prices of the Company's common stock as of the
beginning of the respective periods did not exceed the exercise prices of vested
options and warrants outstanding during those periods. As of March 31, 2001 and
2002, 843,450 and 790,810 options to purchase common shares were outstanding,
respectively, for which the option exercise prices exceeded the average market
price of the common shares for the three-month periods then ended. The
additional shares that would have been included in the diluted EPS calculation
related to the convertible preferred stock, if the effect was not anti-dilutive,
were 2,559,128 and 5,555,607 for the three months ended March 31, 2001 and 2002,
respectively.

Accounts Receivable and Unbilled Receivables

       The Company's subsidiaries record accounts receivable based upon billing
for services and products. Unbilled receivables are recorded when services have
been provided prior to the end of the period and invoicing has not occurred.
Allowances on accounts receivable are recorded when circumstances indicate
collection is doubtful for particular accounts receivable or as a general
reserve for all accounts receivable. Accounts receivable are written off if
reasonable collection efforts prove unsuccessful.

Inventory

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

                                      -9-
<PAGE>

                      Allin Corporation and Subsidiaries
           Notes to Consolidated Financial Statements - (Continued)

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.

Deferred Revenue

       Deferred revenue is recorded for amounts billed or received for which
services will be performed in future periods. Such amounts are recognized as
revenue when services are performed. As of March 31, 2001 and 2002, deferred
revenue represented amounts expected to be recognized as revenue within one year
of the applicable date.

Financial Instruments

       As of March 31, 2002, 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

       Cash payments for income taxes were approximately $3,000 during the three
months ended March 31, 2001. There were no cash payments for income taxes during
the three months ended March 31, 2002. Cash payments for interest were
approximately $52,000 and $19,000 during the three months ended March 31, 2001
and 2002, respectively. Cash payments for dividends were approximately $59,000
and $89,000 during the three months ended March 31, 2001 and 2002, respectively.
Dividends on preferred stock of approximately $143,000 and $149,000 were accrued
but unpaid during the three months period ended March 31, 2001 and 2002,
respectively.

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. As
of March 31, 2002, the Company has outstanding 25,000, 2,750, 1,000 and 150
shares of Series C, D, F and G preferred stock, respectively. 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.

3. Equity Transactions

       A total of 25,000 options for common shares were awarded under the
Company's 2000 Stock Plan to non-employee directors of the Company during the
three months ended March 31, 2002. The exercise price of $0.18 per share was
based on the market price of the Company's common stock on the date of grant.
All of the options awarded will vest on the first anniversary, and will expire
on the seventh anniversary, of the date of grant. No options were forfeited
under the terms of the 2000 Stock Plan during the three months ended March 31,
2002. Options granted under the 2000 Stock Plan to purchase 137,000 shares of
common stock remain outstanding as of March 31, 2002.

                                      -10-
<PAGE>

                      Allin Corporation and Subsidiaries
           Notes to Consolidated Financial Statements - (Continued)

       During the three months ended March 31, 2002, vested options to purchase
540 shares and non-vested options to purchase 640 shares of common stock
previously awarded under the Company's 1998 Stock Plan were forfeited under the
terms of the Plan. Options granted under the 1998 Stock Plan to purchase 249,960
shares of common stock remain outstanding as of March 31, 2002.

       During the three months ended March 31, 2002, vested options to purchase
160 shares of common stock previously awarded under the Company's 1997 Stock
Plan were forfeited under the terms of the Plan. Options granted under the 1997
Stock Plan to purchase 224,050 shares of common stock remain outstanding as of
March 31, 2002.

       During the three months ended March 31, 2002, vested options to purchase
500 shares of common stock previously awarded under the Company's 1996 Stock
Plan were forfeited under the terms of the Plan. Options granted under the 1996
Stock Plan to purchase 204,800 shares of common stock remain outstanding as of
March 31, 2002.

       On March 14, 2002, the former sole shareholder of Allin Consulting-
California, who was also a shareholder of the Company until this date and was
also formerly President of the Company, sold all of the 1,000 outstanding shares
of the Company's Series F Convertible Redeemable Preferred Stock, approximately
$55,000 of accrued but unpaid dividends related to the preferred stock, and
213,333 shares of the Company's common stock to another shareholder of the
Company. On April 15, 2002, the purchaser sold certain amounts of the Series F
preferred stock, accrued but unpaid dividends related to the preferred stock,
and common stock to other parties related to the Company. See Note 8 -
Subsequent Events - for additional information.

4. Note Payable

       On March 14, 2002, the former sole shareholder of Allin Consulting-
California, who was also a shareholder of the Company until this date and was
also formerly President of the Company, sold a note due from the Company, with a
principal balance of $1,000,000 due on April 15, 2005 and approximately $73,000
of accrued but unpaid interest related to the note to another shareholder of the
Company. On April 15, 2002, the purchaser sold certain amounts of the note and
accrued but unpaid interest related to the note to other parties related to the
Company. See Note 8 - Subsequent Events - for additional information.

5. 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 80% 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 March 31, 2002, maximum borrowing availability under the revolving credit
loan was approximately $1,169,000. There was no outstanding balance as of March
31, 2002. Loans made under the revolving credit loan bear interest at the bank's
prime interest rate plus one percent. As of March 31, 2002, the rate of interest
on the revolving credit loan was 5.75%. There were no changes to the interest
rate in the first quarter of 2002.

       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. During the
fiscal quarter ended March 31, 2002, the Company recognized net interest income.
S&T Bank has acknowledged that the cash flow to interest ratio cannot be
calculated as intended for the first quarter of 2002 since net interest expense
was

                                      -11-
<PAGE>

                       Allin Corporation and Subsidiaries
            Notes to Consolidated Financial Statements - (Continued)

not recognized and that this instance does not represent a violation of the cash
flow coverage covenant. The Company was in compliance with all other covenants
as of March 31, 2002.

6.   Industry Segment Information

Basis for Determining Segments

         The Company follows Statement of Financial Accounting Standards
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 reported 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 interactive media and Microsoft-based technology services: Interactive
Media, Technology Infrastructure and E-Business. 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. The Company also performs consulting for IBM
mainframe legacy technology. Legacy technology consulting services are grouped
with Solution Area Services because the services are overseen by executive
management and support personnel in the Company's Pittsburgh office with
responsibility for all of the Pittsburgh-based solution area operations.

         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 customer satisfaction, the Company
maintains an ancillary capability to provide information system products,
including interactive television equipment and computer hardware, software and
supplies. The Company also occasionally performs ancillary services resulting in
revenue such as website hosting or placement fees. Until December 2001, the
Company also operated 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,
processes, types of customers and distribution methods for each solution area.
Segments grouped as Solution Area Services include Interactive Media Consulting,
Interactive Media Systems Integration, Technology Infrastructure Consulting,
E-Business Consulting and Legacy Technology Consulting. Segments grouped as
Ancillary Services & Product Sales include Information System Product Sales and
Other Services. Interactive Television Transactional Services had previously
been reported as a separate segment under Ancillary Services & Product Sales,
but will henceforth be included under Other Services due to the diminished
recent activity of this type as compared to periods prior to 2000. Information
presented for the three months ended March 31, 2001 or as of March 31, 2001 has
been restated to reflect this change.

         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 period ended March 31, 2001 to exclude the discontinued
operations. Information about assets related to Allin Digital's operations as of
March 31, 2001, previously reported under these segment captions, has been
reclassified to a line item captioned Discontinued Operations-Digital Imaging.

         During the three months ended March 31, 2002, three significant
customers accounted for approximately 24%, 19% and 11%, respectively, of the
revenue recognized by the Company. The segments included in the revenue
associated with these customers were Interactive Media Consulting, Interactive
Media Systems Integration, Information System Product Sales and Other Services.

                                     -12-
<PAGE>

                       Allin Corporation and Subsidiaries
            Notes to Consolidated Financial Statements - (Continued)

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 Operations and Consolidated Balance Sheets. There are no
differences in measurement method.

Revenue

         Information on revenue derived from external customers is as follows:

<TABLE>
<CAPTION>
     (Dollars in thousands)                                         Revenue from External
                                                                          Customers
     Three Month Periods ended March 31                              2001          2002
                                                                 ----------------------------
<S>                                                              <C>            <C>
     Solution Area Services:
         Interactive Media Consulting                            $        789   $        505
         Interactive Media Systems Integration                          1,528            952
         Technology Infrastructure Consulting                             935            362
         E-Business Consulting                                            561            497
         Legacy Technology Consulting                                     770            356
                                                                 ----------------------------
          Total Solution Area Services                           $      4,583   $      2,672

     Ancillary Services & Product Sales:
         Information System Product Sales                        $         83   $        126
         Other Services                                                   138             19
                                                                 ----------------------------
          Total Ancillary Services & Product Sales               $        221   $        145

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

     Consolidated Revenue from External Customers                $      4,804   $      2,817
                                                                 ============================
</TABLE>

         Certain of the Company's segments also perform 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>
     (Dollars in thousands)                                          Revenue from Related
                                                                           Entities
     Three Month Periods ended March 31                                2001          2002
                                                                  ----------------------------

<S>                                                               <C>            <C>
     Solution Area Services                                       $        ---   $        19
     Ancillary Services & Product Sales                                     32           ---
                                                                  ----------------------------

     Total Revenue from Related Entities in Other Segments        $         32   $        19
                                                                  ============================
</TABLE>

                                     -13-
<PAGE>

                       Allin Corporation and Subsidiaries
            Notes to Consolidated Financial Statements - (Continued)


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>
     (Dollars in thousands)                                              Gross Profit
     Three Month Periods ended March 31                              2001          2002
                                                                 ----------------------------
<S>                                                              <C>            <C>
     Solution Area Services:
         Interactive Media Consulting                            $        550   $        316
         Interactive Media Systems Integration                            453            364
         Technology Infrastructure Consulting                             579            199
         E-Business Consulting                                            295            297
         Legacy Technology Consulting                                     208             95
                                                                 ----------------------------
          Total Solution Area Services                           $      2,085   $      1,271

     Ancillary Services & Product Sales:
         Information System Product Sales                        $         35   $         52
         Other Services                                                    99             19
                                                                 ----------------------------
          Total Ancillary Services & Product Sales               $        134   $         71

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

     Consolidated Gross Profit                                   $      2,219   $      1,342
                                                                 ============================
</TABLE>

Assets

         Information on total assets attributable to segments is as follows:

<TABLE>
<CAPTION>
     (Dollars in thousands)                                              Total Assets
     As of March 31                                                  2001          2002
                                                                 ------------- --------------
<S>                                                              <C>            <C>
     Solution Area Services:
         Interactive Media Consulting                            $        876   $        387
         Interactive Media Systems Integration                          1,838            784
         Technology Infrastructure Consulting                           6,389          1,357
         E-Business Consulting                                          1,879          1,048
         Legacy Technology Consulting                                   7,794          1,346
                                                                 ------------- --------------
          Total Solution Area Services                           $     18,776  $       4,922

     Ancillary Services & Product Sales:
         Information System Product Sales                        $        115  $         102
         Other Services                                                   379             66
                                                                 ------------- --------------
          Total Ancillary Services & Product Sales               $        494  $         168

     Corporate                                                          1,009          2,327
     Discontinued Operations - Digital Imaging                          1,332            145
                                                                 ------------- --------------

     Consolidated Gross Profit                                   $     21,611  $       7,562
                                                                 ============= ==============
</TABLE>

                                     -14-
<PAGE>

                      Allin Corporation and Subsidiaries
           Notes to Consolidated Financial Statements - (Continued)

7.   Goodwill and Intangible Assets

         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 deemed to have definite lives
will continue to be amortized over their useful lives. Implementation of these
standards was required as of the start of fiscal years beginning after December
15, 2001. The Company implemented SFAS Nos. 141 and 142 as of January 1, 2002.

         SFAS Nos. 141 and 142 also include provisions related to goodwill and
other intangible assets acquired in business combinations prior to June 30, 2001
as well as the ongoing treatment of goodwill and intangible assets. The
statements set forth guidance as to required transition testing and accounting
for implementation of the standards and required annual testing and accounting
thereafter. The transition requirements of the new standards require a re-
examination of recorded intangible assets related to business combinations that
transpired prior to June 30, 2001. As of January 1, 2002, the Company's assets
of this type included customer lists, assembled workforces and goodwill
associated with the acquisitions of Allin Consulting-California in 1996 and
Allin Consulting-Pennsylvania and MEGAbase, Inc. (merged into Allin-Consulting-
California) in 1998. As of January 1, 2002, recognized balances for customer
lists, assembled workforces and goodwill were approximately $1,681,000, $104,000
and $712,000, respectively. Under the new standards, assembled workforces are no
longer to be recognized as a separate intangible asset. In accordance with the
transition provisions of the new standards, balances recognized for assembled
workforces were reclassified to goodwill.

         The transition provisions of the new standards require a review of
intangible assets recorded in connection with acquisitions that transpired prior
to June 30, 2001 to determine whether additional separate intangible assets
should be recorded. The guidance for identifying separate assets is consistent
with the standards for intangible assets to be recorded in connection with
business combinations initiated after June 30, 2001. SFAS Nos. 141 and 142
provide guidance for identifying potential intangible assets, including
marketing-related, customer-related, artistic-related, contract-based and
technology-based assets. The lives of these assets are to be identified as
either definite, subject to a specific or estimated term, which are to be
amortized over the definite life, or indefinite, which are no longer to be
amortized. Goodwill is an indefinite asset and is no longer to be amortized.

         The types of potential intangible assets specified under the new
standards were reviewed in relation to the acquisitions of Allin Consulting-
California, Allin Consulting-Pennsylvania and MEGAbase. No value was placed on
marketing-related assets since the Company has not acquired trademarks or
service marks related to technology consulting and since the acquired businesses
used different names at the times of the acquisitions. No value was placed on
contract-based assets since contracts in place at the time of the acquisitions
had lapsed prior to January 1, 2002. Although the acquired businesses had
considerable technological expertise, no value was placed on technology-based
assets since the acquired expertise in Microsoft and IBM legacy technologies is
no longer current. Artistic-related assets were determined to be non-applicable
to the acquired businesses.

         Certain customer-related assets were reviewed in relation to the
acquisitions. Order backlogs and customer contracts acquired would have lapsed
prior to January 1, 2002 so no value was established for these assets. The
customer contacts and relationships acquired with these businesses represented
in customer lists were identified as being potentially recognizable as
intangible assets. No value was estimated for the customer list recorded in
connection with the acquisition of Allin Consulting-California since the value
recorded at acquisition was fully amortized as of January 1, 2002. Since a
customer list involves specific customer relationships, the Company does not
believe fair value can be determined by comparison to similar assets in other
companies. Therefore, the Company determined the fair value of the customer list
associated with the acquisition of Allin Consulting-Pennsylvania through an
estimate of the discounted cash flows attributable to the customers included on
the acquired list. Management utilized historical information related to
business derived from customers on the acquired list and the operations of Allin
Consulting-Pennsylvania, future projections, industry information concerning
expected growth in the technology consulting industry and information relevant
to the Company's financing capabilities to develop assumptions and estimates of
future cash flows applicable to the acquired customer list. The resulting
estimate of fair value exceeded the recorded value of the

                                      -15-
<PAGE>

                      Allin Corporation and Subsidiaries
           Notes to Consolidated Financial Statements - (Continued)

customer list. The Company believes the customer list is an asset with a
definite life. The Company will continue to amortize the customer list through
2011. Amortization expense of approximately $42,000 related to the customer list
was recognized during the three months ended March 31, 2002.

         The new standards set forth guidance on testing for impairment of
goodwill, both as a transition step and on an annual basis after implementation.
The Company attributed the recognized assets of the acquired businesses,
including cash, accounts receivable, prepaid expenses, property and equipment,
customer list and goodwill, net of accounts payable and accrued liabilities, to
reporting units. The reporting units utilized were the Company's reported
segments applicable to the acquired subsidiaries, Technology Infrastructure, E-
Business and Legacy Technology, further broken down geographically between
northern California-based and Pittsburgh-based operations. Recognized assets
were attributed to reporting units in a manner consistent with that used for
segment reporting. Since the recognized assets included substantially all of the
assets and liabilities of the reporting units which would be relevant to a
potential acquirer, the Company's management believed the most relevant source
of fair value estimation was industry valuation multiples for public technology
consulting businesses. Management utilized multiple sources of industry
information to develop assumptions for appropriate revenue multiples for
estimating the fair values of the reporting units. The estimated fair value of
each reporting unit exceeded the recorded value of the recognized assets plus
goodwill. Management determined, therefore, that the completed transition
testing did not indicate impairment of the recorded values for customer list or
goodwill.

         SFAS Nos. 141 and 142 require an annual test for impairment for
intangible assets and goodwill similar to the transition testing described
above. The Company elected to do such testing for 2002 as of January 1, 2002.
The calculations performed for the transition testing also were utilized for the
2002 annual testing with the same conclusions. The Company anticipates future
annual testing will be conducted as of the beginning of each fiscal year or more
often if any changes or developments affecting the reporting units indicate any
potential impairment of the customer list or goodwill.

         Amortization expense of approximately $283,000 related to goodwill and
assembled workforces was recorded for the three-month period ended March 31,
2001. Under the new standards, no amortization expense is being recorded related
to these assets in 2002.

8.   Subsequent Events

         On April 15, 2002, a shareholder of the Company sold portions of his
holdings in certain financial instruments related to the Company, including
Series F Convertible Redeemable Preferred Stock, related accrued but unpaid
dividends, common stock, and a note payable by the Company and related accrued
but unpaid interest to other parties related to the Company. An entity in which
another shareholder of the Company has an ownership interest purchased 250
shares of Series F preferred stock, approximately $15,000 of accrued but unpaid
dividends, 53,333 shares of common stock, a $250,000 portion of the note payable
and approximately $19,000 of accrued but unpaid interest. An entity in which a
director and shareholder of the Company has an ownership interest purchased
41.67 shares of Series F preferred stock, approximately $2,000 of accrued but
unpaid dividends, 8,889 shares of common stock, a $41,667 portion of the note
payable and approximately $3,000 of accrued but unpaid interest. A director,
executive officer and shareholder of the Company purchased 16.67 shares of
Series F preferred stock, approximately $1,000 of accrued but unpaid dividends,
3,556 shares of common stock, a $16,667 portion of the note payable and
approximately $1,000 of accrued but unpaid interest. An executive officer of the
Company purchased 16.67 shares of Series F preferred stock, approximately $1,000
of accrued but unpaid dividends, 3,555 shares of common stock, a $16,667 portion
of the note payable and approximately $1,000 of accrued but unpaid interest.

                                      -16-
<PAGE>

                        Independent Accountants' Report
                        -------------------------------


To the Shareholders of
Allin Corporation and Subsidiaries

We have reviewed the accompanying consolidated balance sheet of Allin
Corporation (a Delaware corporation) and Subsidiaries as of March 31, 2002, and
the related consolidated statements of operations and cash flows for the three
months ended March 31, 2002. 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 U.S. generally accepted auditing standards, 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 U.S. generally accepted accounting principles.

The balance sheet for the year ended December 31, 2001, was audited by other
auditors whose report dated February 8, 2002, expressed an unqualified opinion
on that statement. The statements of operations and cash flows for the three
months ended March 31, 2001, were reviewed by other accountants whose report
dated April 24, 2001, indicated they were not aware of any material modification
that needed to be made for these statements to be in conformity with U.S.
generally accepted accounting principles.


/s/ Hill, Barth & King LLC

May 6, 2002

                                      -17-
<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-month periods ended March 31, 2002 and 2001. 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, 2001,
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 "estimates," "expects," "anticipates," "believes,"
"intends," "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, dependence on key personnel, competitive market
conditions in the Company's existing and potential future lines of business,
rapidly changing technology, risks of technological obsolescence, as well as
other risks and uncertainties. See Risk Factors below.

Overview of Organization, Products & Markets

         The Company is a leading provider of solutions-oriented applications
development, technology infrastructure consulting and systems integration
services. The Company specializes in solutions based on interactive media and
technology from Microsoft Corporation ("Microsoft"). The Company's operations
center on three solution areas: Interactive Media, Technology Infrastructure and
E-Business. The Company leverages its experience in these areas through a
disciplined project framework to deliver technology solutions that address
customer needs on time and on budget. The Company is headquartered in
Pittsburgh, Pennsylvania with additional offices located in Ft. Lauderdale,
Florida and San Jose and Walnut Creek, California.

         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. The Company
was also a recipient of the Deloitte & Touche Technology Fast 500 award in 2001.

         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 March 31, 2002, the
organizational legal structure consists of Allin Corporation and six
subsidiaries. Allin Interactive Corporation ("Allin Interactive"), formed in
June 1994, Allin Corporation of California ("Allin Consulting-California"),
acquired by the Company in November 1996, Allin Consulting of Pennsylvania, Inc.
("Allin Consulting-Pennsylvania"), acquired by the Company in August 1998, and
Allin Network Products, Inc. ("Allin Network"), acquired by the Company in
November 1996, are operating subsidiaries focusing on different aspects of the
applications development, technology infrastructure consulting and systems
integration services provided by the Company. Allin Consulting-Pennsylvania has
also historically performed consulting services related to certain legacy
technologies. Allin Holdings Corporation ("Allin Holdings"), which was formed in
October 1996, is a non-operating subsidiary that provides treasury management
services to the Company. In June 2001, the Company decided to discontinue the
digital imaging technology-based operations of Allin Digital Imaging Corp.
("Allin Digital"), which was formed in August 1996. Phase-out of these
operations continues and is expected to be completed in 2002. Allin Interactive,
Allin Holdings and Allin Digital are Delaware corporations, Allin Consulting-
California and Allin Network are California corporations and Allin Consulting-
Pennsylvania is a Pennsylvania corporation. The Company utilizes the trade-names
Allin Interactive, Allin Consulting and Allin Corporation in its operations. All
trade- and brand-names included in this Report on Form 10-Q are the property of
their respective owners.

                                      -18-
<PAGE>

         Information for the three-month period ended March 31, 2001 has been
restated to reflect the results of Allin Digital's operations as a loss from
discontinued operations. Information for the three-month period ended March 31,
2002 reflect the results of Allin Digital's operations as income from
discontinued operations.

         The Interactive Media Solution Area focuses on the Company's expertise
in interactive media applications by providing interactive television solutions
that management believes enable customers to improve service and increase
productivity and revenue. Interactive Media enables customers to convert manual
and analog processes into interactive digital solutions. Management believes
that interactive television solutions are cost-effective because they leverage a
pooled set of advanced head-end equipment to deliver advanced applications
across digital networks or radio frequency distribution systems to end-user
monitors or 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, which are
based on Microsoft BackOffice products, allows for development of applications
in commonly used programming languages. Interactive Media solutions are Internet
accessible and support highly-functional applications and high-end graphics and
MPEG content. Interactive Media's customers have historically been concentrated
in the cruise industry. Among the applications developed for, and utilized by,
customers are shore excursion preview and ticketing, pay-per-view movies, in-
cabin gaming, meal service ordering, and distribution of activities and
informational content. Interactive Media's customers include some of the world's
largest cruise lines, Carnival Corporation ("Carnival") and Royal Caribbean
Cruise Lines, Ltd. ("Royal Caribbean") and its affiliate Celebrity Cruises
("Celebrity"). Interactive Media operational and marketing personnel have
extensive experience in the cruise industry. Committed services for cruise line
customers represent a majority of the Company's backlog of business as of March
31, 2002. Interactive Media activities are located in Ft. Lauderdale near the
most active concentration of cruise line operations in the United States.

         The Technology Infrastructure Solution Area focuses on customers'
network and application architecture, messaging and collaboration systems and
security issues. 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. Technology Infrastructure designs and implements
enterprise-quality systems based on Microsoft technology that maximize network
availability and efficiency and 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,
evaluation of customer operating systems and database platforms, messaging
systems, information system security solutions such as firewalls and proxy
servers and application services such as message queing and transaction servers.

         The ability of businesses to manage information has become a
prerequisite for their success. The E-Business Solution Area provides solutions
based on Microsoft technology that enable organizations to evaluate and optimize
business processes, streamline workflow and extend the accessibility of
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
solutions emphasize Internet and intranet capabilities including company
portals, extranet-based supply chains and electronic commerce sites, data
warehousing, work flow, and interfaces with, or custom development for, business
operation transaction systems. E-Business delivers portal and business
intelligence solutions that automate and streamline information creation,
storage, sharing and retrieval. Management believes that E-Business solutions
enable customers to increase productivity by improving the flow and
accessibility of information, thereby eliminating inefficiencies and reducing
costs. Management believes E-Business solutions empower customer personnel with
business intelligence for fast and effective decision making.

         The Technology Infrastructure and E-Business Solution Areas focus on
developing Microsoft-based technology solutions for customers in horizontal
markets, meaning organizations across a broad array of industries. The Company's
current target market for these solution areas 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 mid-market companies 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

                                      -19-
<PAGE>

to customers of this size. Technology Infrastructure and E-Business consulting
services are provided from the Company's Northern California and Pittsburgh
offices.

         The Company's solution area-based organizational structure is designed
to complement the customer-oriented focus of the Company's marketing strategy.
Solution area sales and operational personnel must understand a customer's
business issues to provide a solution customized to meet the customer's
particular 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 foster the growth of
long-term customer relationships with ongoing service opportunities. There can
be no assurance, however, that the Company will realize revenue at current or
increased levels in future periods as a result of its current strategy.
Management believes that the customer-oriented focus that is the fundamental
principal of its marketing strategy is firmly established throughout the
Company.

         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 are the operating relationships with On
Command Corporation ("On Command") and Microsoft. The Company utilizes end-user
component and computer hardware platforms and configurations developed by On
Command for its interactive television systems integration projects. On Command
is one of the world's largest providers of interactive television services to
the lodging industry. Through extensive research and development efforts, On
Command has developed specifications and configurations for computer hardware
and end-user components that facilitate efficient and reliable interactive
television operations. The Company has a Supplier Agreement with On Command that
grants it exclusivity in purchasing hardware and end-user components for
interactive television systems for the cruise line market.

         Both of the Company's Allin Consulting subsidiaries and Allin
Interactive are certified as Microsoft Solutions Provider Partners. During 2001,
both of the Allin Consulting subsidiaries were also designated as Microsoft Gold
Certified Partners in recognition of their attainment of rigorous certification
criteria and demonstrated technical competency in providing complex business
solutions. Allin Consulting-Pennsylvania was the first partner in the Pittsburgh
area awarded gold status. 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. During 2001, Allin Consulting-Pennsylvania was also named to the
Microsoft Project Partner Program for demonstrated capabilities in developing
and deploying project management solutions. The Company intends to continue its
specialization in Microsoft-based technology products.

         The Company has developed a solutions framework, the Allin Solutions
Framework, for guiding the planning and conduct of solutions-oriented projects.
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 developed through past projects. 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, solution area managers and consultants fully
control the planning, development and implementation of turnkey solutions.
Client personnel function as sources

                                      -20-
<PAGE>

of information concerning the business need for which a solution is sought. With
the co-managed delivery method, solution area managers and consultants and
customer technical staff members work on a collaborative basis in planning,
developing and implementing solutions. 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 the
development and implementation of technology-based solutions. Services delivered
under these methods are viewed as being the most consistent with the Company's
marketing strategy and offering the potential for higher billing rates and
margins due to the Company's performance of high level managerial tasks.
References in this report to solutions-oriented services mean services delivered
through the Allin-managed or co-managed methods. With the customer-managed
delivery method, the Company provides technical resources with specific
technical skill sets that the customer utilizes to complement and assist its
technical staff in the execution of customer-managed tasks or projects.
Currently, the substantial majority of the services of the Interactive Media,
Technology Infrastructure and E-Business Media Solution Areas are solutions-
oriented services because they are delivered on the Allin-managed or co-managed
methods. The substantial majority of legacy technology services are delivered on
the customer-managed method. The Company seeks to continue to increase the
proportion of overall solution area services delivered on the Allin-managed and
co-managed delivery methods.

         As noted above, Allin Consulting-Pennsylvania performs legacy
technology consulting services, including application development, data base
development and administration, and data communications development for IBM
proprietary technology. Legacy technology consulting services are overseen by
executive management and support personnel in the Company's Pittsburgh office
with responsibility for all of the Pittsburgh-based solution area operations.
Legacy technology consulting services are not considered by management to be
completely consistent with the Company's marketing and operating strategies due
to their divergence from interactive media or Microsoft-based technology and the
greater role of customer personnel in managing the delivery of the services than
is typical with the Interactive Media, Technology Infrastructure or E-Business
Solution Areas. While management expects legacy technology consulting operations
to continue, the level of these services declined significantly in 1999, 2000
and 2001. Legacy technology revenue has, however, been fairly consistent on a
quarter-to-quarter basis over the third and fourth quarters of 2001 and the
first quarter of 2002. Management expects legacy technology revenue to be
realized over the full year 2002 will represent a decline from that realized in
2001.

         The Company also provides certain ancillary services and information
system product sales, which are those revenue producing activities 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. In connection with its solutions-oriented services, customers
will occasionally 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 customer
satisfaction, the Company maintains an ancillary capability to provide
information system products, including interactive television equipment and
computer hardware, software and supplies. The Company also occasionally performs
ancillary services resulting in revenue such as website hosting or placement
fees. Until December 2001, the Company also operated two interactive television
systems as a result of a discontinued operating model.

Certain Critical Accounting Policies and Estimates

         The Company's significant accounting policies are described in Note 2
in the Notes to Consolidated Financial Statements included in Item 8 - Financial
Statements and Supplementary Data in the Company's Report on Form 10-K for the
year ended December 31, 2001. The preparation of financial statements in
conformity with accounting principles generally accepted in the United States
requires management to make estimates and assumptions to apply certain of these
critical accounting policies. These estimates and assumptions affect the
reported amounts of assets and liabilities and the reported amounts of revenue
and expenses during the reporting periods. In applying policies requiring
estimates and assumptions, management uses its judgment based on historical
experience, terms of existing contracts, industry practices and trends,
information available from customers, publicly available information and other
factors deemed reasonable under the circumstances. Actual results may differ
from estimates. Critical accounting policies requiring the use of estimates and
assumptions include the following.

         Revenue and Cost of Sales Recognition. The Company's recognition method
for revenue and cost of sales for the Interactive Media Solution Area's 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, the Company recognizes revenue and cost of sales
based on percentage of completion, if significant software modification is
required, or proportional performance.

                                      -21-
<PAGE>

Software modification is typically involved with these projects, including
loading of proprietary applications developed by the Company for the customer,
so the percentage of completion method is normally used for these significant
projects. The Company utilizes the proportion of labor incurred to expected
total project labor as a quantitative factor in determining the percentage of
completion when the proportion of total project costs incurred to expected total
project costs is not representative of actual project completion status. The
majority of the equipment for systems integration projects is typically ordered,
and associated costs are incurred, in the early stages of a project.
Consequently, the proportion of labor incurred to expected total project labor
is more frequently representative of percentage of completion than the
proportion of total project costs incurred to expected total project costs. The
labor factor is therefore most often used to determine the percentage of
completion. For systems integration projects of this type, management must
estimate expected total labor hours and costs and expected total non-labor costs
at the beginning of the project. Management reviews the status of projects
monthly, including labor and other costs incurred to date and expected for
completion of the project, project timing, and any issues impacting project
performance. Any changes to expected labor hours or expected costs for project
completion are factored into the monthly estimate of project cumulative
percentage of completion, which is used to determine current revenue and cost of
sales recognition. For consulting engagements performed on a fixed-price basis,
revenue and related cost of sales are recognized on a percentage of completion
basis. Management must estimate expected labor for project completion at the
beginning of each project. Fixed price consulting projects are reviewed monthly,
with any changes to expected project labor factored into the determination of
cumulative percentage of completion, which is used to determine current revenue
and cost of sales recognition. Revenue recognized on the percentage of
completion or proportional performance bases was approximately 31% and 42% of
the Company's total revenue for the three-month periods ended March 31, 2001 and
2002, respectively. Usage of the percentage of completion or proportional
performance methods can result in unwarranted acceleration of or delay in
recognition of revenue and cost of sales if management's estimates of certain
critical factors such as expected total project labor or total project costs are
materially less than or greater than actual project requirements. The Company
believes its monthly reviews of project status, including expected total project
labor and costs, mitigate the potential for inappropriate revenue or cost of
sales recognition since the reviews result in revenue and cost of sales
recognition based on the latest available information. Management's estimates
and assumptions also impact the Company's assets and liabilities as revenue and
cost of sales recognition for these projects may also impact the carrying value,
if any, of unbilled revenue, costs and estimated gross margins in excess of
billings, billings in excess of costs and estimated gross margins, accrued
liabilities and deferred revenue on the Company's Consolidated Balance Sheets.

         Goodwill and Intangible Assets. 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"), which the Company implemented January 1,
2002. SFAS Nos. 141 and 142 include provisions related to goodwill and other
intangible assets acquired in business combinations that transpired prior to
June 30, 2001 which require a transitional examination of recognized intangible
asset values. As of January 1, 2002, the Company's assets of this type included
customer lists, assembled workforces and goodwill associated with the
acquisitions of Allin Consulting-California in 1996 and Allin Consulting-
Pennsylvania and MEGAbase, Inc. (merged into Allin-Consulting-California) in
1998. As of January 1, 2002, recognized balances for customer lists, assembled
workforces and goodwill were approximately $1,681,000, $104,000 and $712,000,
respectively. Under the new standards, assembled workforces are no longer to be
recognized as a separate intangible asset and balances recognized for assembled
workforces were reclassified to goodwill. The transition provisions of the new
standards require a review to determine whether additional separate intangible
assets should be recorded. The guidance for identifying separate assets is
consistent with the standards for intangible assets to be recorded in connection
with business combinations initiated after June 30, 2001. SFAS Nos. 141 and 142
provide guidance for identifying potential intangible assets to be recorded,
including marketing-related, customer-related, artistic-related, contract-based
and technology-based assets. The lives of these assets are to be identified as
either definite, subject to a specific or estimated term, which are to be
amortized over the definite life, or indefinite, which are no longer to be
amortized. Goodwill is an indefinite asset and is no longer to be amortized. The
types of potential intangible assets specified under the new standards were
reviewed in relation to the acquisitions of Allin Consulting-California, Allin
Consulting-Pennsylvania and MEGAbase. Management's judgment was that no value
should be placed on marketing-related assets since the Company has not acquired
trademarks or service marks related to technology consulting and since the
acquired businesses used different names at the times of the acquisitions. No
value was placed on contract-based assets since contracts in place at the time
of the acquisitions had lapsed prior to January 1, 2002. Although the acquired
businesses had considerable technological expertise, no value was placed on
technology-based assets since the acquired expertise in Microsoft and legacy
technologies is no longer current. Artistic-related assets were determined to be
non-applicable to the acquired businesses.

                                      -22-
<PAGE>

         Certain customer-related assets were reviewed in relation to the
acquisitions. Order backlogs and customer contracts acquired would have lapsed
prior to January 1, 2002 so no value was established for these assets. The
customer contacts and relationships acquired with these businesses represented
in customer lists were identified as being potentially recognizable as
intangible assets. No value was estimated for the customer list recorded in
connection with the acquisition of Allin Consulting-California since the value
recorded at acquisition was fully amortized as of January 1, 2002. Since a
customer list involves specific customer relationships, management did not
believe fair value could be determined by comparison to similar assets in other
companies. Therefore, the Company determined the fair value of the customer list
associated with the acquisition of Allin Consulting-Pennsylvania through an
estimate of the discounted cash flows attributable to the customers included on
the acquired list. Management utilized historical information related to
business derived from customers on the acquired list and the operations of Allin
Consulting-Pennsylvania, future projections, industry information concerning
expected growth in the technology consulting industry and information relevant
to the Company's financing capabilities to develop assumptions and estimates of
future cash flows applicable to the acquired customer list. The resulting
estimate of fair value exceeded the recorded value of the customer list. This
information was also utilized by management in its judgment that the customer
list is an asset with a definite life.

         The new standards also set forth guidance on testing for impairment of
goodwill. The Company attributed the recognized assets of the acquired
businesses, including cash, accounts receivable, prepaid expenses, property and
equipment, customer list and goodwill, net of accounts payable and accrued
liabilities, to reporting units. The reporting units utilized were the Company's
reported segments applicable to the acquired subsidiaries, Technology
Infrastructure, E-Business and Legacy Technology, further broken down
geographically between northern California-based and Pittsburgh-based
operations. Recognized assets were attributed to reporting units in a manner
consistent with that used for segment reporting. Since the recognized assets
included substantially all of the assets and liabilities of the reporting units
which would be relevant to a potential acquirer, the Company's management
believed the most relevant source of fair value estimation was industry
valuation multiples for public technology consulting businesses. Management
utilized multiple sources of industry information to develop assumptions for
appropriate revenue multiples for estimating the fair values of the reporting
units. The estimated fair value of each reporting unit exceeded the recorded
value of the recognized assets plus goodwill. Management determined, therefore,
that the completed transition testing did not indicate impairment of the
recorded values for customer list or goodwill. SFAS Nos. 141 and 142 require an
annual test for impairment for intangible assets and goodwill similar to the
transition testing described above. The Company elected to do such testing for
2002 as of January 1, 2002. The calculations performed for the transition
testing also were utilized for the 2002 annual testing with the same
conclusions.

Certain Related Party Transactions

         During the three-month periods ended March 31, 2001 and 2002, the
Company engaged in transactions with related parties, including sale of
services, purchases of services and products and leases for office space.
Services and products sold represented less than 1% of the Company's revenue in
each of these periods. The charges for services and products sold to related
parties were comparable to charges for similar services and products sold to
non-related entities. Purchased services and products represented less than 1%
of cost of sales or selling, general & administrative expenses in each of these
periods. Management believes the cost of these services and products is similar
to that which could have been obtained from non-related entities.

         The Company's office space in Pittsburgh, Pennsylvania is leased from
an entity in which a beneficial holder of greater than five percent of the
Company's common stock, as well as certain of his family members, have equity
interests. Rental expense related to this lease was approximately $72,000 and
$47,000 during the three-month periods ended March 31, 2001 and 2002,
respectively, which represented 2% and 3%, respectively, of selling, general and
administrative expenses during these periods. The Company's management believes
that the rental rates for the lease that expired January 31, 2002 were
competitive with the marketplace for similar commercial real estate at the time
the lease was entered in 1997. Management believed the Company's Pittsburgh-
based operations could effectively utilize a smaller space due to staff
reductions in 2001. The Company's landlord agreed to permit the Company to
continue to occupy its present space on a month-to-month basis until such time
as the landlord identifies an alternate tenant for the Company's space. At that
time, the Company will likely move to smaller space within the same building
more commensurate with its needs. The Company's rent expense was reduced by
approximately 51% under the new arrangement reflecting both its reduced
requirements for space and current real estate market conditions. Management
believes the new arrangement benefits both parties as the Company has benefited
from a rent reduction while deferring the cost and inconvenience of moving while
the landlord has deferred the costs associated with buildout of new space for
the Company.

                                      -23-
<PAGE>

         The Company has an outstanding note payable, with a principal balance
of $1,000,000 and interest fixed at 7% per annum. The note is associated with
the 1996 acquisition of Allin Consulting-California and was originally held by
its former sole shareholder, who was also a former President of the Company and
was a beneficial holder of greater than five percent of the Company's common
stock until March 14, 2002. On that date the note, including accrued interest of
approximately $73,000, was sold to another person who is a beneficial holder of
greater than five percent of the Company's common stock. On April 15, 2002, the
new noteholder sold certain interests in the note payable and related accrued
interest to other parties related to the Company. An entity in which another
shareholder of the Company has an ownership interest purchased a $250,000
portion of the note payable and approximately $19,000 of accrued but unpaid
interest. An entity in which a director and shareholder of the Company has an
ownership interest purchased a $41,667 portion of the note payable and
approximately $3,000 of accrued but unpaid interest. A director, executive
officer and shareholder of the Company purchased a $16,667 portion of the note
payable and approximately $1,000 of accrued but unpaid interest. An executive
officer of the Company purchased a $16,667 portion of the note payable and
approximately $1,000 of accrued but unpaid interest. Interest expense related to
the note was approximately $18,000, during both of the three-month periods ended
March 31, 2001 and 2002, respectively.

         See Liquidity and Capital Resources following in this Part I, Item 2 -
Management's Discussion and Analysis of Financial Condition and Results of
Operations and Notes 4 - Note Payable and 8 - Subsequent Events in the Notes to
Consolidated Financial Statements included in Part I, Item 1 - Financial
Statements of this Report on Form 10-Q and the Liquidity and Capital Resources
section of Item 7 - Management's Discussion and Analysis of Financial Condition
and Results of Operations, Notes 17 - Related Party Transactions and 18 -
Subsequent Events in the Notes to Consolidated Financial Statements included in
Item 8 - Financial Statements and Supplementary Data, Item 11 - Executive
Compensation and Item 13- Certain Relationships and Related Transactions of the
Company's Report of Form 10-K for the year ended December 31, 2001 for
additional information concerning related party transactions.

Results of Operations

Three Months Ended March 31, 2002 Compared to Three Months Ended March 31, 2001

Revenue

         The Company's total revenue for the three months ended March 31, 2002
was $2,817,000, a decrease of $1,987,000, or 41%, from total revenue of
$4,804,000 for the three months ended March 31, 2001. All of the Company's
solution areas experienced declines in revenue in the first quarter of 2002 as
compared to the first quarter of 2001.

         The Company's solution area revenue, after elimination of intercompany
sales, was $2,672,000 for the three months ended March 31, 2002, including
$1,457,000 for Interactive Media, $362,000 for Technology Infrastructure,
$497,000 for E-Business and $356,000 for legacy technology consulting services.
Comparable solution area revenue for the three months ended March 31, 2001 was
$4,583,000 in total, including $2,317,000 for Interactive Media, $935,000 for
Technology Infrastructure, $561,000 for E-Business and $770,000 for legacy
technology consulting services.

         Revenue for the Interactive Media Solution Area for the three months
ended March 31, 2002 included $505,000 for interactive media consulting and
$952,000 for interactive media systems integration. Comparable Interactive Media
revenue for the three months ended March 31, 2001 included $789,000 for
interactive media consulting and $1,528,000 for interactive media systems
integration. The decrease in revenue for the Interactive Media Solution Area
from the first quarter of 2001 to the first quarter of 2002 was 37%. The
Interactive Media Solution Area's consulting and systems integration services
have historically been highly concentrated, predominantly with customers in the
cruise industry. During the first quarter of 2002, 96% of Interactive Media
revenue was derived from Carnival, Royal Caribbean and Celebrity. The majority
of the revenue in both periods related to consulting and systems integration
projects for the design, configuration and installation of interactive
television systems aboard cruise ships. These projects are of many months'
duration, but a project will typically experience a period of peak activity
coincident with the majority of the on-site labor at the shipyard for newly
built ships or on the ship for ships in service. The timing of the peak activity
is dependent on many factors including shipyard construction schedules for
system installations on new ships and itinerary considerations and cabin
availability for installations on ships already in service. Since the Company
has limited control of these factors, the degree of activity on shipboard
installations can vary substantially from quarter to quarter resulting in
significant variation in revenue. The first quarter of 2001 included periods of
peak

                                      -24-
<PAGE>

activity for two ship systems while the first quarter of 2002 included only a
portion of the peak activity period for one ship system. This was the most
significant factor in the decrease in revenue from the first quarter of 2001 to
the first quarter of 2002. Another factor in the decline in consulting revenue
was a higher level of applications development in the first quarter of 2001 due
to the initiation of a major applications development project for Carnival in
the first quarter of 2001. Based on the Company's backlog of Interactive Media
projects and current schedule expectations, Interactive Media revenue is
expected to be higher in each of the remaining quarters of 2002 than the first
quarter. However, this expectation is subject to uncertainty due to several
factors. Unanticipated schedule changes may result in project delays that could
negatively impact revenue expected to be realized in any of the remaining fiscal
quarters of 2002. Another factor is that cruise line passenger levels and
revenue declined following the September 2001 incidents of terrorism in the
United States. Recent public announcements by the industry's largest cruise
lines indicate that a recovery in passenger levels and revenue is being realized
in 2002. If the recovery of passenger levels and revenue is not sustained, the
cruise lines could potentially seek to delay projects currently expected to be
performed in 2002. Due to these factors and other considerations such as general
economic conditions, 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 quarter of
2002 or that any increases realized will result in the desired improvement to
the Company's financial condition or results of operations.

         Technology Infrastructure revenue decreased $573,000, or 61%, in the
three months ended March 31, 2002 as compared to the three months ended March
31, 2001. Management attributes the decline in period-to-period Technology
Infrastructure revenue to a softening of demand for technology consulting
services throughout 2001 and the first quarter of 2002 due to the downturn in
the domestic economy. In addition to the cost of the consulting services,
Technology Infrastructure solutions will frequently recommend or require
significant upgrades in customers' hardware, software and networking equipment.
The economic downturn has resulted in a decrease in spending on technology-
related services and equipment throughout 2001 and early 2002, which has
negatively impacted the demand for the services offered by the Technology
Infrastructure Solution Area. However, management believes that certain industry
trends, as discussed in the Company's Report on Form 10-K for the year ended
December 31, 2001 in Item 1, Business under the caption "Industry Overview -
Technology Consulting Services", including increasing security concerns and
expected growth in wireless access to distributed networks will foster growth in
long-term demand for Technology Infrastructure services. There can be no
assurance, however, that these trends will result in the realization of future
revenue equal to or greater than current levels for the Technology
Infrastructure Solution Area 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 realized a revenue decrease of $64,000, or
11%, for the three months ended March 31, 2002 as compared with the three months
ended March 31, 2001. Management believes the decline in revenue is primarily
attributable to the negative impact of the economic downturn on demand for
technology-based services. While E-Business activity has been negatively
affected by the economic downturn, management believes the continuing growth of
Internet-based business has mitigated the impact on E-Business. Management
believes the impact of the Internet continues to move businesses to seek
seamless access of employees, customers and suppliers to business knowledge
capital and transactional systems through company portals, extranet-based supply
chains and electronic commerce sites. Management believes the Internet will
continue to drive opportunities for E-Business consulting for the custom
development of applications and interfaces with business transaction systems.
There can be no assurance, however, that the Company will realize future revenue
equal to or greater than current levels for the 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.

         Revenue from legacy technology consulting services declined $414,000,
or 54%, for the three months ended March 31, 2002 as compared to the three
months ended March 31, 2001. The Company ceased performing legacy technology
services associated with Hogan IBA software products, which are specialized
applications for the banking industry, in July 2001. Hogan IBA-based services
accounted for approximately 44% of the Company's legacy technology consulting
revenue in the first quarter of 2001. Management also attributes the decline in
revenue to a general trend in technology away from mainframe systems toward a
client/server environment.

         The Company recognized revenue for ancillary services & product sales,
after elimination of intercompany sales, of $145,000 during the three months
ended March 31, 2002, including $126,000 for information system product sales
and $19,000 for other services. Ancillary services & product sales revenue of
$221,000 was recognized during the three months ended March 31, 2001, including
$83,000 for information system product sales and $138,000 for other services.
The increase in information system product sales is due primarily to increased
sales of interactive television equipment and spare parts to the Company's
cruise line customers. Management attributes the increase in demand

                                      -25-
<PAGE>

primarily to a larger base of installed interactive television systems in the
cruise industry in the first quarter of 2002. The decline in revenue for other
services was primarily due to interactive television transactional services
revenue decreasing by $93,000 from the first quarter of 2001 to the first
quarter of 2002. Operations of this type ceased in December 2001 after the
transfer of systems operation on two ships to Carnival following the sale of the
systems to Carnival earlier in 2001.

Cost of Sales and Gross Profit

         The Company recognized cost of sales of $1,475,000 during the three
months ended March 31, 2002 as compared to $2,585,000 during the three months
ended March 31, 2001. The decrease in cost of sales of $1,110,000 was consistent
with the declines in revenue experienced in the Company's operations. Gross
profit of $1,342,000 was recognized for the three months ended March 31, 2002 as
compared to $2,219,000 for the three months ended March 31, 2001, a decrease of
$877,000, or 40%. Gross profit as a percentage of revenue increased from 46% in
the first quarter of 2001 to 48% in the first quarter of 2002.

         The Company's solution areas recorded a total of $1,401,000 for cost of
sales during the three months ended March 31, 2002, including $777,000 for
Interactive Media, $163,000 for Technology Infrastructure, $200,000 for E-
Business and $261,000 for legacy technology consulting services. Comparable cost
of sales for the three months ended March 31, 2001 was $2,498,000 in total,
including $1,314,000 for Interactive Media, $356,000 for Technology
Infrastructure, $266,000 for E-Business and $562,000 for legacy technology
consulting services. Gross profit for the Company's solution areas for the three
months ended March 31, 2002 was $1,271,000, including $680,000 for Interactive
Media, $199,000 for Technology Infrastructure, $297,000 for E-Business and
$95,000 for legacy technology consulting services. Comparable gross profit for
the three months ended March 31, 2001 was $2,085,000 in total, including
$1,003,000 for Interactive Media, $579,000 for Technology Infrastructure,
$295,000 for E-Business and $208,000 for legacy technology consulting services.

         Cost of sales for the Interactive Media Solution Area for the three
months ended March 31, 2002 included $189,000 for interactive media consulting
and $588,000 for interactive media systems integration. Interactive Media cost
of sales for the three months ended March 31, 2001 included $239,000 for
interactive media consulting and $1,075,000 for interactive media systems
integration. Interactive Media Solution Area gross profit for the three months
ended March 31, 2002 included $316,000 for interactive media consulting and
$364,000 for interactive media systems integration. Interactive Media gross
profit for the three months ended March 31, 2001 included $550,000 for
interactive media consulting and $453,000 for interactive media systems
integration. The period-to-period decreases in consulting cost of sales and
gross profit were primarily attributable to scheduling considerations for
consulting and systems integration services related to shipboard interactive
television system installations. The first quarter of 2001 included the periods
of peak activity related to two shipboard interactive television systems while
the first quarter of 2002 included only a portion of the peak activity period
for one shipboard system installation. As discussed above under Revenue, there
will continue to be significant quarter-to-quarter variation in the level of
Interactive Media services, which will result in significant variation in the
levels of cost of sales and gross profit recognized.

         Technology Infrastructure gross profit decreased $380,000, or 66%, for
the three months ended March 31, 2002 as compared to the three months ended
March 31, 2001. Management attributes the decline in period-to-period Technology
Infrastructure gross profit to the economic downturn throughout 2001, which has
curtailed technology spending for consulting services or the equipment and
software upgrades that will frequently accompany infrastructure solutions.

         E-Business gross profit increased $2,000 in the first quarter of 2002
as compared to the first quarter of 2001, while the corresponding decrease in
revenue was 11%. Gross profit as a percentage of revenue experienced a 7%
period-to-period increase from higher average billing rates in Northern
California. There can be no assurance that the Company will realize gross profit
or gross profit as a percentage of revenue in future periods equal to or greater
than current levels for its E-Business Solution Area.

         Gross profit realized on legacy technology consulting services declined
from $208,000 in the first quarter of 2001 to $95,000 in the first quarter of
2002. The decline in legacy technology consulting gross profit is consistent
with the period-to-period decline in revenue. Management attributes the decline
to both the July 2001 cessation of services related to Hogan IBA-based
technology and industry trends away from mainframe computer systems.

                                      -26-
<PAGE>

         Cost of sales for the Company's ancillary services and product sales
was $74,000 for the three months ended March 31, 2002, with all of the cost of
sales attributable to information system product sales. Cost of sales for
ancillary services and product sales was $87,000 for the three months ended
March 31, 2001, including $48,000 for information system product sales and
$39,000 for other services, related to the cost of pay-per-view movies
associated with the operation of interactive television systems. Gross profit on
ancillary services and product sales was $71,000 for the three months ended
March 31, 2002, including $52,000 for information system product sales and
$19,000 for other services. Gross profit for ancillary services and product
sales was $134,000 for the three months ended March 31, 2001, including $35,000
for information system product sales and $99,000 for other services. The
increase in gross profit related to information system product sales is
consistent with the increase in revenue from sales of this type. The decline in
gross profit for other services was primarily due to the December 2001 cessation
of interactive television transactional services.

Selling, General & Administrative Expenses

         The Company recorded $1,552,000 in selling, general & administrative
expenses during the three months ended March 31, 2002, including $149,000 for
depreciation and amortization and $1,403,000 for other selling, general &
administrative expenses. Selling, general & administrative expenses were
$3,062,000 during the three months ended March 31, 2001, including $514,000 for
depreciation and amortization and $2,548,000 for other selling, general &
administrative expenses. The decrease in selling, general & administrative
expenses of $1,510,000 is attributable to substantial period-to-period expense
reductions, including the cost of personnel resources, rent and other expenses,
the inclusion of severance costs in the first quarter of 2001 and a substantial
reduction in depreciation and amortization expense.

         The downturn in the domestic economy experienced beginning late in 2000
significantly lowered technology-based spending in the United States, which
negatively impacted the demand for technology services. 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. As a
result of these actions, the expense associated with personnel resources was
substantially lower in the first quarter of 2002 than that incurred in the first
quarter of 2001. Management also implemented cost savings efforts throughout the
final three quarters of 2001 and the first quarter of 2002 which have resulted
in reductions in other expenses such as travel and entertainment, communications
and supplies. Another factor contributing to the decrease in selling, general &
administrative expenses was a reduction in expenses for rent and facilities. The
Company's lease for its office space in Pittsburgh expired January 31, 2002.
Management believed the Company's Pittsburgh-based operations could effectively
utilize a smaller space due to the 2001 staff reductions. The Company's landlord
agreed to permit the Company to continue to occupy its present space on a month-
to-month basis until such time as the landlord identifies an alternate tenant
for the Company's space. The Company's rent expense for its Pittsburgh office
was reduced by approximately 51% under the new arrangement reflecting both its
reduced requirements for space and current real estate market conditions. The
Company was also able to substantially reduce its offsite storage costs in Ft.
Lauderdale.

         During the three months ended March 31, 2001, restructuring charges of
approximately $74,000 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. There were no comparable
restructuring charges recorded in the first quarter of 2002.

         Depreciation and amortization were $149,000 for the three months ended
March 31, 2002 as compared to $514,000 for the three months ended March 31,
2001. The decrease of $365,000, or 71%, is due to several factors. The most
significant was the Company's implementation of Statement of Financial
Accounting Standards No. 141 "Business Combinations" ("SFAS No. 141") and
Statement of Financial Accounting Standards No. 142 "Goodwill and Other
Intangible Assets" ("SFAS No. 142") as of January 1, 2002. Under the new
standards, goodwill is no longer amortized. Also, intangible asset values
previously recorded for assembled workforces in connection with the acquisitions
of Allin Consulting-California in 1996 and Allin Consulting-Pennsylvania in 1998
were reclassified to goodwill. During the three months ended March 31, 2001,
approximately $283,000 of amortization expense had been recorded related to
goodwill and assembled workforces. Other factors contributing to the period-to-
period reduction in depreciation and amortization included 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 June and December 2001.

                                      -27-
<PAGE>

Loss from Continuing Operations

         The Company recorded a loss from continuing operations of $209,000 for
the three months ended March 31, 2002, as compared to a loss from continuing
operations of $890,000 for the three months ended March 31, 2001. The
substantial reduction in selling, general & administrative expenses of
$1,510,000 more than offset the decrease in gross profit of $877,000 realized on
the Company's operations, resulting in a reduction of $633,000 in loss from
continuing operations. The factors contributing to the reductions in both gross
profit and selling, general & administrative expenses are discussed above.

Loss from Discontinued Operations

         During the three months ended March 31, 2002, the Company recorded
income of $8,000 from its discontinued digital imaging operations as compared to
a loss of $107,000 during the three months ended March 31, 2001. The loss
recognized in the first quarter of 2001 resulted from ongoing digital imaging
activity prior to management's decision to discontinue digital imaging
operations. Activity in the first quarter of 2002 included continuing sales of
remaining inventory, fulfillment of technical support obligations and website
hosting services. Any remaining obligations for technical support services will
be completed in the second quarter of 2002. The remaining inventory balance for
digital imaging equipment was approximately $12,000 as of March 31, 2002 so any
future sales will not be significant. Website hosting services are expected to
be transferred to Allin Interactive in the second quarter of 2002, but future
revenue associated with this activity is not expected to be significant.

Net Loss

         The Company's net loss for the three months ended March 31, 2002 was
$201,000 as compared to $997,000 for the three months ended March 31, 2001. The
most significant factor in the reduction in net loss was the substantial period-
to-period decrease in selling, general & administrative expenses, as discussed
above.

Liquidity and Capital Resources

         At March 31, 2002, the Company had cash and liquid cash equivalents of
$2,641,000 available to meet its working capital and operational needs. The net
change in cash from December 31, 2001 was an increase of $451,000, which
resulted primarily from collection of accounts receivable and progress billings
on interactive media systems integration projects, partially offset by cash used
for reduction of accounts payable and accrued liabilities, payment of dividends
on preferred stock and cash used in the Company's operations.

         The Company recognized a net loss for the three months ended March 31,
2002 of $201,000. The Company recorded non-cash expenses of $153,000 for
depreciation of property and equipment and amortization of intangible assets,
resulting in net cash use of $48,000 related to the income statement. Working
capital adjustments resulted in net cash provided of $556,000. Among the working
capital adjustments resulting in cash provided were a decrease in accounts
receivable of $1,695,000 and an increase in billings in excess of costs and
estimated gross margins of $343,000. These were substantially offset by working
capital adjustments using cash, including decreases in accounts payable and
accrued liabilities of $1,315,000 and $210,000, respectively. The net result of
the income statement activity and working capital adjustments was net cash
provided of $508,000 related to operating activities.

         Investing activities resulted in a net cash use of $4,000 for the three
months ended March 31, 2002 for capital expenditures relating to the periodic
upgrading of the Company's computer hardware. Financing activities resulted in a
net cash use of $89,000 during the three months ended March 31, 2002 for
preferred stock dividends.

         The Company does not rely on off-balance sheet financing and does not
have non-consolidated special purpose entities.

         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

                                      -28-
<PAGE>

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.

     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 80% 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 March 31, 2002, maximum borrowing availability under
the S&T Loan Agreement was approximately $1,169,000. There was no outstanding
balance as of March 31, 2002 and there have been no borrowings under the S&T
Loan Agreement subsequent to that date. As of May 3, 2002, maximum borrowing
availability under the S&T Loan Agreement was approximately $1,108,000.

     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. The interest rate in effect as of
the beginning of 2002, 5.75%, was unchanged during the first quarter and has
remained unchanged as of May 3, 2002. 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 did not record any interest expense related to this revolving credit
loan during the three months ended March 31, 2002. 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, as amended, 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 Exhibit 4 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.
During the fiscal quarter ended March 31, 2002, the Company recognized net
interest income. S&T Bank has acknowledged that the cash flow to interest ratio
cannot be calculated as intended for the first quarter of 2002 since net
interest expense was not recognized and that this instance does not represent a
violation of the cash flow coverage covenant. The Company was in compliance with
all other covenants as of March 31, 2002 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 March 31, 2002, the Company had outstanding 25,000 shares of the
Company's Series C Redeemable Preferred Stock, having a liquidation preference
of $100 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; however, the Company may redeem shares of Series C preferred
stock at any time. Accrued but unpaid dividends on the Series C preferred stock
were approximately $1,404,000 as of March 31, 2002 and approximately $1,441,000
as of May 13, 2002. 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

                                      -29-
<PAGE>

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 March 31, 2002, 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; however, the Company may redeem shares of Series D
preferred stock after August 13, 2003. 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 closing price of the common stock 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
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 $27,000 as of March 31,
2002 and approximately $6,000 as of May 13, 2002. 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 March 31, 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; however, the Company may redeem shares of Series F
preferred stock at any time. 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, if any. 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 in arrears
on the 15th of the first month of the following 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 $58,000 as of March 31, 2002 and approximately $49,000 as of
May 13, 2002. 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.

     On March 14, 2002, Les D. Kent sold all of the 1,000 outstanding shares of
the Series F preferred stock, with accrued dividends of approximately $55,000, a
note due from the Company, as discussed below, with a principal balance of
$1,000,000, with approximately $73,000 of accrued interest, and 213,333 shares
of the Company's common stock, held by him to Henry Posner, Jr., a beneficial
owner of greater than five percent of the Company's common stock both before and
after the sale. Prior to the sale, Mr. Kent was also a beneficial owner of
greater than five percent of the Company's common stock.

     On April 15, 2002, Mr. Posner sold certain portions of the financial
instruments related to the Company acquired from Mr. Kent in March 2002 to other
parties related to the Company. Rosetta Capital Partners, LP, an entity in which
Thomas D. Wright, a beneficial holder of greater than five percent of the
Company's common stock, has an ownership interest purchased 250 shares of Series
F preferred stock, approximately $15,000 of accrued but unpaid dividends, 53,333
shares of common stock, a $250,000 portion of the note payable and approximately
$19,000 of accrued but unpaid interest. Churchill Group LLC, an entity in which
William C. Kavan, a director and beneficial holder of greater than five percent
of the Company's common stock, has an ownership interest purchased 41.67 shares
of Series F preferred stock, approximately $2,000 of accrued but unpaid
dividends, 8,889 shares of common stock, a $41,667 portion of the note payable
and approximately $3,000 of accrued but unpaid interest. Richard W. Talarico,
the Company's Chairman and Chief Executive Officer and a beneficial holder of
greater than five percent of the Company's common stock, purchased 16.67 shares
of Series F preferred stock, approximately $1,000 of accrued but unpaid
dividends, 3,556 shares of common stock, a $16,667 portion of the note payable
and approximately $1,000 of accrued but unpaid interest. Dean C. Praskach, the
Company's Chief Financial Officer, Secretary and Treasurer, purchased 16.67
shares of Series F preferred stock, approximately $1,000 of accrued but unpaid
dividends, 3,555 shares of common stock, a $16,667 portion of the note payable
and approximately $1,000 of accrued but unpaid interest.

                                      -30-
<PAGE>

     As of March 31, 2002, 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; however, 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. Each share of Series G preferred stock is
convertible into 28,571 shares of common stock at any time prior to redemption
by the Company, if any. The conversion price was set on December 29, 2001, the
first anniversary of the issuance of the Series G preferred stock, at the
minimum permissible price of $0.35 per common share. The minimum price became
effective since it exceeded 85% of the average closing price of the common stock
for the five trading days prior to December 29, 2001. 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. Unless redeemed or converted to
common stock sooner, Series G preferred earns cumulative quarterly dividends at
the rate of 8% 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 March
31, 2002 and approximately $14,000 as of May 13, 2002.

     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,
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 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
in arrears on the 15th of the first month of the following 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 March 31, 2002 and approximately $67,000 as of May
13, 2002.

     Capital expenditures during the three months ended March 31, 2002 were
approximately $4,000 and included computer hardware for the Company's periodic
upgrading of technology. Management forecasts capital expenditures of
approximately $50,000 for 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 2002,

                                      -31-
<PAGE>

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 stockholders.

Risk Factors

     Certain matters in this quarterly Report on Form 10-Q, including, without
limitation, certain matters discussed in this Management's Discussion and
Analysis of Financial Condition and Results of Operations and other sections of
this report 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. 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. 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. 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
the Company to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. Among the
factors that could affect performance are those risks and uncertainties
discussed below, 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, general
domestic and international economic conditions and future incidents of terrorism
that may negatively impact the markets where the Company competes. 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 reduced 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. Management attributes the decreases in
Technology Infrastructure and E-Business revenue to a softening of the demand
for technology consulting services due to the downturn in the domestic economy
beginning late in 2000. In addition to the cost of the consulting services,
Technology Infrastructure solutions will frequently recommend or require
significant upgrades in customers' hardware, software and networking equipment,
which has compounded the negative impact of the economic downturn on this
solution area. A number of customers or

                                      -32-
<PAGE>

potential customers have postponed projects or delayed consideration of new
technology initiatives pending improvement to the domestic economic outlook or
their financial results. Management believes the economic uncertainty will
likely negatively impact the Technology Infrastructure and E-Business Solution
Areas for at least the majority of 2002. There can be no assurance that the
effects of the economic uncertainty will not worsen or extend beyond 2002, 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 56% and 52% of the Company's revenue for the year
ended December 31, 2001 and the three months ended March 31, 2002, respectively,
and 51% of the Company's gross profit for these periods. Interactive Media
projects also represent a substantial majority of the Company's committed
backlog for the remainder of 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 declines in passenger occupancy and revenue. As of early
2002, passenger occupancy and revenue had partially recovered from these
declines. However, should the 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 events which
negatively impact the cruise industry may also negatively impact the Interactive
Media Solution Area's ability to obtain additional future business. To the
extent that any future incidents of terrorism or other events negatively impact
the economy in general or any businesses that are current or potential
Technology Infrastructure or E-Business customers, the Company's future results
of operations may also be negatively impacted.

     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 half
of 2001. The decline is attributable to both industry trends and the Company's
marketing focus on solutions-oriented services over that period. Recently,
legacy technology has stabilized, with similar levels of revenue and gross
profit realized in the third and fourth quarters of 2001 and the first quarter
of 2002. However, management expects legacy technology revenue to be realized
over the full year 2002 will represent a decline from that realized in 2001.
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.

     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 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 remains
fragmented with a large number of smaller-sized participants despite a recent
trend toward consolidation in the industry. 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 may 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
to be utilized in interactive television system installations. The Company
believes its application development expertise and the On Command hardware
platform

                                      -33-
<PAGE>

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 scheduling, or 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 2001 and the first
quarter of 2002. As of March 31, 2002, the Company had a retained deficit of
$45,529,000. Although net income was recognized for the third and fourth
quarters of 2001, a net loss was recognized in the first quarter of 2002 and the
Company anticipates that net losses may 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.

         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 general 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 the Company's or
customers' 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 to independently 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 and the ability of key suppliers to develop, refine and introduce high
quality improvements in the functionality and features of their 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.

                                      -34-
<PAGE>

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 were required to be
implemented for any goodwill and intangible assets acquired after June 30, 2001
immediately upon acquisition. With respect to goodwill and intangible assets
acquired prior to July 1, 2001, adoption of the new standards was required as of
the beginning of fiscal years starting after December 15, 2001. The Company
implemented SFAS Nos. 141 and 142 effective as of January 1, 2002. The Company
completed required transition testing as of that date and determined that the
Company's recognized values for customer list and goodwill were not impaired.
The Company also elected to complete the annual testing requirement for 2002 as
of the beginning of the fiscal year. Information utilized for transition testing
was also utilized for the 2002 annual test with the same conclusion that the
recognized values for customer list and goodwill were not impaired. Amortization
expense of approximately $283,000 had been recognized in the first quarter of
2001 related to goodwill and assembled workforces recorded in connection with
the acquisitions of Allin Consulting-California, MEGAbase, Inc. and Allin
Consulting-Pennsylvania. An impairment loss recorded in June 2001 reduced
recorded balances for goodwill. Following this, amortization expense related to
goodwill and assembled workforces of approximately $340,000 would have been
recorded in 2002 had the former accounting standards remained in place. Under
the new standards, amortization expense related to these assets is no longer
recorded effective January 1, 2002. See above in this Management's Discussion
and Analysis of Financial Condition and Results of Operations under the caption
Certain Critical Accounting Policies and Estimates for additional information
concerning the Company's implementation of SFAS Nos. 141 and 142.

         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 adopted SFAS No. 144 effective January 1,
2002. The Company does not believe SFAS No. 144 will have a significant effect
on its results of operations and financial position.

                                      -35-
<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.

                                      -36-
<PAGE>

Part II

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

         (a)      Exhibits.

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

11                Computation of Earnings per Share.



         (b)   Reports on Form 8-K.

               On April 5, 2002, Allin Corporation filed with the Securities and
               Exchange Commission a Current Report of Form 8-K (date of
               earliest event reported - March 29, 2002) to report that the
               Company had dismissed Arthur Andersen LLP and engaged Hill, Barth
               & King LLC as independent accountants for the fiscal year ending
               December 31, 2002.

                                      -37-
<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: May 14, 2002                By:  /s/   Richard W. Talarico
                                       --------------------------
                                       Richard W. Talarico
                                       Chairman and Chief Executive Officer

Date: May 14, 2002                By:  /s/   Dean C. Praskach
                                       ----------------------
                                       Dean C. Praskach
                                       Chief Financial Officer and Chief
                                       Accounting Officer

                                      -38-
<PAGE>

Allin Corporation
Form 10-Q
March 31, 2002
Exhibit Index


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


11                Computation of Earnings per Share