<PAGE>

                                   FORM 10-Q

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



(Mark One)

(X)  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
     THE SECURITIES EXCHANGE ACT OF 1934
     For the quarterly period ended:  September 30, 1999

                                       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.)

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

                                 (412) 928-8800
              (Registrant's telephone number, including area code)

      Indicate by check mark whether the registrant: (1) has filed all reports
      required to be filed by Section 13 or 15 (d) of the Securities Exchange
      Act of 1934 during the preceding 12 months (or for such shorter period
      that the registrant was required to file such reports); and (2) has been
      subject to such filing requirements for the past 90 days.

                       ( X )    Yes      (  )    No

              Shares Outstanding of the Registrant's Common Stock

                             As of November 5, 1999

                        Common Stock,  5,987,663 Shares

<PAGE>

                               Allin Corporation

                                   Form 10-Q

                                     Index


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  16
               Condition and Results of Operations

      Item 3.  Quantitative and Qualitative Disclosure about Market    Page  42
               Sensitive Instruments

Part II -  Other Information

      Item 5.  Other Information                                       Page  43

      Item 6.  Exhibits and Reports on Form 8-K                        Page  47

Signatures                                                             Page  48

                                      -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," 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 "Special Note on Forward-Looking Statements"
included therein.  Allin Corporation undertakes no obligation to update publicly
any forward-looking statements, whether as a result of new information, future
events or otherwise.

                                      -3-
<PAGE>

Part I - Financial Information

Item 1. - Financial Statements

ALLIN CORPORATION & SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

  (Dollars in thousands)
       (Unaudited)

<TABLE>
<CAPTION>

                                                                                  December 31,                September 30,
                                                                                      1998                         1999
                                                                               -----------------             ----------------
<S>                                                                            <C>                           <C>
ASSETS

Current assets:
           Cash and cash equivalents                                           $           2,510             $          2,624
           Accounts receivable, net of allowance for
                   doubtful accounts of $316 and $299                                      2,768                        3,049
           Note receivable                                                                   463                          ---
           Inventory                                                                         396                          791
           Prepaid expenses                                                                  317                          378
           Costs in excess of billings                                                       ---                        1,017
                                                                               -----------------             ----------------
                   Total current assets                                                    6,454                        7,859

Property and equipment, at cost:
Leasehold improvements                                                                       478                          473
Furniture and equipment                                                                    2,477                        2,594
On-board equipment                                                                         3,688                          951
                                                                               -----------------             ----------------
                                                                                           6,643                        4,018

Less--accumulated depreciation                                                            (3,559)                      (2,407)
                                                                               -----------------             ----------------
                                                                                           3,084                        1,611

Assets held for resale                                                                        15                           56
Notes receivable from employees                                                               35                           29
Software development costs, net of accumulated
           amortization of $877 and $885                                                      36                           28
Goodwill, net of accumulated amortization of
           $722 and $1,507                                                                14,039                       13,254
Other assets, net of accumulated amortization of
           $2,907 and $3,140                                                               2,649                        2,347
                                                                               -----------------             ----------------

Total assets                                                                   $          26,312             $         25,184
                                                                               =================             ================

</TABLE>


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

                                      -4-
<PAGE>

ALLIN CORPORATION & SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

  (Dollars in thousands)
       (Unaudited)

<TABLE>
<CAPTION>

                                                                                  December 31,                September 30,
                                                                                      1998                         1999
                                                                                ----------------             ---------------

<S>                                                                             <C>                          <C>
LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
           Current portion of notes payable                                     $                2           $                2
           Bank lines of credit                                                              1,506                          500
           Accounts payable                                                                    575                          753
           Accrued liabilities:
                   Compensation and payroll taxes                                              475                          603
                   Dividends on preferred stock                                                546                          783
                   Other                                                                       694                          950
           Deferred revenue                                                                     76                        2,071
           Income taxes payable                                                                 67                           25
                                                                                ------------------           ------------------
                   Total current liabilities                                                 3,941                        5,687

Non-current portion of notes payable                                                         4,004                        1,003
Deferred income taxes                                                                          126                           81
Commitments and contingencies

Preferred stock, par value $.01 per share,
           authorized 100,000 shares:
           Series A convertible, redeemable preferred stock,
                   designated 40,000 shares, issued and
                   outstanding 25,000 and -0- shares                                         2,500                          ---
           Series B redeemable preferred stock, designated
                   5,000 shares, issued and outstanding
                   2,750 and -0- shares                                                      2,152                          ---

Shareholders' equity:
           Common stock, par value $.01 per share - authorized
                   20,000,000 shares, issued 5,995,830 shares                                   60                           60
           Preferred stock, par value $.01 per share,
                   authorized 100,000 shares:
                   Series C redeemable preferred stock, designated,
                          issued and outstanding -0- and 25,000
                          shares                                                               ---                        2,500
                   Series D convertible redeemable preferred stock,
                          designated, issued and outstanding
                          -0- and 2,750 shares                                                 ---                        2,152
                   Series E convertible redeemable preferred stock,
                          designated -0- and 2,000 shares, issued and
                          outstanding -0- and 1,926 shares                                     ---                        1,926
                   Series F convertible redeemable preferred stock,
                          designated, issued and outstanding
                          -0- and 1,000 shares                                                 ---                        1,000
           Additional paid-in-capital                                                       40,793                       40,353
           Warrants                                                                            598                          598
           Deferred compensation                                                              (104)                          (8)
           Treasury stock at cost, 1,800 and 7,967 common shares                                (6)                         (26)
           Retained deficit                                                                (27,752)                     (30,142)
                                                                                ------------------           ------------------
Total shareholders' equity                                                                  13,589                       18,413
                                                                                ------------------           ------------------
Total liabilities and shareholders' equity                                      $           26,312           $           25,184
                                                                                ==================           ==================


</TABLE>

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

                                      -5-
<PAGE>

ALLIN CORPORATION & SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

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

<TABLE>
<CAPTION>


                                                             Three Months       Three Months       Nine Months        Nine Months
                                                                Ended              Ended              Ended              Ended
                                                            September 30,       September 30,      September 30,      September 30,
                                                                 1998                1999              1998               1999
                                                            -------------       -------------      -------------      -------------
<S>                                                         <C>                 <C>                <C>                <C>
Revenue                                                     $       4,540       $       6,118      $       9,568      $      18,880

Cost of sales                                                       2,676               3,805              5,088             12,054
                                                            -------------       -------------      -------------      -------------

Gross profit                                                        1,864               2,313              4,480              6,826

Selling, general & administrative                                   5,452               2,771             10,936              8,955
                                                            -------------       -------------      -------------      -------------

Loss from operations                                               (3,588)               (458)            (6,456)            (2,129)


Interest (income) expense, net                                         47                  34                (66)               178
                                                            -------------       -------------      -------------      -------------

Loss before provision for income taxes                             (3,635)               (492)            (6,390)            (2,307)


Provision for income taxes                                            ---                 ---                  6                 19
                                                            -------------       -------------      -------------      -------------

Loss after provision for income taxes                              (3,635)               (492)            (6,396)            (2,326)


(Income) loss from non-consolidated corporation                        18                  31                 18                 67
                                                            -------------       -------------      -------------      -------------

Loss from continuing operations                                    (3,653)               (523)            (6,414)            (2,393)


(Income) loss of disposed segment,
           net of income tax                                           64                 ---               (220)               ---

(Gain) loss on disposal of segment                                 (1,499)                ---             (1,499)                (2)
                                                            -------------       -------------      -------------      -------------

(Gain) loss from discontinued operations                           (1,435)                ---             (1,719)                (2)
                                                            -------------       -------------      -------------      -------------

Net loss                                                           (2,218)               (523)            (4,695)            (2,391)


Accretion and dividends on preferred stock                             82                 152                194                546
                                                            -------------       -------------      -------------      -------------

Net loss attributable to common shareholders                $      (2,300)      $        (675)     $      (4,889)     $      (2,937)
                                                            =============       =============      =============      =============

Loss per common share from continuing operations
           attributable to common shareholders -
           basic and diluted                                $       (0.67)      $       (0.11)     $       (1.24)     $       (0.49)
                                                            =============       =============      =============      =============

Income (loss) per common share from discontinued
           operations - basic and diluted                   $        0.26       $        0.00      $        0.32      $        0.00
                                                            =============       =============      =============      =============

Net loss per common share attributable to common
           shareholders - basic and diluted                 $       (0.41)      $       (0.11)     $       (0.92)     $       (0.49)
                                                            =============       =============      =============      =============

Weighted average shares outstanding - basic and diluted         5,590,300           5,969,162          5,301,699          5,969,162
                                                            -------------       -------------      -------------      -------------


</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>

                                                                                               Nine Months         Nine Months
                                                                                                  Ended              Ended
                                                                                              September 30,        September 30,
                                                                                                   1998                 1999
                                                                                              -------------        -------------
<S>                                                                                           <C>                  <C>
Cash flows from operating activities:
           Net loss                                                                                  (4,695)              (2,391)
           Adjustments to reconcile net loss to net cash flows
           from operating activities:
                   Depreciation and amortization                                                      2,693                1,977
                   Amortization of deferred compensation                                                 93                    3
                   Loss from disposal of assets                                                         237                   86
                   Loss from impairment of assets                                                     2,765                  ---
                   Cost of fixed assets sold                                                            ---                  102
                   (Income) loss from
                          non-consolidated corporation                                                   18                   67
                   Gain on disposal of segment                                                       (1,499)                 ---
           Changes in certain assets and liabilities:
                   Accounts receivable                                                                  103                 (281)
                   Inventory                                                                           (137)                (355)
                   Prepaid expenses                                                                      44                  (61)
                   Software development costs                                                           (20)                 ---
                   Assets held for sale                                                                (266)                 (41)
                   Costs in excess of billings                                                          ---                 (475)
                   Other assets                                                                         (37)                   6
                   Accounts and notes payable                                                          (253)                 180
                   Accrued liabilities                                                                 (157)                 392
                   Income taxes payable                                                                 ---                  (87)
                   Deferred revenues                                                                    144                1,995
                                                                                                    -------              -------
           Net cash flows from operating activities                                                    (967)               1,117
                                                                                                    -------              -------

Cash flows from investing activities:
           Acquisition of subsidiary                                                                 (2,234)                 ---
           Change in assets and liabilities of disposed segment                                         (90)                 ---
           Proceeds from sale of assets                                                                   9                   36
           Proceeds from note receivable related to
                   sale of subsidiary                                                                   ---                  463
           Capital expenditures                                                                        (316)                (283)
                                                                                                    -------              -------
               Net cash flows from investing activities                                              (2,631)                 216
                                                                                                    -------              -------


Cash flows from financing activities:
           Proceeds from preferred stock deposit                                                      2,750                  ---
           Net repayment on lines of credit                                                             ---               (1,006)
           Payment of dividends on preferred stock                                                      ---                 (133)
           Debt acquisition costs                                                                       (40)                  (3)
           Repayment of note payable                                                                    ---                  (74)
           Repayment of debt                                                                           (627)                 ---
           Repayment of capital lease obligations                                                        (2)                  (3)
                                                                                                    -------              -------
               Net cash flows from financing activities                                               2,081               (1,219)
                                                                                                    -------              -------

Net change in cash and cash equivalents                                                              (1,517)                 114
Cash and cash equivalents, beginning of period                                                        6,802                2,510
                                                                                                    -------              -------
Cash and cash equivalents, end of period                                                              5,285                2,624
                                                                                                    =======              =======


</TABLE>

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

                                      -7-
<PAGE>

                       Allin Corporation and Subsidiaries

                   Notes to Consolidated Financial Statements

1.  Basis of Presentation

    The information contained in these financial statements and notes for the
    three- and nine-month periods ended September 30, 1998 and 1999 should be
    read in conjunction with the audited financial statements and notes for the
    years ended December 31, 1997 and 1998, contained in Allin Corporation's
    (the "Company") Annual Report on Form 10-K for the year ended December 31,
    1998. The accompanying unaudited Consolidated Financial Statements have been
    prepared in accordance with generally accepted accounting principles and the
    rules and regulations of the Securities and Exchange Commission. These
    interim statements do not include all of the information and footnotes
    required for complete financial statements. It is management's opinion that
    all adjustments (including all normal recurring accruals) considered
    necessary for a fair presentation have been made. However, results for these
    interim periods are not necessarily indicative of results to be expected for
    the full year.

    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.

    Disposal of Segment

    On September 30, 1998, the Company sold all of the issued and outstanding
    capital stock of SportsWave, Inc. ("SportsWave"), a wholly-owned subsidiary.
    The sale of SportsWave represents the disposal of a segment since SportsWave
    comprised the entirety of the Company's sports marketing business.
    Accordingly, the results of operations for SportsWave for three- and nine-
    month periods ended September 30, 1998 are presented in the Company's
    Consolidated Statements of Operations as income or loss of disposed segment,
    which is presented after loss from continuing operations. Adjustments to the
    gain recorded on the disposal of SportsWave recorded during the nine-month
    period ended September 30, 1999 are also presented after net loss from
    continuing operations.

    Use of Estimates in the Preparation of Financial Statements

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

    Revenue and Cost of Sales Recognition

    Allin Corporation of California ("Allin Consulting-California") and Allin
    Consulting of Pennsylvania, Inc. ("Allin Consulting-Pennsylvania") charge
    consulting fees, typically on an hourly basis, to their clients for their
    technology consulting services. Revenue and related cost of sales are
    recognized as services are performed.

    Allin Interactive Corporation's ("Allin Interactive") recognition method for
    revenue and cost of sales for systems integration services and fixed price
    consulting services is determined based on the size and expected duration of
    the project. For systems integration and fixed price consulting 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. Allin Interactive utilizes the proportion of labor
    cost incurred to expected total project labor cost as a quantitative factor
    in determining the percentage of completion 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
    projects, revenue and cost of sales are recognized upon

                                      -8-
<PAGE>

    completion of the project. Time based consulting revenue and cost of sales
    are recognized as services are performed. Interactive television
    transactional revenue and management fees and any associated cost of sales
    are recognized as the services are performed.

    Allin Digital Imaging Corp. ("Allin Digital") recognizes revenue and cost of
    sales for systems integration services upon completion of the respective
    projects. Revenue and associated cost of sales for equipment and consumable
    sales is recognized upon shipment of the product. Technology support fees
    and associated cost of sales are recognized as services are performed.

    Allin Network Products, Inc. ("Allin Network") recognizes revenue and
    associated cost from the sale of products at the time the products are
    shipped.

    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 includes the weighted average of the outstanding common shares of the
    Company, excluding 24,868 shares of outstanding restricted stock for the
    three- and nine-month periods ended September 30, 1998 and 18,701 and 18,834
    shares of outstanding restricted stock, respectively, for the three- and
    nine-month periods ended September 30, 1999. Outstanding restricted stock,
    outstanding stock options and the Company's Series D, E and F convertible
    redeemable preferred stock would all be considered dilutive securities under
    SFAS No. 128; however, these securities have not been included in the
    calculation of diluted EPS, for the applicable periods, as their effect
    would be anti-dilutive. The additional shares that would have been included
    in the diluted EPS calculation, if their effect was not anti-dilutive, were
    89,479 and 176,177 for the three-month periods ended September 30, 1998 and
    1999, respectively, and 35,850 and 75,351 for the nine-month periods ended
    September 30, 1998 and 1999, respectively.

    Inventory

    Inventory, consisting principally of digital photography equipment and
    software, and computer hardware, software and communications equipment, is
    stated at the lower of cost or market. The Company utilizes a specific
    identification inventory method. Cost of sales and inventory value under
    this method approximate the first-in, first-out method.

    Software Development Costs

    Costs of software development are capitalized subsequent to the project
    achieving technological feasibility and prior to market introduction. Prior
    to the project achieving technological feasibility and after market
    introduction, development costs are expensed as incurred. Amortization of
    capitalized software costs for internally developed software products and
    systems is computed on a product-by-product basis over a three-year period.

    Financial Instruments

    As of September 30, 1999, the Company's Consolidated Balance Sheet includes
    a note payable to a shareholder 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. Interest payments
    are not required during 1999. 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 $69,000 and $26,000 during
    the three months ended September 30, 1998 and 1999, respectively. Cash
    payments for interest were approximately $3,000 and $24,000 during the three
    months ended September 30, 1998 and 1999, respectively. Cash payments for
    dividends were approximately $-0- and $51,000 during the three months ended
    September 30, 1998 and 1999,

                                      -9-
<PAGE>

    respectively. Dividends on preferred stock of approximately $82,000 and
    $138,000 were accrued but unpaid during the three-month periods ended
    September 30, 1998 and 1999, respectively.

    Cash payments for income taxes were approximately $75,000 and $223,000
    during the nine months ended September 30, 1998 and 1999, respectively. Cash
    payments for interest were approximately $3,000 and $148,000 during the nine
    months ended September 30, 1998 and 1999, respectively. Cash payments for
    dividends were approximately $-0- and $133,000 during the nine months ended
    September 30, 1998 and 1999, respectively. Dividends on preferred stock of
    approximately $194,000 and $265,000 were accrued but unpaid during the nine-
    month periods ended September 30, 1998 and 1999, 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 and 1,000 as Series F
    Convertible Redeemable Preferred Stock. The order of liquidation preference
    of the series of the Company's outstanding preferred stock, from senior to
    junior, is Series E, Series F, Series D and Series C. As of September 30,
    1999, the Company has outstanding 25,000, 2,750, 1,926 and 1,000 shares of
    Series C, D, E and F preferred stock, respectively, All previously
    outstanding shares of the Company's Series A and B preferred stock were
    exchanged in May 1999 for a like number of shares of Series C and D
    preferred stock.

3.  Liability for Employee Termination Benefits

    The Company recognizes liabilities for involuntary employee termination
    benefits in the period management approves the plan of termination if during
    that period management has approved and committed to the plan of termination
    and established the benefits to be received; communicated benefit plans to
    employees; identified numbers, functions and locations of anticipated
    terminations; and the period of time for the plan of termination indicates
    significant changes are not likely.

    A reorganization charge of approximately $208,000 was recorded as of January
    12, 1999 to establish a liability for severance costs associated with the
    termination of services of the Company's president. Associated expenses are
    reflected in Selling, general & administrative expenses on the Consolidated
    Statement of Operations during that period. As of September 30, 1999,
    approximately $150,000 of the amount accrued under the January 12, 1999
    charge had been paid. The remaining balance, approximately $58,000, is
    included in accrued compensation and payroll taxes on the Consolidated
    Balance Sheet. It is anticipated that payments under this plan will be
    completed by January 2000.

    A reorganization charge of approximately $491,000 was recorded as of
    February 4, 1998 to establish a liability for separation costs associated
    with a plan for reorganization of operations, including the resignations of
    certain senior executives. Associated expenses are reflected in Selling,
    general & administrative expenses on the Consolidated Statement of
    Operations during that period. The plan included three positions including
    the Company's president, chief operating officer and an administrative
    assistant, all of whom have ceased employment with the Company. All of the
    amounts accrued under the February 4, 1998 charge had been paid prior to
    March 31, 1999.

    An accrual of approximately $298,000 was recorded as of June 30, 1997 to
    establish a liability for severance costs associated with a plan for
    involuntary employee terminations. During the quarterly period ended March
    31, 1998, additional expense of approximately $15,000 was recorded to adjust
    the severance accrual previously recorded. Associated expenses were
    reflected in Selling, general & administrative expenses on the Consolidated
    Statement of Operations during these periods. The plan included eleven
    employee terminations. Included in the plan were financial and marketing
    executive positions, marketing and administrative staff positions,
    operational management, staff and sales positions associated with digital
    photography operations, and clerical support staff positions. All of the
    positions included in the plan were eliminated. All of the amounts accrued
    under the June 30, 1997 plan had been paid prior to September 30, 1998.

                                      -10-
<PAGE>

4.  Equity Transactions

    During the three months ended September 30, 1999, non-vested options to
    purchase 9,600 shares of common stock previously awarded under the Company's
    1998 Stock Plan were forfeited under the terms of the Plan. Forfeited
    options were restored to the 1998 Stock Plan and are available for
    reissuance. There were no options awarded under the 1998 Stock Plan during
    the three months ended September 30, 1999. Options granted under the 1998
    Stock Plan to purchase 310,398 shares of common stock remain outstanding as
    of September 30, 1999.

    During the three months ended September 30, 1999, vested options to purchase
    40 shares and non-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. Forfeited options were restored to the 1997 Stock
    Plan and are available for reissuance. There were no options awarded under
    the 1997 Stock Plan during the three months ended September 30, 1999.
    Options granted under the 1997 Stock Plan to purchase 290,250 shares of
    common stock remain outstanding as of September 30, 1999.

    During the three months ended September 30, 1999, options to purchase 15,000
    shares of the Company's common stock were awarded under the Company's 1996
    Stock Plan. There were no forfeitures of options previously awarded under
    the 1996 Stock Plan during the three months ended September 30, 1999.
    Options granted under the 1996 Stock Plan to purchase 164,900 shares of
    common stock remain outstanding as of September 30, 1999.

    During the three months ended September 30, 1999, a total of 200 restricted
    shares of the Company's common stock were forfeited due to their holders'
    termination of employment. The forfeited restricted stock reverted to
    treasury stock, which the Company has recorded at cost.

5.  Industry Segment Information

    Basis for Determining Segments

    The Company has determined the segments reported based on the types of
    services and products offered, which is consistent with management's method
    of evaluating the financial performance of segments.

    The term "Allin Consulting" is used to denote the collective operations of
    Allin Consulting-California and Allin Consulting-Pennsylvania. Allin
    Consulting provides technology consulting services oriented around solutions
    areas meeting customer needs for information technology infrastructure,
    business operations, electronic business and knowledge management technology
    services. Segments related to Allin Consulting's operations include
    Information Technology Infrastructure, Business Operations, Electronic
    Business, Knowledge Management and Other, which reflects operational
    activity not attributable to the identified segments.

    The term "Interactive Media Solutions & Product Sales" is used to denote
    collectively the Company's operational activity related to interactive video
    and digital photography systems and applications as well as computer
    hardware and software sales. Allin Interactive provides specialized systems
    integration, consulting and operational services related to interactive
    video systems and applications and video streaming technology. Allin Digital
    provides specialized systems integration and technical support for digital
    photography systems and also sells ancillary products related to digital
    photography operations. Allin Network sells computer hardware and software.
    These operations are grouped together, and are differentiated from the
    Company's other technology consulting solutions areas, because of the
    specialized nature of the interactive technology and because the sales
    activity and strategies for these operations involve projects with
    significant equipment components in addition to consulting expertise.
    Segments related to these operations include Interactive Television Systems
    Integration & Consulting, Interactive Television Transactional Revenue &
    Management Fees, Digital Imaging Systems Integration & Ancillary Products
    and Computer Hardware and Software Sales.

    The Company conducted a sports marketing business until the sale of its
    subsidiary SportsWave in September 1998. Results of SportsWave operations
    are reflected as discontinued operations on the Company's Consolidated
    Statements of Operations and accordingly, sports marketing is not included
    in segment revenue or gross profit information.

                                      -11-
<PAGE>

    Measurement Method

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

    Revenue

    Information on revenue derived from external customers is as follows:

<TABLE>
<CAPTION>
                                                                           Revenue from External Customers
                                                         --------------------------------------------------------------------
                                                                  Three              Three            Nine           Nine
                                                                  Months             Months           Months         Months
                                                                   Ended              Ended           Ended          Ended
                                                                 September          September       September      September
(Dollars in thousands)                                           30, 1998            30, 1999        30, 1998       30, 1999
                                                         --------------------------------------------------------------------
<S>                                                      <C>                       <C>              <C>              <C>
Allin Consulting Solutions Areas:
Information Technology Infrastructure                              $  874             $1,047           $3,272         $ 3,180
Business Operations                                                 2,432              2,649            2,712           9,452
Electronic Business                                                    50                 48              117              78
Knowledge Management                                                  ---                181              ---             386
Other                                                                  20                 79               22             231
                                                         --------------------------------------------------------------------
  Total Allin Consulting                                           $3,376             $4,004           $6,123         $13,327

Interactive Media Solutions & Product Sales:
Interactive Television Systems Integration & Consulting            $    8             $1,139           $  119           2,177
Interactive Television Transactional Revenue &
 Management Fees                                                      755                427            2,320           1,453
Digital Imaging Systems Integration & Ancillary
 Products                                                             305                503              755           1,629
Computer Hardware & Software Sales                                     96                 45              251             294
                                                         --------------------------------------------------------------------
  Total Interactive Media Solutions & Product Sales                $1,164             $2,114           $3,445         $ 5,553
                                                         --------------------------------------------------------------------

  Consolidated Revenue from External Customers                     $4,540             $6,118           $9,568         $18,880
                                                         ====================================================================
</TABLE>

                                      -12-
<PAGE>

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

<TABLE>
<CAPTION>
                                                                             Revenue from Related Entities
                                                         ---------------------------------------------------------------------
                                                           Three Months      Three Months          Nine             Nine
                                                              Ended              Ended         Months Ended     Months Ended
                                                          September 30,      September 30,     September 30,    September 30,
                                                               1998              1999              1998             1999
(Dollars in thousands)                                   ----------------------------------------------------------------------
<S>                                                      <C>               <C>                <C>              <C>
Technology Consulting                                             $317                $ 45            $  767             $150
Interactive Television Systems Integration & Consulting            ---                  24               ---               64
Digital Imaging Systems Integration & Ancillary
 Products                                                          ---                 ---               ---                1
Computer Hardware & Software Sales                                   81                 49               341              202
                                                         ---------------------------------------------------------------------

  Total Revenue from Related Entities in Other Segments            $398               $118            $1,108             $417
                                                         =====================================================================
</TABLE>


    Gross Profit

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

<TABLE>
<CAPTION>
                                                                                        Gross Profit
                                                          -------------------------------------------------------------------------
                                                                 Three             Three              Nine              Nine
                                                              Months Ended      Months Ended      Months Ended      Months Ended
                                                              September 30,     September 30,     September 30,     September 30,
                                                                  1998              1999              1998              1999
(Dollars in thousands)                                   --------------------------------------------------------------------------
<S>                                                      <C>                 <C>                <C>               <C>
Allin Consulting Solutions Areas:
Information Technology Infrastructure                                $  363            $  492             $1,336           $1,439
Business Operations                                                     714               743                828            2,746
Electronic Business                                                      25                25                 52               40
Knowledge Management                                                    ---                70                ---              154
Other                                                                     8               (13)                12              (54)
                                                         ------------------------------------------------------------------------
  Total Allin Consulting                                             $1,110            $1,317             $2,228           $4,325

Interactive Media Solutions & Product Sales:
Interactive Television Systems Integration & Consulting              $    7            $  560             $   38           $  912
Interactive Television Transactional Revenue &
 Management Fees                                                        674               349              2,080            1,234
Digital Imaging Systems Integration & Ancillary
 Products                                                                51                82                 96              309
Computer Hardware & Software Sales                                       22                 5                 38               46
                                                         ------------------------------------------------------------------------
  Total Interactive Media Solutions & Product Sales                  $  754            $  996             $2,252           $2,501
                                                         ------------------------------------------------------------------------

  Consolidated Gross Profit                                          $1,864            $2,313             $4,480           $6,826
                                                         ========================================================================
</TABLE>

                                      -13-
<PAGE>

    Assets

    Information on total assets attributable to segments is as follows:

<TABLE>
<CAPTION>

(Dollars in thousands)                                                          Total Assets
As of September 30                                                          1998              1999
                                                                    -----------------------------------
<S>                                                                   <C>                <C>
Allin Consulting Solutions Areas:
Information Technology Infrastructure                                           $ 4,258         $ 7,306
Business Operations                                                              14,669          11,423
Electronic Business                                                                 191             242
Knowledge Management                                                                ---             122
Other                                                                               164             126
                                                                    -----------------------------------
  Total Allin Consulting                                                        $19,282         $19,219

Interactive Media Solutions & Product Sales:
Interactive Television Systems Integration & Consulting                         $    92         $ 1,314
Interactive Television Transactional Revenue & Management Fees                    2,746             813
Digital Imaging Systems Integration & Ancillary Products                            600           1,151
Computer Hardware & Software Sales                                                  114              65
                                                                    -----------------------------------
  Total Interactive Media Solutions & Product Sales                             $ 3,552         $ 3,343

Corporate & Other                                                                 8,199           2,622
                                                                    -----------------------------------

  Consolidated Total Assets                                                     $31,033         $25,184
                                                                    ===================================
</TABLE>


6.  Sale of Celebrity Ship Interactive Television Systems

    During August 1999, Allin Interactive entered an agreement with Celebrity
    Cruises, Inc. ("Celebrity") providing for Celebrity's purchase for
    approximately $2,400,000 of the four interactive television systems
    previously owned by Allin Interactive and operated on Celebrity ships. Sale
    proceeds were received by Allin Interactive subsequent to satisfactory joint
    inspections of the systems by Allin Interactive and Celebrity. Two ship
    system sales were completed in each of August and September 1999.

    Allin Interactive and Celebrity also entered related agreements providing
    for operation and maintenance of the interactive systems to be sold. Upon
    satisfactory joint inspection of, and Celebrity's payment for, each
    interactive system, operational responsibility for that system shifted from
    Allin Interactive to Celebrity. Transactional revenue from pay-per-view
    movies and video gaming was terminated for Allin Interactive after the
    transfer of operational responsibility for each ship to Celebrity.
    Similarly, management fees were terminated after the transfer of operational
    responsibility for each ship. Celebrity assumed responsibility for
    operational staffing for each interactive system upon transfer of
    operational responsibility. The agreements between Allin Interactive and
    Celebrity also provided for transfer of operational responsibility for the
    interactive television system aboard the M.V. Mercury, which had previously
    been owned by Celebrity, but which had been operated by Allin Interactive on
    financial terms identical to the other systems operated on Celebrity
    vessels. Operational responsibility for the M.V. Mercury system transferred
    in September 1999 upon Celebrity's notice that it was prepared to assume
    operations. Allin Interactive lost transactional revenue and management fees
    subsequent to the transfer of operational responsibility for the M.V.
    Mercury system.

    Under the new maintenance agreement between Allin Interactive and Celebrity,
    Allin Interactive will provide ongoing technical support for the five
    interactive television systems on Celebrity ships for a minimum period of
    six months following completion of all system sales and transfers of
    operational responsibility. The minimum maintenance period will end March
    17, 2000. Allin Interactive earns fixed monthly maintenance fees during

                                      -14-
<PAGE>

    the initial six-month maintenance period. For services provided in excess of
    a threshold number of hours during this period, Allin Interactive will
    charge additional hourly fees. Revenue for the four interactive television
    system sales will be recognized over the minimum period of the maintenance
    agreement concurrent with Allin Interactive's ongoing technical maintenance
    obligation.

7.  Subsequent Events

    Restricted Stock Forfeiture

    During October 1999, a total of 200 restricted shares of the Company's
    common stock were forfeited due to their holders' termination of employment.
    The forfeited restricted stock reverted to treasury stock, which the Company
    has recorded at cost.

                                      -15-
<PAGE>

Item 2.

                               Allin Corporation

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


     The following discussion and analysis by management provides information
with respect to the Company's financial condition and results of operations for
the three- and nine-month periods ended September 30, 1999 and 1998.  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, 1998,
as well as the information discussed herein under "Special Note on Forward
Looking Statements".  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," 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, the Company's
limited operating history with its recent acquisitions; uncertainty as to the
Company's future profitability; the Company's history of net losses, accumulated
deficit, and liquidity; the risks inherent in development of new products and
markets; certain customers' rights to terminate operations; competition in the
Company's existing and potential future lines of business; risks associated with
the Company's management of growth; dependence on key personnel; rapidly
changing technology and a rapidly evolving market for interactive applications;
and fluctuations in operating results, as well as other risks and uncertainties.
See "Special Note on Forward-Looking Statements" below.

Overview of Organization, Products & Markets

     Allin Corporation, is a solutions-oriented information technology
consulting company that specializes in the development and deployment of
Microsoft-based technology solutions through five solutions practices:
Information Technology Infrastructure, Business Operations, Knowledge
Management, Electronic Business and Interactive Media Solutions.  The Company
delivers these services through the trade-names Allin Consulting, Allin
Interactive and Allin Digital Imaging.  In both 1998 and 1999, the Company was a
Pittsburgh Technology 50 award recipient in recognition of its high rate of
revenue growth among technology-based businesses in the Pittsburgh region.

     The Company was organized under the laws of the State of Delaware in July
1996 to act as a holding company for operating subsidiaries which focus on
particular aspects of the Company's business.  As of September 30, 1999, the
organizational legal structure consists of Allin Corporation, five wholly owned
operating subsidiaries and one wholly owned non-operating subsidiary.  The
operating subsidiaries are Allin Corporation of California ("Allin Consulting-
California"), Allin Consulting of Pennsylvania, Inc. ("Allin Consulting-
Pennsylvania"), Allin Interactive Corporation ("Allin Interactive"), Allin
Digital Imaging Corp. ("Allin Digital Imaging") and Allin Network Products, Inc.
("Allin Network").  Allin Holdings Corporation ("Allin Holdings") is a non-
operating subsidiary providing treasury management services to the Company.
Allin Consulting-California and Allin Network are California corporations, Allin
Consulting-Pennsylvania is a Pennsylvania corporation and Allin Interactive,
Allin Digital and Allin Holdings are Delaware corporations.

     Discussion and analysis of results of operations follow the Company's
operational model and focus on the Company's solutions areas.  Information
technology infrastructure, business operations, knowledge management and
electronic business solutions consulting are performed by Allin Consulting-
California and Allin Consulting-Pennsylvania.  The term "Allin Consulting" as
used throughout this Report on Form 10-Q refers collectively to the two
subsidiaries, Allin Consulting-California and Allin Consulting-Pennsylvania.
Financial information is presented for these subsidiaries collectively due to
the similarity of their service offerings.  Interactive media

                                      -16-
<PAGE>

solutions services are performed by Allin Interactive and Allin Digital. Allin
Interactive provides specialized systems integration, consulting and operational
services related to interactive video systems and applications. Allin Digital
provides specialized systems integration and technical support for digital
photography systems and also sells ancillary products related to digital
photography operations. Interactive media solutions activity is discussed and
analyzed separately from the Company's other technology consulting solutions
areas because of the specialized nature of the interactive technology and
because the sales activity and strategies for these operations involve projects
with significant equipment components in addition to consulting expertise. Allin
Network's computer hardware and software sales, which are not material to the
Company as a whole, are grouped with Interactive Media Solutions for financial
presentation. The term "Interactive Media Solutions and product sales" is used
to denote collectively the Company's operational activity related to interactive
video and digital photography services and applications as well as computer
hardware and software sales.

     Allin Consulting utilizes a customer-oriented approach in its technology
consulting operations.  Management has structured Allin Consulting operations
into solutions areas intended to meet customer needs for professional technology
services in the following areas:

 .  The Information Technology Infrastructure solutions area focuses on the
   underlying platforms and operating systems necessary to take advantage of
   today's technology capabilities and systems, including operating systems and
   general platform principles such as total cost of ownership and thin-client
   computing. Services include design, configuration, implementation and support
   of customer operating systems, management and maintenance of database
   platforms, messaging systems, information system security solutions, help
   desk support and application services such as message queing and transaction
   servers.

 .  The Business Operations solutions area focuses on an organization's core
   information gathering processes including sales, finance, administration,
   logistics and manufacturing. Business Operations solutions may involve custom
   development or package implementation to improve operational efficiency or
   information flow.

 .  Knowledge Management solutions focus on the flow and processing of
   information within an organization. These solutions typically include data
   warehousing or work flow systems requiring expertise in business processes as
   well as the implementation of technology. These solutions will typically
   interface with the business operation transaction systems to access
   information from the captured data for wide accessibility within customer
   organizations.

 .  The Electronic Business solutions area delivers systems that enable an
   organization to represent itself and its data electronically. Electronic
   Business solutions help clients improve information exchange with their
   customers, suppliers and other third parties. Electronic Business solutions
   emphasize internet- and intranet-based services including company portals,
   extranet-based value chains and electronic commerce sites.

     The customer-oriented strategic model for Allin Consulting's operations,
with Information Technology Infrastructure, Business Operations, Knowledge
Management and Electronic Business Solutions areas, is intentionally similar to
Microsoft's product and service groupings.  Management believes this structural
focus will foster more focused communication and interaction with the Microsoft
organization and will promote the continued development of technological
expertise within the Company focused on products and applications that closely
correspond to particular disciplines of the Allin Consulting organization.
However, there can be no assurance that the strategic model will lead to
increased revenue or profitability in the future.  Management intends to enhance
the Microsoft focus in Allin Consulting's operations through continued training
and certification of its consultants and through joint marketing efforts with
Microsoft.  Both of the Allin Consulting operating entities are authorized as
Microsoft Solutions Provider Partners.  In March 1999, Allin Consulting-
California was among four firms nominated as finalists for Microsoft Solutions
Provider Partner of the Year in Northern California from among approximately
fifty-five eligible firms.  The Partner of the Year award honors those firms
whose work and achievements have demonstrated excellence in Microsoft-oriented
consulting services.  Allin Consulting is also a member of Microsoft's
Infrastructure Partner Advisory Council.  Council members are a select group of
Microsoft Solution Providers with a successful history of implementing Microsoft
infrastructure technology and who participate in the development of Microsoft's
message and focus within its infrastructure products group.  Management believes
Allin Consulting's established relationship with Microsoft as a Solution
Provider Partner and the quality of its services, as recognized by Microsoft,
will position the Company to benefit from Microsoft's expected growth in
infrastructure and interactive media products since Microsoft has historically
relied extensively on third parties for custom development and integration
services.  No assurance can be given, however, that any

                                      -17-
<PAGE>

growth or change in Microsoft's product sales will result in growth in the
Company's revenue or improvements to its financial condition or results of
operations.

     The Information Technology Infrastructure solutions area services for the
client/server environment maintain a focus on Microsoft BackOffice technology
including NT Server, SQL Server, SNA Server, Systems Management Server, Exchange
Server and Internet Information Server.  This solutions area also creates
network solutions that integrate Unix, Lotus, Oracle, Novell and IBM mainframe
systems with Windows NT-based networks.  Electronic Business performs solutions
services for web applications using Visual InterDev and ASP with SQL Server and
performs web-based development services using Java, Perl, CGI and HTML.  Allin
Consulting is a Microsoft certified provider of custom application development
services utilizing Access, Visual C++, Visual Basic, Visual J++, SQL Server,
Outlook, Excel and Visual Fox Pro.  Business Operations utilizes this expertise
in the development of solutions for customers' core information gathering
processes.

     Allin Consulting's Business Operations solutions area also provides
consulting and custom development for mainframe systems, including application
development, data base development and administration, and data communications
development for IBM proprietary technology, intended to meet its clients' legacy
system needs for special or deadline sensitive projects, peak and backlogged
workloads, and specialized skill applications.  Allin Consulting provides
technical solutions including custom development for IBM MVS proprietary
environments and mainframe development and support for Cobol, DB2, IMS DB/DC and
CICS applications.

     Business Operations also provides specialized technology consulting
services for the banking industry, including conversions for mergers and
acquisitions, software product implementation, systems modification and support.
The banking industry services are focused on development, implementation and
management of Hogan IBA software applications, which are specialized products
for the banking industry.  Allin Consulting is expanding its bank consulting
services to specialize in applications for deposits, lending, back office
operations, product/service offerings and delivery/alternate delivery.  Allin
Consulting is able to support current technology systems devoted to automatic
teller machines, call centers, interactive video kiosks, telephone and home
banking operations.

     Allin Consulting currently generates revenue from fees under its contracts
for technology consulting services for third party clients.  A significant
majority of services have historically been provided on a time-oriented rather
than fixed-price basis.  Allin Consulting bases its operations in offices in
Pittsburgh, Pennsylvania, San Jose and Oakland, California and Cleveland, Ohio.

     The Company's Interactive Media solutions area encompasses a range of
specialized systems integration, consulting and other services focused on
interactive streaming of video and digital imaging systems and applications.
Allin Interactive currently focuses its marketing efforts on interactive
television system sales and systems integration projects and consulting services
specializing in interactive media design and applications.  Allin Interactive is
currently targeting its sales and marketing efforts on the healthcare, education
and cruise industries.

     The Company believes demand for interactive services will increase in the
healthcare industry as hospitals are driven to market better services and state
of the art systems and to invest in labor saving tools such as interactive
systems to improve the efficiency of their staffs by facilitating more efficient
flow of information and order processing and a more flexible training process.
The Company believes that an education industry market is emerging for
interactive systems that can facilitate wide area networking connections and
Internet and Intranet accessibility and that utilize on-demand educational video
content that is both digital and analog based.  The Company believes that the
interactive television applications Allin Interactive has developed and
implemented in the cruise and healthcare markets are well suited for application
to the education industry.  There can be no assurance, however, that Allin
Interactive will be successful in selling interactive television systems and
services to the healthcare and education industries during 1999 and beyond or
that any business obtained from these industries will result in the desired
improvements to the Company's financial condition or results of operations.

     The majority of historical activity for Allin Interactive's interactive
television and systems integration services has been concentrated in the cruise
industry.  Services provided for the cruise industry remained the dominant
operating activity during the third quarter of 1999.  Management believes that
the newer, larger ships that are being developed within the cruise industry will
require a heightened level of automation to effectively service

                                      -18-
<PAGE>

the larger number of cruise passengers. Allin Interactive's historical
operations within the cruise industry have resulted in the development of many
applications that could be readily implemented on new ships. In May 1999, Allin
Interactive entered a $1.9 million contract with Royal Caribbean Cruises Ltd.
("RCCL") to develop and install an interactive television system for RCCL's new
Eagle Class ship Voyager of the Seas. Allin Interactive is currently performing
services under this contract. The new system will use web technology to enable
RCCL passengers to use the cabin televisions to access a variety of services
such as previewing and reserving shore excursions, watching on-demand movies and
informational videos, ordering room service and reviewing shipboard activities.
It is anticipated that the Voyager of the Seas will be the world's largest
cruise ship upon its introduction to service in late November 1999. There can be
no assurance, however, that Allin Interactive will obtain additional orders for
new interactive systems for the cruise industry in the future or that any sales
made will result in the desired improvements to the Company's financial
condition or results of operations.

     During August 1999, Allin Interactive entered an agreement with Celebrity
Cruises, Inc. ("Celebrity") providing for Celebrity's purchase, for
approximately $2.4 million, of the four interactive television systems owned by
Allin Interactive and previously operated on Celebrity ships.  The system sales
were effective subsequent to satisfactory joint inspections of the systems
conducted by Allin Interactive and Celebrity in August and September 1999.
Operational responsibility for the M.V. Mercury system, previously owned by
Celebrity but operated by the Company under terms similar to the other Celebrity
ship systems, transferred in September 1999 upon Celebrity's notice that it was
prepared to assume operations. Under a related maintenance agreement between the
parties, Allin Interactive provides ongoing technical support for the
interactive television systems on the five Celebrity ship systems and earns
maintenance fees through March 17, 2000. Celebrity has the option to renew the
maintenance agreement on a month-to-month basis for up to an additional eighteen
months thereafter. Revenue recognition for the system sales will be prorated
over the minimum period of the related maintenance obligation. Transactional
revenue from pay-per-view movies and video gaming and management fees terminated
upon transfer of operational responsibility for each system to Celebrity.
Celebrity assumed responsibility for operational staffing for the interactive
systems. During the nine months ended September 30, 1999, transactional revenue
and management fees related to the Celebrity ships represented approximately
4.5% and 11.3% of the Company's consolidated revenue and gross profit,
respectively.

     During the first quarter of 1998, the Company implemented a new strategy
for its digital photography operations, providing systems integration services
related to digital photography systems for professional and commercial
photography businesses.  Allin Digital also provides technical support and
ancillary product sales for digital photography.  Allin Digital's systems
integration projects have to date been conducted on a fixed-price basis.  Allin
Digital's growth is dependent on continued identification and effective
marketing to new customers, although there can be no assurance that increases in
revenue will continue to be realized.  Allin Digital has been effective to date
at generating ancillary sales from the majority of customers for which it has
performed systems integration services.

     The hardware and software configurations Allin Digital provides for systems
integration customers utilize, for the most part, readily available "off the
shelf" components purchased from third parties.  However, Allin Digital released
a proprietary portrait viewing and selling system in August 1998 named Portraits
Online.  This product, sold as a digital system add-on, allows the portrait
studio's customers to view and order their portraits on a touchscreen monitor
immediately following their portrait session.  In addition, the system gives the
consumer the ability to access and order their images via the Portraits Online
Internet site.  During the fourth quarter of 1999, Allin Digital is introducing
a Portraits Online service for photographic laboratories which will provide
their clients with online sales and image archival capabilities.  The Company
believes the Portraits Online system offers it a competitive advantage over
competing integration services because of the functionality and sales
opportunity advantages it is expected to present to potential customers.  There
can be no assurance, however, that the Company will be successful in continuing
to generate increased sales because of its Portraits Online services or that
sales obtained will result in the desired improvements to the Company's
financial condition or results of operations.  There can also be no assurance
that competitors will not develop similar or superior products which may
adversely affect Allin Digital's sales efforts.

     Allin Network's historical operations for computer product sales have been
predominantly in support of related companies.  Third party business has been
primarily obtained in connection with Allin Consulting engagements for
consulting services.  Allin Network's product offerings include most computer-
related hardware

                                      -19-
<PAGE>

and software available in the marketplace. It has historically maintained very
little in inventory, relying on product availability and prompt delivery from
its suppliers.

     Allin Interactive's interactive television operations are conducted
primarily through technical and administrative personnel based in its Ft.
Lauderdale, Florida office.  It is expected that technical personnel based with
the Florida operations will be primarily responsible for any interactive system
installations Allin Interactive is successful in obtaining during the remainder
of 1999.  The Company recently opened an office in Scottsdale, Arizona to
further support the operations of the Interactive Media solutions area.  Allin
Digital's operations are managed from the Company's Pittsburgh, Pennsylvania
office while installations are performed at the respective clients' locations.
Technical resources necessary for installations and technical support are
obtained by utilizing Allin Interactive personnel and independent contractors.
Hardware and software sales operations are conducted from the Company's
Pittsburgh, Pennsylvania office.

Results of Operations:
---------------------

Three Months Ended September 30, 1999 Compared to Three Months Ended September
30, 1998

     The September 1998 sale of SportsWave, Inc. ("SportsWave") has been treated
as the disposal of a segment since SportsWave included all of the Company's
sports marketing activities.  The results of operations of SportsWave for the
three months ended September 30, 1998 and the gain recognized on the disposal
are presented after loss from continuing operations in the Company's
Consolidated Statements of Operations.  Information presented herein concerning
revenue, cost of sales, gross profit, and selling, general and administrative
expenses excludes the operations of SportsWave.

Revenue

     The Company's total revenue for the three months ended September 30, 1999
was $6,118,000, an increase from total revenue of $4,540,000 for the three
months ended September 30, 1998.  The increase of $1,578,000, or 35%, is
attributable to substantial growth in Interactive Media solutions area revenue
and an increase in Allin Consulting revenue.

     Allin Consulting recognized revenue, after elimination of intercompany
sales, of $4,004,000 during the three months ended September 30, 1999, including
$2,649,000 for Business Operations, $1,047,000 for Information Technology
Infrastructure, $181,000 for Knowledge Management, $48,000 for Electronic
Business and $79,000 in other revenue.  Comparable third quarter 1998 revenue
was $3,376,000 in total, including $2,432,000 from Business Operations, $874,000
from Information Technology Infrastructure, $50,000 from Electronic Business and
$20,000 in other revenue.

     The increase in Business Operations revenue of $217,000 is attributable to
the acquisition of Allin Consulting-Pennsylvania.  Allin Consulting-Pennsylvania
was acquired in August 1998 resulting in the inclusion of only two months of
revenue in the third quarter of 1998, as compared to three months of revenue in
the 1999 period.  The specialized bank consulting operations of Allin
Consulting-Pennsylvania are predominantly included in the Business Operations
solutions area, as well as a significant portion of Allin Consulting-
Pennsylvania's Pittsburgh consulting operations. While revenue growth is noted
in comparison to the prior year, Business Operations revenue declined from the
second to the third quarters of 1999 by $503,000.  The reduction has resulted
from a slowdown in the demand for staffing services related to mainframe
computer systems and for Allin Consulting's specialized bank consulting
operations.  Management believes the decline in demand is due principally to a
significant number of clients postponing new projects and developments relating
to their technology systems until the final impact of the Year 2000 computer
problem is realized.  Management expects further declines in Business Operations
revenue over the remainder of 1999.  Management believes, however, that once
Year 2000 problems, if any, occur and are corrected by clients, market
conditions will result in increased demand for technology consulting services as
previously postponed projects and developments are undertaken.  There can be no
assurance, however, that demand for technology consulting services will increase
in the future, or that Allin Consulting's Business Operations revenue will
return to or exceed the levels experienced by the Company in previous calendar
quarters.

                                      -20-
<PAGE>

     The increase in Information Technology Infrastructure revenue of $173,000
in the 1999 period is attributable to growth in Allin Consulting-Pennsylvania's
Information Technology Infrastructure solutions area. Allin Consulting-
Pennsylvania is strategically focusing its marketing efforts on growing diverse
solutions-oriented project revenue, which the Company's management believes will
generally offer a higher gross profit potential than the staffing services model
which represented the majority of Allin Consulting-Pennsylvania's operations at
acquisition.  There can be no assurance, however, that the Company will realize
increases in solutions oriented revenue in the Information Technology
Infrastructure solutions area in the future, or that any revenue increases
realized will result in the desired improvements to gross profit.  The
Information Technology Infrastructure solutions area experienced a decline in
revenue of $73,000 as compared to the second quarter of 1999.  Management
believes that the principal reason for the decline is the same as for Business
Operations, clients postponing new technology initiatives until after the impact
of the Year 2000 computer problem is realized.

     The new marketing strategy Allin Consulting implemented in 1999 also seeks
to develop and grow a solutions-oriented practice in the Knowledge Management
solutions area.  Knowledge Management consulting operations commenced in the
second quarter of 1999.  Allin Consulting recognized revenue of $181,000 during
the three months ended September 30, 1999 for this solutions area.  There can be
no assurance, however, that Knowledge Management revenue will continue to be
realized at levels equal to or greater than that realized during the third
quarter of 1999.

     Electronic business is a developing area of technology.  Allin Consulting
is committed to further development of this solutions area.  Allin Consulting's
marketing strategy seeks to develop and grow a solutions oriented Electronic
Business practice, although there can be no assurance that the Company will be
successful in developing this solutions area or that the desired improvements in
revenue and gross profit will be realized.  The Electronic Business solutions
area recognized revenue of $48,000 during the three months ended September 30,
1999 as compared to revenue of $50,000 during the three months ended September
30, 1998.

     Allin Consulting's expertise with Microsoft operating systems and software
is viewed by the Company's management as key to restoring previously obtained
levels of revenue and subsequently obtaining additional growth in its technology
consulting business.  Microsoft will be introducing a number of new products in
2000, such as Windows 2000, which Management believes will offer opportunities
for growth in consulting services.  The Company intends to pursue opportunities
for technology consulting services during the remainder of 1999 and in 2000
through increased sales and marketing efforts, although additional acquisitions
of existing businesses will also be considered.  There can be no assurance,
however, that the Company will be able to identify suitable and available
acquisition opportunities, reach agreement with any identified candidate, or
obtain the capital necessary for additional acquisitions.  There also can be no
assurance that the Company will be successful in maintaining or expanding Allin
Consulting's level of revenue or gross profit.

     Revenue from Interactive Media solutions and product sales was $2,114,000
for the three months ended September 30, 1999 as compared to $1,164,000 for the
three months ended September 30, 1998.  The increase in revenue of $950,000, or
82%, is primarily attributable to substantial revenue growth in interactive
television systems integration and consulting services.

     Allin Interactive recorded revenue of $1,566,000 during the three months
ended September 30, 1999, including $1,139,000 for interactive television
systems integration and consulting services and $427,000 for shipboard
transactional revenue and management fees.  Comparable third quarter 1998
revenue was $763,000 in total, including $8,000 for interactive television
systems integration services and $755,000 for shipboard transactional revenue
and management fees.  The increase in interactive television systems integration
and consulting revenue of $1,131,000 is attributable to ongoing development and
installation of the interactive television system for the RCCL ship Voyager of
the Seas and Allin Interactive's sale of four interactive television systems
previously operated on Celebrity ships.  Revenue from the Celebrity system sales
is being recognized over the life of an associated maintenance obligation for
the systems, which extends through March 17, 2000.  The decline between periods
in transactional revenue and management fees of $328,000 is attributable to a
reduction in 1999 management fees for systems operated on Celebrity ships and
the cessation of operations on the Norwegian Cruise Lines ("NCL") ship Norwegian
Dream in April 1999.  Transactional revenue and management fees will decline
significantly after the third quarter of 1999.  Transactional revenue will be
earned from only two systems operated on Carnival ships.  Management fees will
cease to be a source of revenue for Allin Interactive as Carnival

                                      -21-
<PAGE>

discontinued payment of management fees after August 1999. During the remainder
of 1999, sale and maintenance fee revenue to be recognized is expected to exceed
the levels of transactional revenue and management fees recognized immediately
prior to the Celebrity system sales. There can be no assurance, however, that
revenue will continue to be realized at similar or higher levels in 2000 after
the completion of recognition of the system sale revenue over the minimum period
of the maintenance obligation.

     Allin Digital recognized revenue of $503,000 during the three months ended
September 30, 1999 for digital imaging systems integration services and
ancillary product sales as compared to $305,000 for the three months ended
September 30, 1998.  The increase in revenue from digital photography operations
of $198,000 is attributable to Allin Digital's continued operations under the
systems integration strategy implemented in 1998 and the introduction of the
Portraits Online internet-based digital imaging sales and archival product
between the periods.  There can be no assurance, however, that either the
current revenue level or increases in revenue will continue to be realized.

     Allin Network recognized $45,000 in revenue for computer hardware and
software sales in the third quarter of 1999 as compared to $96,000 during the
third quarter of 1998.  Allin Network's third party revenue has been
historically obtained in connection with Allin Consulting technology consulting
projects.  Since many of Allin Consulting's clients have postponed new
technology projects for the remainder of 1999, Allin Network sales have also
been negatively affected.

Cost of Sales and Gross Profit

     The Company recognized cost of sales of $3,805,000 during the three months
ended September 30, 1999 as compared to $2,676,000 during the three months ended
September 30, 1998.  The increase in cost of sales of $1,129,000 was
attributable to the substantial increase in interactive television systems
integration and consulting activity and the increase in cost of sales for
technology consulting operations corresponding to the growth in revenue between
the periods.  Gross profit of $2,313,000 was recognized during the third quarter
of 1999 as compared to $1,864,000 during the third quarter of 1998, an increase
of $449,000, or 24%.  Again, the increase in gross profit is mainly attributable
to the increases in revenue realized in interactive television systems
integration and consulting and technology consulting operations.  The percentage
increase in gross profit between the periods was lower than that of revenue due
to a decline in interactive television transactional revenue and management
fees, which have low related cost of sales.  The Company's gross profit for the
third quarter of 1999 increased by 5% as compared to the second quarter of 1999
despite an 8% decline in revenue between the periods as a result of the
improving gross profit in Interactive Media Solutions.

     Allin Consulting recorded a total of $2,687,000 for cost of sales during
the three months ended September 30, 1999, including $1,906,000 for Business
Operations, $555,000 for Information Technology Infrastructure, $111,000 for
Knowledge Management, $23,000 for Electronic Business and $92,000 for other cost
of sales.  Comparable third quarter 1998 cost of sales was $2,266,000 in total,
including $1,718,000 for Business Operations, $511,000 for Information
Technology Infrastructure, $25,000 for Electronic Business and $12,000 for other
cost of sales.  Increases or decreases in cost of sales are also attributable to
the factors that resulted in changes in revenue for these services, primarily
the inclusion of Allin Consulting-Pennsylvania for all of the third quarter of
1999 and increased marketing emphasis on developing solutions-oriented
practices.  Gross profit for the three months ended September 30, 1999 was
$1,317,000, including $743,000 for Business Operations, $492,000 for Information
Technology Infrastructure, $70,000 for Knowledge Management, $25,000 for
Electronic Business and a gross loss of $13,000 on other services.  Comparable
third quarter 1998 gross profit was $1,110,000 in total, including $714,000 for
Business Operations, $363,000 for Information Technology Infrastructure, $25,000
for Electronic Business and $8,000 for other services.  Again, the increase in
consulting revenue due to the inclusion of Allin Consulting for the full third
quarter in 1999 is principally responsible for the increase in gross profit.
The gross profit recognized by the Business Operations solutions area
represented a decline of $141,000 between the second and third quarters of 1999
due to a decline in demand for mainframe system and bank consulting due to
clients postponing technology projects until the impact of the year 2000
computer problem is realized.  Management expects Business Operations gross
profit will decline further during the remainder of 1999, but believes demand
for these services should increase in 2000 after the Year 2000 impact is
realized, which could result in increases to Business Operations gross profit.
No assurance can be given, however, that gross profit realized by Business
Operations will return to or exceed levels previously realized by the Company.

                                      -22-
<PAGE>

     Cost of sales for Interactive Media solutions and product sales was
$1,118,000 in total for the third quarter of 1999, as compared with $410,000 for
the third quarter of 1998. The increase in cost of sales resulted from the
substantial increases in interactive television systems integration and
consulting services and digital imaging systems integration and ancillary
product sales. Gross profit on interactive media solutions and product sales was
$996,000 for the third quarter of 1999, as compared with $754,000 for the third
quarter of 1998. The increase in gross profit is attributable primarily to the
increase in revenue realized from interactive television systems integration and
consulting, partially offset by a decline in gross profit realized from
interactive transactional revenue and management fees.

     Allin Interactive recorded a total of $657,000 for cost of sales during the
three months ended September 30, 1999, including $579,000 related to interactive
television systems integration and consulting services and $78,000 related to
pay-per-view movies.  Comparable third quarter 1998 cost of sales was $82,000,
including $1,000 for systems integration services and $81,000 for pay-per-view
movies.  The increase in cost of sales for interactive television systems
integration and consulting is attributable to the inclusion of activity related
to the Voyager of the Seas project and the Celebrity ship interactive system
sales in the third quarter of 1999.  Gross profit recognized by Allin
Interactive during the three months ended September 30, 1999 was $909,000,
including $560,000 from interactive television systems integration and
consulting services and $349,000 from shipboard transactional revenue and
management fees.  Comparable third quarter 1998 gross profit amounts were
$681,000 in total, including $7,000 from systems integration and $674,000 from
shipboard transactional revenue and management fees.  The $228,000 increase in
gross profit in the 1999 period is attributable to the substantially increased
scope of integration and consulting activity for the Voyager of the Seas project
and the Celebrity system sales.  Systems integration and consulting gross profit
increased by $553,000 over the third quarter of 1998, when there was very little
activity of this type.  The increase more than offset the gross profit decrease
of $325,000 for interactive television transactional revenue and management
fees.  The decline is attributable to the reduction in the number of operating
ship systems and the reduction in management fees for the Celebrity ship
interactive systems in 1999.  Since there are no cost of sales associated with
management fees, the reduction fully impacts gross profit.  Gross profit from
transactional revenue and management fees will decline further following the
third quarter of 1999 as these sources of revenue will no longer be available
for the interactive systems transferred to Celebrity.  Management expects that
gross profit recognized currently and in the next two quarters on the sale of
the Celebrity systems and maintenance fees to be earned over this period will
exceed the gross profit earned from transactional revenue and management fees
related to the systems immediately prior to the transfer.  There can be no
assurance, however, that gross profit will continue to be realized at similar or
higher levels in 2000 after the completion of recognition of the system sale
gross profit over the minimum period of the maintenance obligation.
Additionally, management fees related to the two interactive systems still in
operation under the owner-operator model have been discontinued by Carnival
following August 1999.

     The growth in interactive television systems integration and consulting
projects corresponds to a strategic shift away from operation of interactive
television systems on an owner-operator model.  Since systems integration
projects typically include a significant equipment component, they carry a lower
margin than the transactional revenue and management fees derived under the
owner-operator model.  The strategic change has resulted in a shift of activity
away from transactional revenue and management fees, with a resultant impact on
gross profit percentage.  Management believes systems integration and consulting
services in interactive media offer greater growth potential than the owner-
operator model and do not require the substantial capital commitments of the
owner-operator model.  There can be no assurance, however, that the Company will
continue to obtain growth in interactive media systems integration and
consulting services.

     Allin Digital recognized cost of sales on its digital imaging operations of
$421,000 for the three months ended September 30, 1999 as compared with $254,000
for the three months ended September 30, 1998.  Allin Digital recognized gross
profit of $82,000 for the third quarter of 1999 as compared with $51,000 for the
third quarter of 1998.  The introduction of the Portraits Online internet-based
image sales and archival product between the periods has contributed to the
overall increase in profitability of Allin Digital's operations.  Management
believes Portraits Online offers Allin Digital a competitive advantage over
other integrators and the opportunity for increased margin where Portraits
Online is included in a system installation.  There can be no assurance,
however, that competitors will not introduce similar or superior products or
systems, which would have an adverse effect on Allin Digital's operations.

                                      -23-
<PAGE>

     Allin Network recognized cost of sales of $40,000 on computer hardware and
software sales during the third quarter of 1999 as compared with $74,000 during
the third quarter of 1998.  Gross profit decreased from $22,000 to $5,000.  The
decrease is attributable to the inclusion of several large sales in connection
with Allin Consulting-California consulting engagements in the 1998 period.

Selling, General & Administrative Expenses

     The Company recorded $2,771,000 in selling, general & administrative
expenses during the three months ended September 30, 1999, as compared with
$5,452,000 during the three months ended September 30, 1998, a decrease of
$2,681,000. The decrease in expenses is primarily attributable to the inclusion
of a loss of $2,765,000 for the impairment of certain interactive television
system equipment in the third quarter of 1998. The impairment loss had been
recorded to write down to salvage value equipment associated with five
interactive television systems which had been discontinued or not completed, as
well as three systems where management viewed continued long-term operation to
be in jeopardy. Net of the impairment loss, selling, general & administrative
expenses increased $84,000 between the periods. This is attributable to the 1999
addition of solution area operational and sales personnel to the Company's
technology consulting businesses to facilitate the move toward a solutions-
oriented project focus and to facilitate the development of the Electronic
Business and Knowledge Management solutions areas, offset partially by
reductions in depreciation and amortization.

     Depreciation and amortization were $730,000 during the three months ended
September 30, 1999 as compared to $854,000 during the three months ended
September 30, 1998.  The decline is due to August 1998 writedowns in capitalized
interactive television system assets, the majority of capitalized software
development costs reaching full amortization in 1998, and a significant
intangible asset value for an employment agreement recorded in connection with
the 1996 acquisition of Allin Consulting-California reaching full amortization
in 1998.

     Research and development expense included in selling, general &
administrative expenses was $27,000 during the third quarter of 1999, as
compared to $78,000 during the third quarter of 1998.  Research and development
activity during the third quarter of 1999 related to Allin Interactive's
development activities associated with On Command Corporation's ("On Command")
equipment platform, which is newly utilized by the Company for interactive
systems in 1999, and Allin Digital's development of a Portraits Online internet-
based product targeted for photographic laboratories.

Loss from Continuing Operations

     The Company's loss from continuing operations decreased by $3,130,000 from
$3,653,000 for the three months ended September 30, 1998 to $523,000 for the
three months ended September 30, 1999.  The $3,130,000 reduction in loss from
continuing operations is attributable to the inclusion of the significant
impairment loss of $2,765,000 on interactive television system equipment in the
third quarter of 1998 and the increase in gross profit of $449,000 due to growth
in Interactive Media solutions and technology consulting revenue.

Discontinued Operations

     The Company recorded a gain on the sale of SportsWave of $1,499,000 during
the third quarter of 1998. This was partially offset by a loss of $64,000 from
the operation of the discontinued sports marketing business during that quarter.

Net Loss

     The Company's net loss for the three months ended September 30, 1999 was
$523,000, as compared to $2,218,000 for the three months ended September 30,
1998.  The decrease in net loss resulted primarily from the inclusion of the
impairment loss for interactive television system assets in the third quarter of
1998 and an the increase in gross profit in the 1999 period as noted above.

                                      -24-
<PAGE>

Results of Operations:
---------------------

Nine Months Ended September 30, 1999 Compared to Nine Months Ended September 30,
1998

     The September 1998 sale of SportsWave has been treated as the disposal of a
segment since SportsWave included all of the Company's sports marketing
activities.  The results of operations of SportsWave for the nine months ended
September 30, 1998 and adjustments to the gain on disposal recognized during the
nine months ended September 30, 1999 are presented after loss from continuing
operations in the Company's Consolidated Statements of Operations.  Information
presented herein concerning revenue, cost of sales, gross profit, and selling,
general and administrative expenses excludes the operations of SportsWave.

Revenue

     The Company's total revenue for the nine months ended September 30, 1999
was $18,880,000, an increase from total revenue of $9,568,000 for the nine
months ended September 30, 1998.  The increase of $9,312,000, or 97%, is
attributable primarily to a $7,204,000, or 118%, increase in revenue for Allin
Consulting's operations.  The most significant factor in the increase is the
inclusion of revenue from Allin Consulting-Pennsylvania in the full 1999 period,
whereas only two months of revenue from Allin Consulting-Pennsylvania were
included in the 1998 period.  Another contributing factor to the overall revenue
increase is the substantial revenue growth realized for Interactive Media
solutions.

     Allin Consulting recognized revenue, after elimination of intercompany
sales, of $13,327,000 during the nine months ended September 30, 1999, including
$9,452,000 for Business Operations, $3,180,000 for Information Technology
Infrastructure, $386,000 for Knowledge Management, $78,000 for Electronic
Business and $231,000 in other revenue.  Comparable nine-month period 1998
revenue was $6,123,000 in total, including $2,712,000 from Business Operations,
$3,272,000 from Information Technology Infrastructure, $117,000 from Electronic
Business and $22,000 of other revenue.

     The substantial increase in Business Operations revenue of $6,740,000 in
the nine-month period ended September 30, 1999 as compared to the nine-month
period ended September 30, 1998 is attributable to the acquisition of Allin
Consulting-Pennsylvania, whose bank consulting services and Pittsburgh
consulting operations were significantly oriented toward this solution area.
Another factor was an increase in Allin Consulting-California's Business
Operations revenue due to a broadening of its solutions area focus.  As noted
previously in the discussion of three-month period results, Business Operations
revenue has declined overall between the second and third quarters of 1999 due
to decreasing demand for mainframe staffing services and the Company's
specialized bank consulting services due to clients' postponement of technology
projects and developments until the impact of the Year 2000 computer problem is
realized.  Management expects Business Operations revenue to continue to decline
during the remainder of 1999.  Management believes, however, that once Year 2000
problems occur and are corrected by clients, market conditions will result in
increased demand for technology consulting services as previously postponed
projects and developments are undertaken.  There can be no assurance, however,
that demand for technology consulting services will increase in the future, or
that Allin Consulting's Business Operations revenue will return to or exceed the
levels experienced by the Company previously.

     Information Technology Infrastructure revenue decreased $92,000 in the
nine-month period ended September 30, 1999, as compared to the nine-month period
ended September 30, 1998.  The decline is attributable to the reorientation of
Allin Consulting-California's solutions-oriented consulting mix from primarily
Information Technology Infrastructure in 1998 to a broader mix in 1999.  Allin
Consulting-California has shown growth in Business Operations and Knowledge
Management revenue in 1999, but Information Technology Infrastructure revenue
has declined due to the change in focus.  Allin Consulting-Pennsylvania is
strategically focusing its marketing efforts on growing diverse solutions-
oriented project revenue, including Information Technology Infrastructure, which
the Company's management believes will generally offer a higher gross profit
potential than the staffing services model which represented the majority of
Allin Consulting-Pennsylvania's operations at acquisition.  Revenue growth in
this solutions area at Allin Consulting-Pennsylvania has partially offset some
of the decline in Allin Consulting-California revenue in this area in the first
nine months of 1999 as compared to the first nine months of 1998.  There can be
no assurance, however, that Allin Consulting-Pennsylvania will continue to
increase solutions-oriented revenue in the Information Technology Infrastructure
solutions area in the future.  The Year

                                      -25-
<PAGE>

2000 problem has also negatively impacted Information Technology Infrastructure
operations, although not as significantly as Business Operations.

     Knowledge Management operations were fully implemented during the second
quarter of 1999.  Year to date Knowledge Management revenue is $386,000 as of
September 30, 1999.  No revenue was recognized for this solution area in 1998.
There can be no assurance, however, that Knowledge Management revenue will
continue to be realized at levels similar to or greater than that realized
during the second and third quarters of 1999.

     Allin Consulting is committed to further development of the Electronic
Business solutions area.  A decline in revenue of $39,000 was realized in the
first nine months of 1999 as compared to the first nine months of 1998.  As was
noted previously, the Company believes the decline in revenue and the relatively
low revenue level in both periods are attributable to the developmental stage of
the Company's operations in this solutions area.  Allin Consulting's marketing
strategy seeks to develop and grow a solutions oriented Electronic Business
practice, although there can be no assurance that the Company will be successful
in developing this solutions area or that the desired improvements in revenue
and gross profit will be realized.

     Revenue from interactive media solutions and product sales was $5,553,000
for the nine months ended September 30, 1999 as compared to $3,445,000 for the
nine months ended September 30, 1998.  The increase in revenue of $2,108,000, or
61%, is primarily attributable to substantial revenue growth in interactive
television systems integration and consulting services and digital imaging
systems integration services and ancillary sales.

     Allin Interactive recorded revenue of $3,630,000 during the nine months
ended September 30, 1999, including $2,177,000 for interactive television
systems integration and consulting services and $1,453,000 for shipboard
transactional revenue and management fees.  Comparable revenue during the nine
months ended September 30, 1998 was $2,439,000 in total, including $119,000 for
interactive television systems integration services and $2,320,000 for shipboard
transactional revenue and management fees.  The increase in interactive
television systems integration and consulting revenue of $2,058,000 is primarily
attributable to the Voyager of the Seas interactive system, which represents a
majority of 1999 systems integration and consulting revenue.  Revenue recognized
from the sales of four interactive television systems aboard Celebrity ships
also has contributed to the increase.  The decline in transactional revenue and
management fees of $867,000 is attributable to a reduction in the number of
operating ship systems due to sales and contract terminations and changes in
management fees for systems operated on Celebrity ships, as was discussed
previously in the comparison of results for the three-month periods.

     Allin Digital recognized revenue of $1,629,000 during the nine months ended
September 30, 1999 for digital imaging systems integration services and
ancillary product sales as compared to $755,000 for the nine months ended
September 30, 1998.  The increase in revenue from digital photography operations
of $874,000 is attributable to the Company's change in strategy in early 1998 to
become a provider of systems integration services for the installation of
digital photography systems.  The change in strategy was not fully implemented
until after the beginning of 1998, whereas it was in place for the full nine-
month period in 1999.  Another contributing factor was the introduction of the
Portraits Online internet-based digital imaging sales and archival product
between the periods.  There can be no assurance, however, that either the
current revenue level or increases in revenue will continue to be realized.

     Allin Network recognized $294,000 in revenue for computer hardware and
software sales in the first nine months of 1999 as compared to $251,000 during
the first nine months of 1998.  The increase is attributable to several
comparatively large sales included in the 1999 period related to technology
consulting engagements being carried out by Allin Consulting-California.  There
were fewer sales of comparable size in 1998.

Cost of Sales and Gross Profit

     The Company recognized cost of sales of $12,054,000 during the nine months
ended September 30, 1999 as compared to $5,088,000 during the nine months ended
September 30, 1998.  The primary reason for the increase in cost of sales of
$6,966,000 was the $5,107,000 increase in cost of sales for Allin Consulting's
technology consulting services, which corresponded to a substantial revenue
increase from these services.  The increase in cost of sales is primarily
attributable to the inclusion of Allin Consulting-Pennsylvania's operations for
all of the 1999

                                      -26-
<PAGE>

period, but only two months of the 1998 period. Gross profit of $6,826,000 was
recognized during the first nine months of 1999 as compared to $4,480,000 during
the first nine months of 1998, an increase of $2,346,000, or 52%. Again, the
increase in gross profit is mainly attributable to the inclusion of Allin
Consulting-Pennsylvania's operations in the entire 1999 period, but only two
months in the 1998 period. The percentage increase in gross profit from the
first nine months of 1998 to the first nine months of 1999 was lower than that
of revenue due to significant growth in the Business Operations solutions area
and interactive television systems integration and consulting services, as
discussed previously. Another contributing factor to the change is the increase
in digital photography systems integration activity in 1999. Since digital
photography systems integration projects typically include a significant
equipment component, they carry a lower margin than other consulting services.
These changes in the mix of the Company's service offerings between the nine-
month periods has resulted in a decrease in gross profit as a percentage of
revenue.

     Allin Consulting recorded a total of $9,002,000 for cost of sales during
the nine months ended September 30, 1999, including $6,706,000 for Business
Operations, $1,741,000 for Information Technology Infrastructure, $232,000 for
Knowledge Management, $38,000 for Electronic Business and $285,000 for other
cost of sales. Comparable cost of sales for the nine months ended September 30,
1998 was $3,895,000 in total, including $1,884,000 for Business Operations,
$1,936,000 for Information Technology Infrastructure, $65,000 for Electronic
Business and $10,000 for other cost of sales. Increases or decreases in cost of
sales are also attributable to the factors that resulted in changes in revenue
for these services, primarily the acquisition of Allin Consulting-Pennsylvania
and increased marketing emphasis on developing solutions-oriented practices.
Gross profit for the nine months ended September 30, 1999 was $4,325,000,
including $2,746,000 for Business Operations, $1,439,000 for Information
Technology Infrastructure, $154,000 for Knowledge Management, $40,000 for
Electronic Business and a gross loss of $54,000 on other services. Comparable
gross profit for the first nine months of 1998 was $2,228,000 in total,
including $828,000 for Business Operations, $1,336,000 for Information
Technology Infrastructure, $52,000 for Electronic Business and $12,000 for other
services. Again, the substantial increase in consulting revenue is principally
responsible for the increase in gross profit. As discussed previously, the
Company expects gross profit generated by the Business Operations solutions area
to decline over the remainder of 1999.

     Cost of sales for Interactive Media solutions and product sales was
$3,052,000 in total for the first nine months of 1999 as compared to $1,193,000
for the comparable period of 1998. The increase in cost of sales resulted from
the substantial increases in interactive television systems integration and
consulting services and digital photography systems integration services. Gross
profit on interactive media solutions and product sales was $2,501,000 for the
first nine months of 1999, as compared with $2,252,000 for the first nine months
of 1998. Gross profit as a percentage of revenue declined between the nine-month
periods of 1998 and 1999. During 1999, systems integration services for both
interactive television and digital photography substantially increased in their
proportion of overall business activity. Since systems integration carries a
significant equipment component, gross profit as a percentage of revenue is
typically lower than with interactive television transactional revenue and
management fees, which was the predominant source of revenue in 1998.

     Allin Interactive recorded a total of $1,484,000 for cost of sales during
the nine months ended September 30, 1999, including $1,265,000 related to
interactive television systems integration and consulting services and $219,000
related to pay-per-view movies.  Comparable nine-month period cost of sales
during 1998 was $321,000, including $81,000 for systems integration services and
$240,000 for pay-per-view movies.  The increase in cost of sales for interactive
television systems integration and consulting is attributable to the inclusion
of activity related to the Voyager of the Seas project and the Celebrity ship
system sales in the 1999 period.  Gross profit recognized by Allin Interactive
during the nine months ended September 30, 1999 was $2,146,000, including
$912,000 from interactive television systems integration and consulting services
and $1,234,000 from shipboard transactional revenue and management fees.
Comparable gross profit amounts for the first nine months of 1998 were
$2,118,000 in total, including $38,000 from systems integration and $2,080,000
from shipboard transactional revenue and management fees.  As noted in
discussing revenue and cost of sales, the substantial increase in gross profit
for interactive television systems integration and consulting is attributable to
the Voyager of the Seas project and the Celebrity ship system sales.  The
decline in gross profit from interactive television transactional revenue and
management fees is attributable to the reduction in the number of operating ship
systems and the reduction in management fees for the Celebrity ship interactive
systems.  Since there are no cost of sales associated with management fees, the
reduction fully impacts gross profit.  Gross profit from transactional revenue
and management fees will decline significantly after September 30, 1999 since
revenue will no longer be derived from the five

                                      -27-
<PAGE>

interactive systems previously operated for Celebrity. Management fees were also
discontinued on the two systems operated for Carnival during the third quarter
of 1999. Management expects gross profit to be recognized on the sale of the
Celebrity systems and maintenance fees to be earned over the remainder of 1999
will exceed the gross profit earned from transactional revenue and management
fees related to the systems immediately prior to the transfer. There can be no
assurance, however, that gross profit will continue to be realized at similar or
higher levels in 2000 after the completion of recognition of the system sale
gross profit over the minimum period of the maintenance obligation.

     Allin Digital recognized cost of sales on its digital imaging operations of
$1,320,000 for the nine months ended September 30, 1999 as compared to $659,000
for the nine months ended September 30, 1998.  Allin Digital recognized gross
profit of $309,000 for the first nine months of 1999 as compared with $96,000
for the first nine months of 1998.  The increase in gross profit is attributable
to operations under the systems integration strategy during the full period in
1999 producing substantially larger revenue than in 1998 and the introduction of
the Portraits Online internet-based image sales and archival product, as
discussed previously.

     Allin Network recognized cost of sales of $248,000 on computer hardware and
software sales during the first nine months of 1999 as compared to $213,000
during the first nine months of 1998.  Gross profit increased from $38,000 to
$46,000 between the nine-month periods.  The increase was attributable to the
inclusion of several large sales in connection with Allin Consulting-California
engagements in the 1999 period.

Selling, General & Administrative Expenses

     The Company recorded $8,955,000 in selling, general & administrative
expenses during the nine months ended September 30, 1999 as compared to
$10,936,000 during the nine months ended September 30, 1998, a decrease of
$1,981,000. The decrease results from the inclusion of significant losses of
$2,997,000 for writedown of interactive television equipment due to impairment
of asset value or termination of ship operations during the first nine months of
1998. The impariment loss had been recorded to write down to salvage value
equipment associated with five interactive television systems which had been
discontinued or not completed, as well as three systems where management viewed
continued long-term operation to be in jeopardy. Excluding these writedowns, the
increase in expenses is primarily attributable to the acquisition of Allin
Consulting-Pennsylvania, resulting in inclusion of selling, general &
administrative costs related to those operations in the full 1999 period, but
only two months of the 1998 period. The increase is also attributable to the
addition of solution area operational and sales personnel to the Company's
technology consulting businesses to facilitate the move toward a solutions-
oriented project focus and to facilitate the development of the Electronic
Business and Knowledge Management solutions areas.

     During the nine months ended September 30, 1998, a severance accrual of
approximately $491,000 was recorded in connection with certain executive
management changes undertaken in connection with the reorganization of the
Company's operations in early 1998, including the Company's President, Chief
Operating Officer and an administrative assistant.  An adjustment of $15,000 was
also recorded in the first quarter of 1998 to reflect additional severance costs
related to a 1997 severance accrual.  During the nine months ended September 30,
1999, a severance accrual of approximately $208,000 was recorded due to the
Company's termination of the employment contract for its President.

     During the first nine months of 1999, the Company recorded a writedown of
approximately $101,000 related to leasehold improvements, furniture and
equipment from Allin Consulting-Pennsylvania's former office in Pittsburgh.
Allin Consulting-Pennsylvania's Pittsburgh staff moved to the Company's
corporate headquarters office.  The assets written down were disposed of or were
not utilized subsequent to the move.  The Company also recorded an accrual of
approximately $116,000 during this period for estimated lease termination costs
for the office space formerly occupied by Allin Consulting-Pennsylvania.  There
was no comparable expense during the first nine months of 1998.

     Depreciation and amortization were $1,977,000 during the nine months ended
September 30, 1999 as compared to $2,693,000 during the nine months ended
September 30, 1998.  The decline is due to August 1998 writedowns in capitalized
interactive television system assets, the majority of capitalized software
development

                                      -28-
<PAGE>

costs reaching full amortization in 1998, and a significant intangible asset
value for an employment agreement recorded in connection with the 1996
acquisition of Allin Consulting-California reaching full amortization in 1998.

     Research and development expense included in selling, general &
administrative expenses was $46,000 during the first nine months of 1999, as
compared to $138,000 during the first nine months of 1998.  Research and
development activity during 1999 related to development by Allin Digital of a
Portraits Online internet-based product targeted for photographic laboratories
and Allin Interactive's development activities associated with On Command's
equipment platform, which is newly utilized by the Company for interactive
systems in 1999.

Loss from Continuing Operations

     The Company's loss from continuing operations decreased by $4,021,000 from
$6,414,000 for the nine months ended September 30, 1998 to $2,393,000 for the
nine months ended September 30, 1999.  The decrease results from the $2,346,000
increase in gross profit between periods due to acquisition-driven growth in the
technology consulting business and the $1,981,000 decrease in selling, general &
administrative expenses due to the inclusion of impairment losses in 1998,
partially offset by a $244,000 change from a net interest income to net interest
expense position.

Discontinued Operations

     The Company recorded a gain on the sale of SportsWave of $1,499,000 as of
September 30, 1998.  The Company recorded income from the operation of its
discontinued sports marketing business of $220,000 during the first nine months
of 1998.  During the first nine months of 1999, the Company recognized a gain of
$2,000 on the disposal of SportsWave.  The gain resulted from the net effect of
an adjustment to an accrual of estimated transaction costs and recording of a
local tax liability related to the pre-disposal period.

Net Loss

     The Company's net loss for the nine months ended September 30, 1999 was
$2,391,000, as compared to $4,695,000 for the nine months ended September 30,
1998.  The decrease in net loss resulted from the increase in gross profit in
the Company's technology consulting business and the decrease in selling,
general & administrative expenses.  These improvements were partially offset by
the inclusion of the gain on the disposal of SportsWave in 1998 and a shift from
a net interest income to a net interest expense position between the periods.

Liquidity and Capital Resources

     At September 30, 1999 the Company had cash and liquid cash equivalents of
$2,624,000 available to meet its working capital and operational needs.  The net
change in cash from December 31, 1998 was an increase of $114,000.  The net cash
provided during the first nine months of 1999 resulted from net provision of
approximately $1,117,000 from operating activities and $216,000 from investing
activities, partially offset by net cash used of approximately $1,219,000 for
financing activities.

     The Company recognized a net loss for the nine months ended September 30,
1999 of $2,391,000.  Included in the net loss were non-cash expenses of
$2,235,000 including depreciation, amortization of software development costs
and other intangible assets, amortization of deferred compensation, the loss
from a non-consolidated corporation and losses from write-down or sale of
assets, resulting in net cash used of $156,000 related to the income statement.
The remaining net cash provided from operating activities of $1,273,000 was
caused by working capital adjustments, primarily increases in deferred revenue
due to receipt from Celebrity of ship interactive sale proceeds in advance of
revenue recognition, partially offset by increases cost in excess of billings
related to the Voyager of the Seas project and increases to accounts receivable
and inventory.

     The net cash used for financing activities during the first nine months of
1999 resulted from a net repayment on lines of credit of $1,006,000, partial
repayment of a note payable and payment of preferred stock dividends.  The net
cash provided from investing activities during the first half of 1999 was
generated primarily by collection of a note receivable of $463,000 related to
the sale of SportsWave.

                                      -29-
<PAGE>

     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.  During the third quarter of 1999, the S&T Loan Agreement was
renewed for a second year, and will now expire on September 30, 2000.  The
maximum borrowing availability under the S&T Loan Agreement is the lesser of
$5,000,000 or eighty-five percent of the aggregate gross amount of eligible
trade accounts receivable aged sixty days or less from the date of invoice.
Accounts receivable qualifying for inclusion in the borrowing base are net of
any prepayments, progress payments, deposits or retention and must not be
subject to any prior assignment, claim, lien, or security interest.  As of
September 30, 1999, maximum borrowing availability under the S&T Loan Agreement
was approximately $2,632,000.  The outstanding balance as of September 30, 1999
was $500,000.

     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.  During the first nine months of
1999, the applicable interest rate ranged from 8.75% to 9.25%, which was in
effect at September 30, 1999.  The interest rate increases or decreases from
time to time as S&T Bank's prime rate changes.  Interest payments on any
outstanding loan balances are due monthly on the first day of the month.  The
Company recorded approximately $68,000 in interest expense related to this
revolving credit loan for the nine-month period ended September 30, 1999.  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 of the Company and its
subsidiaries.  The Company and its subsidiaries, except for Allin Consulting-
California and Allin Holdings, are required to maintain depository accounts with
S&T Bank, in which accounts the bank has a collateral interest.

     The S&T Loan Agreement includes various covenants relating to matters
affecting the Company including insurance coverage, financial accounting
practices, audit rights, prohibited transactions, dividends and stock purchases,
which are disclosed in their entirety in the text of the S&T Loan Agreement
filed as an exhibit to the Company's Current Report on Form 8-K filed on October
9, 1998 and the Second Amendment to Note and Loan and Security Agreement filed
as Exhibit 4.1 to this 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, E and F preferred shares or such distributions made
from time to time to compensate the Company's shareholders for income taxes
attributed to them with respect to the Company's financial performance.  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 amendment between S&T Bank and the Company renewing the
revolving credit facility changed the measurement period for this covenant.  The
cash flow coverage ratio will be measured for each of the Company's fiscal
quarters beginning October 1, 1999.  Previously, the ratio had been computed
monthly based on the most recent six months' results. 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.

     During April 1999, the Company repaid a balance due on a line of credit
with Wells Fargo Bank of approximately $22,000.  This credit facility was
originally obtained by MEGAbase to finance equipment purchases.  The outstanding
balance was assumed by the Company upon acquisition of MEGAbase.  Approximately
$1,000 of interest expense was recorded for this loan during the nine months
ended September 30, 1999.

     As of September 30, 1999, the Company had outstanding $2,500,000 in
liquidation preference of Series C Redeemable Preferred Stock.  On May 31, 1999,
the holders of all of the 25,000 then outstanding shares of the Company's Series
A preferred stock, which had been issued in August 1996, exchanged their shares
for a like number of shares of the Company's Series C preferred stock, having a
liquidation preference of $100 per share.  There is no mandatory redemption date
for the Series C preferred stock.  Accrued but unpaid dividends on the Series C
preferred stock were approximately $703,000 as of September 30, 1999.  Series C
preferred stock earns dividends at the rate of 8% per annum, compounded
quarterly, until June 30, 2006, when the Company will be obligated to pay

                                      -30-
<PAGE>

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% per annum.  After June 30, 2006, dividends on the Series C preferred
stock will accrue and compound at a rate of 12% per annum and will be payable
quarterly, subject to legally available funds.  The Company's current credit
agreement with S&T Bank prohibits payment of dividends on Series C preferred
stock during the term of the agreement.

     On May 31, 1999, the holders of all of the 2,750 outstanding shares of the
Company's Series B preferred stock, which had been issued in August 1998,
exchanged their shares for a like number of shares of the Company's Series D
Convertible Redeemable Preferred Stock having a liquidation preference of $1,000
per share.  All of the 2,750 shares of Series D preferred stock remained
outstanding as of September 30, 1999.  There is no mandatory redemption date for
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 the number of shares of common stock determined by
dividing 1,000 by $3.6125, which is 85% of the $4.25 per share price on the last
trading day prior to the date of closing of the acquisition of Allin Consulting-
Pennsylvania.  Series D preferred stock earns dividends at the rate of 6% per
annum, compounded quarterly.  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 $28,000 as of September 30, 1999.

     On May 31, 1999, the holder of a promissory note issued by the Company in
connection with the acquisition of Allin Consulting-Pennsylvania, with an
outstanding principal balance of approximately $1,926,000 exchanged the
promissory note for 1,926 shares of the Company's Series E preferred stock
having a liquidation preference of $1,000 per share.  All of the 1,926 shares of
Series E preferred stock remained outstanding as of September 30, 1999.  There
is no mandatory redemption date for the Series E preferred stock.  Series E
preferred stock is convertible to the Company's common stock.  If not redeemed
by the Company earlier, outstanding Series E preferred stock will automatically
convert as of August 13, 2000 into the number of shares of the Company's common
stock equal to the amount obtained by dividing the liquidation preference of the
outstanding shares of Series E preferred stock plus accrued and unpaid
dividends, if any, by (i) $4.406 or (ii) at the holder's option, the average of
the bid and asked prices of the common stock for the thirty days preceding
August 13, 2000, subject to a $2.00 minimum price.  Upon the happening of
certain events, the holder of Series E preferred stock will be able to convert
the shares of the Series E preferred stock into the Company's common stock prior
to August 13, 2000.  These events are disclosed in their entirety in the text of
the Certificate of Voting Powers, Designations, Preferences and Relative,
Participating, Optional or Other Rights, and the Qualifications, Limitations or
Restrictions Thereof, of the Series E Convertible Redeemable Preferred Stock
filed as an exhibit to the Company's Current Report on Form 8-K filed on June
15, 1999.  Series E preferred stock earns dividends at the rate of 6% per annum,
payable quarterly in arrears on the first business day of each calendar quarter,
subject to legally available funds.  Accrued but unpaid dividends on Series E
preferred stock were approximately $30,000 as of September 30, 1999.

     On May 31, 1999, the holder of a promissory note issued by the Company in
connection with the acquisition of Allin Consulting-California, with an
outstanding principal balance of $2,000,000 agreed to a reduction in the
principal amount of the promissory note by $1,000,000 in exchange for 1,000
shares of the Company's Series F preferred stock having a liquidation preference
of $1,000 per share.  All of the 1,000 shares of Series F preferred stock
remained outstanding as of September 30, 1999.  There is no mandatory redemption
date for the Series F preferred stock.  Series F preferred stock is convertible
to the Company's Common Stock until the earlier of May 31, 2004 or the Company's
redemption of the Series F preferred shares.  Until and including May 31, 2000,
Series F preferred stock is convertible into the number of shares of the
Company's common stock equal to the amount obtained by (i) dividing 1,000 by
$2.231, which is 85% of the closing price of the common stock as reported by
Nasdaq on the last trading date prior to the issuance of Series F preferred
stock or (ii) if it results in a greater number of common shares, dividing 1,000
by the greater of (a) 85% of the closing price of the common stock as reported
by Nasdaq on the last trading date prior to conversion or (b) $1.236, which is
47.1% of the closing price of the common stock as reported by Nasdaq on the last
trading date prior to the issuance of Series F preferred stock.  From June 1,
2000 until May 31, 2004, Series F preferred stock will be convertible into the
number of shares of the Company's common stock equal to the amount obtained by
(i) dividing 1,000 by $2.231, which is 85% of the closing price of the common
stock as reported by Nasdaq on the last trading date prior to the issuance of
Series F preferred stock or (ii) if it results in a greater number of common
shares, dividing 1,000 by the greater of (a) 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

                                      -31-
<PAGE>

issuance of the Series F preferred stock or (b) $1.236, which is 47.1% of the
closing price of the common stock as reported by Nasdaq on the last trading date
prior to the issuance of Series F preferred stock. Series F preferred stock
earns dividends at the rate of 7% per annum. The dividends will accrue until
April 15, 2000, when accrued dividends will be payable subject to legally
available funds. Dividends will be payable quarterly thereafter, subject to
legally available funds. After April 15, 2000, any unpaid dividends will
compound quarterly. Accrued but unpaid dividends on Series F preferred stock
were approximately $23,000 as of September 30, 1999.

     The exchanges of securities described above were undertaken for purposes of
enhancing the Company's future liquidity by removing mandatory redemption
requirements, strengthening the Company's balance sheet by increasing equity,
improving the Company's results of operations by replacing interest expense with
dividends and maintaining compliance with the Nasdaq Stock Market's National
Market listing requirements.  The order of liquidation preference of the
Company's outstanding preferred stock, from senior to junior, is Series E,
Series F, Series D and Series C.

     In connection with the Company's original sale of Series B Redeemable
Preferred Stock in August 1998, the purchasers of Series B shares 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 Allin Consulting-Pennsylvania closing.  The
exercise price may be paid in cash or by delivery of a like value, including
accrued but unpaid dividends, of Series C Convertible Redeemable Preferred
Stock.

     The Company has outstanding an amended note payable to Les D. Kent related
to the November 1996 acquisition of Allin Consulting-California.  After the May
1999 conversion of a portion of the note principal to the Company's Series F
preferred stock, as discussed previously, the outstanding principal balance of
the note is $1,000,000.  The amended note provides for two principal payments of
$500,000 each on April 15, 2000 and October 15, 2000.  The Company may, however,
defer payment of principal at its option until April 15, 2005.  The note
provides for interest at the rate of 7% per annum from the acquisition date of
November 6, 1996.  The Company has accrued interest of approximately $382,000 as
of September 30, 1999.  Accrued interest as of May 31, 1999, approximately
$359,000, is due and payable on or before April 1, 2000.  Other accrued interest
is due and payable quarterly on the note beginning April 15, 2000.  The Company
believes that the ability to defer principal payments will be beneficial to its
liquidity over the next five years.

     The agreement for the Company's November 1998 acquisition of MEGAbase
provides for contingent payments of up to $800,000, to be determined on the
basis of Allin Consulting-California's Development Practice Gross Margin (as
provided in the stock purchase agreement for the acquisition) for the period
beginning January 1, 1999 and ending December 31, 1999.  The former MEGAbase
sole shareholder, Mark Gerow, is entitled to receive an aggregate contingent
payment equal to $1.00 for each dollar by which Allin Consulting-California's
Development Practice Gross Margin exceeds $500,000, subject to a maximum
contingent payment of $800,000.  Any contingent payment due may be made, at the
Company's sole option, (a) all in cash, (b) 50% in cash and 50% in the Company's
common stock based on a per share amount equal to the average of the bid and
asked prices for the five trading days preceding contingent payment, or (c) 50%
in cash and 50% in the form of a promissory note bearing interest at a rate of
8% per annum to be due one year from the date of such note.  The contingent
payment must be made no later than March 31, 2000, unless the Company selects
(c) above, under which 50% of the payment due must be made no later than March
31, 2000 and 50% one year later.  Emerging Issues Task Force Issue 95-8:
Accounting for Contingent Consideration Paid to the Shareholders of an Acquired
Company in a Purchase Business Combination ("EITF 95-8") describes five factors
that must be considered in evaluating the proper treatment of contingent
consideration, including the terms of continuing employment, the components of
the shareholder group, the reasons for contingent payment provisions, the
formula for determining contingent consideration and other agreements and
issues.  The Company's analysis of these factors indicates that any contingent
payments due will be recorded as additional cost of the acquired enterprise.
Key factors in the evaluation include the Company's ability to control the form
of principal payments and the similarity of the development practice to the pre-
acquisition MEGAbase organization.

     The Company expects interactive television research and development
activities during the remainder of 1999 to focus on development of new
applications and software interfaces for interactive video streaming utilizing
hardware components and technology from On Command.  The Company also
anticipates further research and development activities in 1999 related to Allin
Digital's Portraits Online system for on-line viewing of digital

                                      -32-
<PAGE>

photographic images from an Internet based database archive. Allin Digital is
developing a Portraits Online product targeted for photographic laboratories
that would enable on-line viewing of scanned and archived images by laboratory
clients. The Company incurred approximately $46,000 in research and development
expense in the first nine months of 1999 and currently anticipates expenditures
of up to $25,000 during the remainder of 1999. Preliminary forecasts for 2000
indicate expected research and development expenditures of approximately
$175,000 related to Company's Interactive Media solutions area. Management
intends to evaluate any development projects on an ongoing basis and may reduce
or eliminate projects if alternate technologies or products become available or
if changing business conditions so warrant.

     Capital expenditures during the nine months ended September 30, 1999 were
approximately $283,000 and included furniture and leasehold improvements related
to the relocation of Allin Consulting-Pennsylvania's Pittsburgh staff to the
corporate headquarters , furniture and leasehold improvements related to the
expansion of the Ft. Lauderdale office, furniture for the new Scottsdale,
Arizona office, the purchase of On Command hardware for an interactive demo
system and computer hardware, software and communications equipment for the
Company's periodic upgrading of technology.  The Company anticipates capital
expenditures of up to $80,000 during the remainder of 1999 for upgrades of
computer hardware and software in all of its operations and for computer
hardware to support Allin Digital's Portraits Online services.  Preliminary
forecasts for 2000 indicate expected capital expenditures of approximately
$475,000.  Business conditions and management's plans may change during the
remainder of 1999 or in 2000, so there can be no assurance that the Company's
actual amount of capital expenditures will not exceed the planned amount.

     As discussed above, the S&T Loan Agreement expires September 30, 2000.  So
long as a credit facility substantially similar to the current facility remains
in place, the Company believes, in light of its current operations as discussed
in the preceding paragraphs, that available funds and cash flows expected to be
generated by its 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.  If currently available funds
and cash generated by operations were insufficient to satisfy the Company's
ongoing cash requirements, or if the Company identified an attractive
acquisition candidate in the consulting industry, 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 or convertible debt securities
would result in additional dilution to the Company's shareholders.

Year 2000 Issue

     The Year 2000 computer issue primarily results from the fact that
information technology hardware and software systems and other non-information
technology products containing embedded microchip processors were originally
programmed using a two digit format, as opposed to four digits, to indicate the
year.   Such programming will be unable to interpret dates beyond the year 1999,
which could cause a system or product failure or other computer errors and a
disruption in the operation of such systems and products.

State of Readiness

     The Company has established an internally staffed project team to address
Year 2000 issues. The team is implementing a plan that focuses on Year 2000
compliance efforts for information and non-information technology systems for
the entire Company. The systems include (1) information systems software and
hardware such as accounting systems, personal computers, servers and software,
(2) shipboard equipment, including the Company's interactive systems currently
aboard cruise vessels and (3) certain essential non-information technology
systems such as telephones and HVAC. The Company has identified five phases for
the project team to address for each of the Company's risk areas. These phases
are (1) an inventory of the Company's systems described above, (2) assessment of
the systems to determine the risk and apparent extent of year 2000 problems, (3)
remediation of identified problems, (4) testing of systems and products for Year
2000 readiness and (5) contingency planning for the worst-case scenario.

     Inventories have been completed for all Company software applications,
hardware and shipboard operating systems, and at-risk non-information technology
systems.  The project team has substantially completed an

                                      -33-
<PAGE>

assessment of compliance issues related to the Company's information hardware
and software. The Company undertook significant testing of shipboard equipment
during the assessment phase with no significant failures experienced to date.
Thus far, the task force believes that the Company's main accounting system is
Year 2000 compliant, but it has identified a problem in certain of the Company's
information hardware programming related to the accounting system. The Company
has completed a plan for remediating this problem, which will involve
remediation steps immediately prior to the year-end. The Company has scheduled
the necessary remediation steps. The Company has completed additional testing of
all critical systems during the third quarter of 1999. The Company has
identified and created a list of its third party software manufacturers and has
completed research of their products through direct contact and published
information concerning Year 2000 compliance. The Company has completed
collection of information and testing regarding its internal non-information
technology systems such as telephones and HVAC during the third quarter of 1999.
To date the Company has identified a problem with the telephone system in its
Cleveland, Ohio office which has been remediated. The Company has also
identified a problem with the security system for the building housing the
Company's Pittsburgh office. Building management has indicated the problem is
expected to be remediated by the end of 1999. The Company is also monitoring
information regarding Carnival's onboard billing systems, which interface with
the Company's interactive systems. The Company expects to be operating only two
ship interactive systems on Carnival ships as of December 31, 1999.

     Although the Company's material supply requirements can predominantly be
filled by a large number of suppliers, the Company implemented a program to
track the Year 2000 compliance status of its material vendors and suppliers.
Material vendors and suppliers have been surveyed to ascertain their risks
associated with Year 2000 issues, their state of readiness and the potential for
disruption of business operations.  Similarly, the Company has also implemented
a program to survey and track the Year 2000 compliance status of its material
customers.  A second request for completion of the Company's survey has been
circulated to all material suppliers, vendors and customers who had not replied
to the original request.

     The Company circulated 381 surveys concerning Year 2000 compliance issues
to suppliers, vendors and customers.  The Company's project team has to date
been able to obtain information, either through responses or research of
publicly available information, on approximately 65% of these suppliers, vendors
and customers.  Based on the project team's evaluation of information obtained
to date, the Company believes that the responses that have been received and
information obtained through research do not indicate any material risk to the
Company from these suppliers, vendors and customers as a result of the Year 2000
problem.  During the remainder of 1999, the project team expects to perform a
secondary review of publicly available information concerning the Company's most
significant customers and vendors for any newly disclosed information concerning
the potential for disruption of their business operations from Year 2000 issues,
which may negatively impact the Company.  Potential risks could arise from
failure of customers' vendor payment systems or cancellation or delay of service
engagements for the Company.  Potential risks could also arise if significant
suppliers or service providers do not successfully and in a timely manner
achieve Year 2000 compliance and the Company is unable to replace them.  To the
extent the Company becomes aware of the potential for business disruption among
its significant customers, vendors and suppliers, it will follow the steps
outlined in its contingency plan.  See Contingency Plan below.

Risks of Company's Year 2000 Issues

     Currently, the Company believes that the most reasonably likely sources of
risk to the Company include one or more of the following:  (1) reduced
opportunities for technology consulting engagements due to clients' or potential
clients' Year 2000 compliance expenditures on current systems reducing available
funds for new technology projects or clients' voluntary postponement of new
technology initiatives until the full impact of the Year 2000 problem is
realized; (2) the inability of significant customers to be Year 2000 ready which
could negatively impact the Company's revenue and cash receipts or which could
result in the postponement or cancellation of major client projects due to
clients' Year 2000 business disruption; (3) the possibility that Year 2000
issues develop in interactive systems sold by the Company; (4) the possibility
that disputes may arise with clients regarding Year 2000 problems involving
solutions developed or implemented by the Company or the interaction of such
solutions with other applications; (5) the inability of principal product
suppliers to be Year 2000 ready, which could result in delays in deliveries from
such suppliers and (6) the disruption of revenue production from the two
interactive television systems aboard cruise ships that the Company expects to
be operating as of January 1, 2000, through failures in the systems or the
failure of the cruise lines' shipboard billing systems.

                                      -34-
<PAGE>

     The first risk described above is believed by the Company's management to
be the most significant. This risk has already impacted the Company
significantly in 1999. The Company has experienced sequential quarter revenue
declines in some of its Allin Consulting solutions areas during the second and
third quarters of 1999. While the Company cannot precisely attribute the
proportion of the overall revenue declines to the Year 2000 issue, Management
believes, based on its relationships and communications with its customers, that
the Year 2000 issue is a significant cause for the declines. The Business
Operations solutions area has experienced the strongest impact. Revenue declined
$498,000 between the first and second quarters of 1999 and $503,000 between the
second and third quarters of 1999. A significant portion of Business Operations
consulting is delivered through the staffing model that was predominant in Allin
Consulting-Pennsylvania's operations when it was acquired in August 1998,
including most of Allin Consulting's mainframe computer services and specialized
banking industry consulting services. The services delivered through the
staffing model have experienced the most negative impact in the Business
Operations revenue decline. Management believes that many of the Company's
customers have postponed new technology initiatives or development projects so
that they can be conducting a simpler scope of operations at year end when the
full impact of any Year 2000 problems will be realized. The negative impact of
the revenue decline is mitigated by the corresponding reduction in cost of
sales. The decline in gross profit realized by Business Operations was $235,000
between the first and second quarters of 1999 and $141,000 between the second
and third quarters of 1999. Management also believes the Year 2000 issue has
negatively impacted the Information Technology Infrastructure and Knowledge
Management solution areas, but to a much less significant degree. While both had
sequential quarter revenue and gross profit increases between the first and
second quarters of 1999, declines were realized between the second and third
quarters. Combined gross profit for these two solution areas declined by $25,000
between the second and third quarters. Management expects fourth quarter 1999
operations to be similarly negatively impacted. However, Management believes
that once Year 2000 problems, if any, occur and are corrected by customers,
market conditions will result in increased demand for technology consulting
services as previously postponed projects and developments are undertaken. There
can be no assurance, however, that demand for technology consulting services
will increase in the future, or that Allin Consulting's Business Operations
revenue will return to or exceed the levels experienced by the Company in
previous calendar quarters.

     Based on its assessment efforts to date and information obtained to date
from material customers, vendors and suppliers, the Company does not believe
that the risk of vendor, supplier or customer business disruption from Year 2000
problems is significant or likely to have a material adverse effect on the
Company's results of operations or financial condition. As noted previously, the
Company plans to conduct a secondary review of publicly available information on
significant customers, vendors and suppliers for any recently disclosed risks in
this area. Testing completed on the interactive systems in operation on two
Carnival ships have indicated that Year 2000 problems are not likely. Revenue
and gross profit derived from operation of shipboard interactive television
systems will be much less significant to the Company at year end than in the
past due to the reduction in the number of systems in operation during 1999.
Consequently, the Company does not believe the risk of Year 2000 problems with
these systems is likely to cause a material adverse impact on the Company's
results of operations or financial condition.

     The risks that Year 2000 issues may develop in interactive systems sold by
the Company or the possibility that disputes may arise with clients regarding
Year 2000 problems involving solutions developed or implemented by the Company
or the interaction of such solutions with other applications are dependent, to a
significant degree, upon the Company's customers' completion of identification
and remediation of deficiencies relating to the Year 2000 issue as it is
impracticable for the Company to independently evaluate all interactive systems
sold and all solutions developed or implemented by the Company. Consequently,
the Company is unable to determine with certainty whether Year 2000 failures of
this type will materially affect the Company.

     The Company's Year 2000 issues and any potential business interruptions,
costs, damages or losses related thereto, are dependent, to a significant
degree, upon third parties' completion of identification and remediation of
deficiencies relating to the Year 2000 issue.  If the Company is unable to
successfully identify and remediate Year 2000 problems in a timely manner or the
level of timely compliance by third parties, such as key customers, suppliers
and service providers is not sufficient, Year 2000 failures could have a
material adverse impact on the Company's operations including, but not limited
to, decreased revenue and cash flow, increased operating costs or other
significant business disruptions.  The Company believes that its compliance
efforts have and will continue to reduce the impact on the Company of any such
failures.

                                      -35-
<PAGE>

Contingency Plans

     The Company has completed preparation of its contingency plans to identify
and determine how to handle its most reasonably likely worst-case scenarios.
Management has reviewed and approved these plans.  As discussed above, the risk
of reduced opportunities for technology consulting engagements has been
identified as the most significant risk to the Company.  The Company believes
Year 2000 issues have contributed to a reduction in demand for the Company's
technology consulting services during 1999, particularly for the Business
Operations solutions area, due to customers postponing new technology
initiatives or development projects so that they can be conducting a simpler
scope of operations at year end when the full impact of any Year 2000 problems
will be realized.  The Company believes the most reasonably likely worst case
scenario in relation to this risk is that the Company is unable to obtain
sufficient new business to restore technology consulting operations to levels
similar to the first quarter of 1999.  Gross profit in the solution areas the
Company believes were negatively impacted by the Year 2000 issue was
approximately $400,000 lower in the third quarter of 1999 than in the first
quarter.  The Company's failure to restore gross profit to previously obtained
levels once the full impact of Year 2000 problems is realized would materially
negatively impact the Company's financial condition and results of operations in
future years.  The Company's contingency plan addresses this risk through plans
for aggressive marketing of its solutions oriented technology consulting
services in 2000.  The Company believes that solutions oriented services offer
the potential for increased levels of gross profit as compared to the staffing
services which have been most negatively impacted.  The contingency plan also
views Allin Consulting's expertise with Microsoft operating systems and software
key to restoring previously obtained levels of revenue and gross profit.
Microsoft will be introducing many new products in 2000, such as Windows 2000,
which Management believes will offer opportunities for growth in consulting
services.  Management intends to aggressively pursue solutions oriented services
based on new Microsoft product offerings to restore previously obtained gross
profit levels, although there can be no assurance that the Company will be
successful in restoring revenue and gross profit to prior levels realized.

     The contingency plan also addresses the risk of Year 2000 failure in the
Company's software applications, and hardware operating systems.  The Company
has completed a plan for remediating identified problems, which has been
incorporated into the contingency plan.  The plan involves remediation steps to
be undertaken immediately prior to the year-end in all of the Company's offices.
These remediation steps are aimed at preventing any date related failures
through specified procedures and safeguarding of hardware from potential power
disruptions immediately following the year change.  The contingency plan's
specified procedures include steps to be undertaken both immediately before and
after the year change to assure continued orderly operation of software
applications and hardware operating systems.

     The contingency plan also incorporates steps to be taken in the event that
the Company becomes aware of newly disclosed information through its planned
secondary review of publicly available information for the Company's most
significant suppliers or vendors which indicates risk of significant business
disruption.  In the event of expected Year 2000 business disruption with
material vendors or suppliers, the Company expects to proceed expeditiously with
identification of alternate sources of supply, assessment of their Year 2000
risk of business disruption and establishment of vendor accounts.  The Company
will also consider advancing planned purchases of goods or supplies to December
1999.  In the event of expected business disruption with material customers,
Management expects to proceed with requiring payments in advance prior to the
end of 1999 or postponement of engagements for customers until resolution of
their Year 2000 issues.  There can be no assurance, however, that the Company
will be successful in identifying suppliers, vendors and customers with
significant Year 2000 risk. There can also be no assurance that the Company will
be successful in finding alternative Year 2000 compliant suppliers and vendors,
if required.  In the event that any of the Company's significant customers,
vendors and suppliers do not successfully and in a timely manner achieve Year
2000 compliance and the Company is unable to replace them, the Company's
business or operations could be adversely affected.

Costs

     The Company does not expect that the costs associated with its Year 2000
efforts will be material.  The Company anticipates that any additional work
required for assessment and remediation efforts will be conducted using internal
resources.  Without any allocation from the salaries of relevant internal
personnel, the Company has not to date expended a material amount of direct
costs for efforts to address Year 2000 issues.  The Company does not expect that
material incremental labor charges will be incurred for remaining assessment and
remediation.

                                      -36-
<PAGE>

Given the information that the Company has been able to ascertain to date
regarding potential Year 2000 problems relating to its information technology
and non-information technology systems, management does not believe that
external remediation costs will exceed $25,000 through December 1999. It is
anticipated that any costs associated with these remediation efforts will be
expensed.

Special Note on Forward Looking Statements

     The Management's Discussion and Analysis and other sections of this Report
on Form 10-Q contain forward-looking statements that are based on current
expectations, estimates and projections about the industries in which the
Company operates, management's beliefs and assumptions made by management.
Words such as "expects," "anticipates," "intends," "plans," "believes,"
"estimates," variations of such words and similar expressions are intended to
identify such forward-looking statements.  These statements constitute "forward-
looking statements" within the meaning of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended, and are subject to the safe harbors created thereby.  These statements
are based on a number of assumptions that could ultimately prove inaccurate and,
therefore, there can be no assurance that they will prove to be accurate.
Factors that could affect performance include those listed below, which are
representative of factors which could affect the outcome of the forward-looking
statements.  In addition, such statements could be affected by general industry
and market conditions and growth rates, and general domestic and international
economic conditions.  The Company undertakes no obligation to update publicly
any forward-looking statements, whether as a result of new information, future
events or otherwise.

     Integration of Acquired Entities.  The Company acquired Allin Consulting-
Pennsylvania in August 1998.  The Company acquired MEGAbase in November 1998 and
subsequently merged it into Allin Consulting-California.  The Company intends to
continue to operate all of these entities' businesses under a common Allin
Consulting business strategy and to undertake joint marketing, recruiting and
training programs for all entities.  Additionally, the Company seeks to promote
an orientation toward common solution area disciplines and methodologies across
its consulting operations.  Allin Consulting-California, Allin Consulting-
Pennsylvania and the former MEGAbase have limited history of joint operations
and there can be no assurance that the entities will be able to effectively
carry out joint efforts.  Failure to do so may result in reduced revenue or
earnings for the Company.

     Limited Operating History Under New Marketing Strategies.  The Company
fundamentally changed the marketing strategies for its technology consulting
operations in early 1999 to emphasize a customer-oriented marketing approach and
the delivery of services oriented around solutions areas meeting customer needs
for information technology infrastructure, business operations, electronic
business, knowledge management and interactive media solutions.  The Company is
seeking to develop additional solutions-oriented business for all of these
solution areas and seeks to reposition its operations away from the staffing-
oriented model formerly predominant in Allin Consulting-Pennsylvania.  The
majority of the Company's current Business Operations solution area revenue is
derived from services provided under the staffing model.  The Company has
experienced a decline in demand for Business Operations services during 1999,
particularly for staffing for mainframe computer systems and its specialized
banking industry services.  While the Company attributes a significant portion
of the decline to client postponement of technology projects due to the Year
2000 issue, Business Operations activity in future periods under the staffing
model is expected to decline as a result of both industry trends and the
Company's marketing focus on solutions-oriented projects.  There can be no
assurance that the Company will be successful at growing solutions-oriented
revenue in any or all of its solutions areas or that any growth obtained will
offset or exceed expected declines in Business Operations revenue.  There can
also be no assurance that any growth achieved for solutions-oriented projects
will result in the desired improvements to gross profit.

     The Company fundamentally changed its marketing strategies with respect to
its interactive television operations during mid-1997 and with respect to its
digital photography operations, in early 1998.  Allin Interactive's current
strategy is to sell customized applications and installations of its interactive
television systems on a systems integration basis where the customer bears the
capital cost of the system and to provide consulting services related to
interactive media.  Based on projects currently underway and the recent sale of
four previously installed interactive systems to Celebrity, the Company expects
Allin Interactive's systems integration and consulting revenue will increase in
the second half of 1999 as compared with 1998 and the first half of 1999.
However, the transition toward systems integration and consulting services has
also resulted in a decline in transactional and management fee revenue derived
from interactive television systems owned and operated by Allin Interactive.  A
significant

                                      -37-
<PAGE>

decline in transactional and management fee revenue will occur over the
remainder of 1999 due to the transitioning of operational responsibility to
Celebrity for five interactive systems on their ships. While the Company expects
that systems sale and maintenance revenue from the Celebrity systems to be
recognized over the remainder of 1999 will exceed transactional and management
fee revenue immediately prior to the sales, there can be no assurance that Allin
Interactive will not experience declines in revenue and gross margin during 2000
subsequent to completion of revenue recognition from the Celebrity sale. Because
the Company has only a limited history of operations with the current marketing
strategies, there can be no assurance that the Company will succeed under these
strategies, or that it will obtain financial returns sufficient to justify its
investment in the markets in which it participates.

     Need for Management of Growth and Geographic Expansion.   The Company's
growth strategy will require its management to conduct operations, evaluate
acquisitions and respond to changes in technology and the market. The Company
intends to evaluate continued geographic growth of its operations, particularly
in technology consulting.  The Company has substantially expanded the geographic
scope of its operations in the Northeastern United States through the
acquisition of Allin Consulting-Pennsylvania, with offices in Pittsburgh,
Pennsylvania and Cleveland, Ohio.  Furthermore, Allin Consulting-Pennsylvania's
specialized banking industry technology consulting services operate on a
national scope.  Allin Consulting-California has also experienced growth in the
geographic scope of engagements serviced by personnel based in northern
California.  The Company is evaluating further geographic expansion of
operations through acquisition or investment.  There can be no assurance,
however, that the Company will be successful in identifying or acquiring other
businesses, or that any business that may be acquired will result in the desired
improvements to financial results.  The Company is marketing interactive
television and digital photography services nationally and intends to undertake
installations throughout the United States, as obtained.  The Company recently
opened an office in Scottsdale, Arizona to support its Interactive Media
solutions area operations.  If the Company's management is unable to manage
growth, if any, effectively, its business, financial condition and results of
operations will be materially adversely affected.

     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 operations, development of new markets and products and timely
installation of its systems.  The Company's reorientation of marketing
strategies and operations during 1999 has also resulted in certain key
executives assuming different or additional responsibilities for the Company's
operations.  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 and to engage non-employee consultants. There can be no assurance that
the Company will be successful in attracting and retaining such personnel or
contracting with such non-employee consultants.

     Competitive Market Conditions.  The technology consulting industry is very
fragmented with a large number of participants due to growth of the overall
market for services and low capital barriers to entry.  There are also large
national or multinational firms competing in this market.  Rapid rates of change
in the development and usage of computer hardware, software, internet
applications and networking capabilities will require continuing education and
training of the Company's technical consultants and a sustained effort to
monitor developments in the technology industry to maintain services that
provide value to the Company's customers.  The Company's competitors may have
resources to develop training and industry monitoring programs that are superior
to the Company's.  There can also be no assurance that the Company will be able
to compete effectively with current or future competitors or that the
competitive pressures faced by the Company will not have a material adverse
effect on the Company's business, financial condition and results of operations.
The market for interactive television and digital imaging systems integration
services is new and rapidly evolving.  The types of interactive television
systems and applications offered by the Company are significant capital
expenditures for potential customers and do not have proven markets.  Some of
the Company's current and potential competitors have longer operating histories
and significantly greater financial, technical, marketing and other resources
than the Company and, therefore, may be able to respond more quickly to new or
changing opportunities, technologies and customer requirements.

     Fluctuations in Operating Results.   The Company expects to experience
significant fluctuations in its future quarterly operating results that may be
caused by many factors, including the addition or conclusion of significant
consulting or systems integration engagements or the acquisition of businesses.
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.

                                      -38-
<PAGE>

     Recent Net Losses and Accumulated Deficit. The Company sustained
substantial net losses during the years ended December 31, 1996, 1997 and 1998
and the nine months ended September 30, 1999.  As of September 30, 1999, the
Company had an accumulated deficit of $30,142,000.  The Company anticipates that
it will continue to incur net losses at least through all or a portion of the
remainder of 1999 and 2000, and there can be no assurance that it will be able
to achieve revenue growth or improvements to profitability on an ongoing basis
in the future.

     Liquidity Risk.  Since the beginning of the fourth quarter of 1998, the
Company's cash position declined significantly due primarily to the usage of
operating working capital to fund a portion of the retirement of a note payable
associated with the acquisition of Allin Consulting-Pennsylvania.  While the
Company's management believes the acquisition of Allin Consulting-Pennsylvania
has to date improved operating cash flow and expects this to continue, there can
be no assurance that a prolonged downturn in operations or business setbacks to
Allin Consulting-Pennsylvania or the Company's other operating entities will not
result in working capital shortages which may adversely impact the Company's
operations.  The cash decline has been mitigated somewhat by the Company
obtaining a line of credit facility during the same time period.

     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.  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.  Additionally, the Company is required to maintain
certain financial and other criteria for continued listing of the common stock
on The Nasdaq Stock Market's National Market.  There can be no assurance the
Company will be able to meet such criteria on an ongoing basis.

     Risks Inherent in Development of New Markets.  The Company's strategy
includes attempting to enter new markets for new applications for interactive
technologies on a systems integration basis.  This strategy presents risks
inherent in assessing the value of development opportunities, in committing
resources in unproven markets and in integrating and managing new technologies
and applications.  Within these new markets, the Company will encounter
competition from a variety of sources.  It is also possible that the Company
will experience delays or setbacks in developing new applications of its
technology for new markets. There can be no assurance that the Company will be
successful at penetrating new markets for applications of interactive
technology, or that any contracts obtained will generate improvements to the
Company's profitability or cash flow.  During 1998, the Company entered a new
market by offering systems integration services to professional photography
businesses.  There can be no assurance that the Company will achieve ongoing
success within this market, or that any additional business obtained will
generate improvements to the Company's profitability or cash flow.

     Risks Inherent in Development of New Products.  The Company recently
developed software interfaces and modifications for end-user operating systems
for end-user operating components from On Command to be utilized in interactive
system installations, which the Company believes could result in fundamental
improvements to the functionality of the end-user system components.  The
Company also intends to conduct research and development activities in other
areas to improve its products and systems or to extend their availability to
additional types of communication networks.  There can be no assurance, however,
that such projects will result in improved functionality of the Company's
interactive or digital imaging systems or will result in additional revenue or
improved profitability for the Company.  It is also possible that the Company
will experience delays or setbacks in the areas in which it operates. There can
also be no assurance that competitors will not develop systems and products with
superior functionality or cost advantages over the Company's new products and
applications.

     Cruise Line's Rights to Terminate Operations.  Carnival has the right to
terminate the Company's operations on its ships upon notice.  Any such
termination of operations would eliminate the Company's ability to share in
revenue produced by the affected interactive television system.  The loss or
elimination of the Company's rights to this source of revenue could have an
adverse effect on the Company's business, financial condition and results of
operations.

                                      -39-
<PAGE>

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

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

     Risk of Technological Obsolescence.  The ability of the Company to maintain
a standard of technological competitiveness is a significant factor in the
Company's strategy to maintain and expand its customer base, enter new markets
and generate revenue. The Company's success will depend in part upon its ability
to develop, refine and introduce high quality improvements in the functionality
and features of its systems 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 equipment or software systems that
could adversely affect the Company's business, financial condition and results
of operations.

     Year 2000 issue.  Currently, the Company believes that the most reasonably
likely sources of risk to the Company from the Year 2000 computer problem
include one or more of the following:  (1) reduced opportunities for technology
consulting engagements due to clients' or potential clients' Year 2000
compliance expenditures on current systems reducing available funds for new
technology projects or clients' voluntary postponement of new technology
initiatives until the full impact of the Year 2000 problem is realized; (2) the
inability of significant customers to be Year 2000 ready which could negatively
impact the Company's revenue and cash receipts or which could result in the
postponement or cancellation of major client projects due to clients' Year 2000
business disruption; (3) the possibility that Year 2000 issues develop in
interactive systems sold by the Company; (4) the possibility that disputes may
arise with clients regarding Year 2000 problems involving solutions developed or
implemented by the Company or the interaction of such solutions with other
applications; (5) the inability of principal product suppliers to be Year 2000
ready, which could result in delays in deliveries from such suppliers and (6)
the disruption of revenue production from the two interactive television systems
aboard cruise ships that the Company expects to be operating as of January 1,
2000, through failures in the systems or the failure of the cruise lines'
shipboard billing systems.  The Company's Year 2000 issues and any potential
business interruptions, costs, damages or losses related thereto are dependent,
to a significant degree, upon customers', vendors' and suppliers' identification
and remediation of deficiencies relating to the Year 2000 issue.  If the Company
is unable to successfully identify and timely remediate Year 2000 problems or
the level of timely compliance by key customers, suppliers and service providers
is not sufficient, Year 2000 failures could have a material impact on the
Company's operations including, but not limited to, increased operating costs or
other significant business disruptions.  As noted previously, the Company
believes that the Year 2000 issue has had a material adverse impact on its
technology consulting operations, particularly in the Business Operations
solutions area, during the second and third quarters of 1999 due to clients'
postponement of new technology projects.  See Year 2000 Issue above.

     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.

                                      -40-
<PAGE>

Recently Issued Accounting Standards

     In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS No. 133").  The Statement establishes
accounting and reporting standards requiring reporting of all derivative
instruments, including certain derivative instruments embedded in other
contracts, in the balance sheet as either an asset or liability measured at its
fair value.  SFAS No. 133 requires that changes in the derivative's fair value
be recognized currently in earnings unless specific hedge accounting criteria
are met.  The FASB has approved Statement No. 137, Accounting for Derivative
Instruments and Hedging Activities--Deferral of the effective date of FASB
Statement No. 133, which amends SFAS No. 133 to be effective for all fiscal
quarters of all fiscal years beginning after June 15, 2000 (that is January 1,
2001 for companies with calendar years).  Had the Company applied this standard
currently, the effect on the Company's results of operations for the period
ended September 30, 1999 would be immaterial.

                                      -41-
<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.

                                      -42-
<PAGE>

Part II - Other Information

Item 5.  Other Information

Description of Capital Stock

     The following is a description of certain provisions of the Company's
Certificate of Incorporation (the "Certificate"), By-Laws (the "By-Laws") and
Certificates of Voting Powers, Designations, Preferences and Relative,
Participating, Optional or Other Rights, and the Qualifications, Limitations, or
Restrictions Thereof of the Company's Series C Redeemable Preferred Stock,
Series D Convertible Redeemable Preferred Stock, Series E Convertible Redeemable
Preferred Stock and Series F Convertible Redeemable Preferred Stock
(collectively the "Certificates of Designation").  Such summary does not purport
to be complete and is qualified in its entirety by reference to the terms of the
foregoing documents.

General

     The Company is authorized to issue up to 20,000,000 shares of common stock,
par value $0.01 per share, and 100,000 shares of preferred stock, par value
$0.01 per share.  Certain numbers of shares of the authorized preferred stock
have been designated for issuance as series of preferred stock as follows:

 .  Series A Convertible Redeemable Preferred Stock - 40,000 shares
 .  Series B Redeemable Preferred Stock - 5,000 shares
 .  Series C Redeemable Preferred Stock - 25,000 shares
 .  Series D Convertible Redeemable Preferred Stock - 2,750 shares
 .  Series E Convertible Redeemable Preferred Stock - 2,000 shares
 .  Series F Convertible Redeemable Preferred Stock - 1,000 shares

  As of November 4, 1999, the following numbers of shares of stock were issued
  and outstanding:

 .  Common Stock - 5,987,663 shares
 .  Series C Redeemable Preferred Stock - 25,000 shares
 .  Series D Convertible Redeemable Preferred Stock - 2,750 shares
 .  Series E Convertible Redeemable Preferred Stock - 1,926 shares
 .  Series F Convertible Redeemable Preferred Stock - 1,000 shares

  The order of liquidation preference of the series of the Company's outstanding
  preferred stock, from senior to junior, is:

 .  Series E Convertible Redeemable Preferred Stock
 .  Series F Convertible Redeemable Preferred Stock
 .  Series D Convertible Redeemable Preferred Stock
 .  Series C Redeemable Preferred Stock

     There are no shares of Series A or B preferred stock currently outstanding
and none will be issued in the future.  Each of the Series C, D, E and F
preferred stock is senior on liquidation to the common stock.  Each of the
Certificates of Designation governing the Series C, D, E and F preferred stock
prohibits the Company from declaring or paying dividends or making 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.

Common Stock

     Holders of common stock are entitled to one vote for each share held of
record on all matters to be submitted to a vote of the stockholders. The
Certificate does not provide for cumulative voting for the election of

                                      -43-
<PAGE>

directors. Subject to preferences that may be applicable to any outstanding
shares of preferred stock, holders of common stock are entitled to receive
ratably such dividends, if any, as may be declared from time to time by the
Board of Directors of the Company out of funds legally available therefor. The
holders of common stock have no preemptive or other subscription rights, and
there are no conversion rights or redemption or sinking fund provisions with
respect to the common stock. All outstanding shares of common stock are fully
paid and nonassessable. In the event of any liquidation, dissolution or winding-
up of the affairs of the Company, holders of common stock will be entitled to
share ratably in the assets of the Company remaining after payment or provision
for payment of all of the Company's debts and obligations and liquidation
payments to holders of outstanding shares of preferred stock.

Series C Redeemable Preferred Stock

     The Company's Series C preferred stock has a liquidation preference of $100
per share.  There is no mandatory redemption date for the Series C preferred
stock.  Series C preferred stock earns dividends at the rate of 8% 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% per annum.  After June 30, 2006, dividends on the
Series C preferred stock will accrue and compound at a rate of 12% per annum and
will be payable quarterly, subject to legally available funds.

Series D Convertible Redeemable Preferred Stock

     The Company's Series D preferred stock has a liquidation preference of
$1,000 per share.  There is no mandatory redemption date for the Series D
preferred stock.  Series D preferred stock earns dividends at the rate of 6% per
annum, payable and compounded quarterly.  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 the number of shares of common
stock determined by dividing 1,000 by $3.6125, which is 85% of the $4.25 per
share price on the trading date prior to the date of closing of the acquisition
of Allin Consulting-Pennsylvania.

Series E Convertible Redeemable Preferred Stock

     The Company's Series E preferred stock has a liquidation preference of
$1,000 per share.  There is no mandatory redemption date for the Series E
preferred stock.  Series E preferred stock earns dividends at the rate of 6% per
annum, payable quarterly, subject to legally available funds. Series E preferred
stock is convertible to the Company's common stock.  If not redeemed by the
Company earlier, outstanding Series E preferred stock will automatically convert
as of August 13, 2000 into the number of shares of the Company's common stock
equal to the amount obtained by dividing the liquidation preference of the
outstanding shares of Series E preferred stock plus accrued and unpaid
dividends, if any, by (i) $4.406 or (ii) at the holder's option, the average of
the bid and asked prices of the common stock for the thirty days preceding
August 13, 2000, subject to a $2.00 minimum price.  Upon the happening of
certain events, the holder of Series E preferred stock will be able to convert
the shares of the Series E preferred stock into the Company's common stock prior
to August 13, 2000.

Series F Convertible Redeemable Preferred Stock

     The Company's Series F preferred stock has a liquidation preference of
$1,000 per share.  There is no mandatory redemption date for the Series F
preferred stock.  Series F preferred stock earns dividends at the rate of 7% per
annum.  The dividends will accrue until April 15, 2000, when accrued dividends
will be payable subject to legally available funds.  Dividends will be payable
quarterly thereafter, subject to legally available funds.  After April 15, 2000,
any unpaid dividends will compound quarterly.  Series F preferred stock is
convertible to the Company's Common Stock until the earlier of May 31, 2004 or
the Company's redemption of the Series F preferred shares.  Until and including
May 31, 2000, Series F preferred stock is convertible into the number of shares
of the Company's common stock equal to the amount obtained by (i) dividing 1,000
by $2.231, which is 85% of the closing price of the common stock as reported by
Nasdaq on the last trading date prior to the issuance of Series F preferred
stock or (ii) if it results in a greater number of common shares, dividing 1,000
by the greater of (a) 85% of the closing price of the common stock as reported
by Nasdaq on the last trading date prior to conversion or (b) $1.236, which is
47.1% of the closing price of the common stock as reported by Nasdaq on the last
trading date prior to the issuance of Series F preferred stock.  From June 1,
2000 until May 31, 2004, Series F preferred stock will be

                                      -44-
<PAGE>

convertible into the number of shares of the Company's common stock equal to the
amount obtained by (i) dividing 1,000 by $2.231, which is 85% of the closing
price of the common stock as reported by Nasdaq on the last trading date prior
to the issuance of Series F preferred stock or (ii) if it results in a greater
number of common shares, dividing 1,000 by the greater of (a) 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
or (b) $1.236, which is 47.1% of the closing price of the common stock as
reported by Nasdaq on the last trading date prior to the issuance of Series F
preferred stock.

Voting Rights of Outstanding Preferred Stock

  The holders of Series C, D, E and F preferred stock have no voting rights
except as provided by the Delaware General Corporation Law (the "DGCL") and
except with respect to actions which adversely affect the right and preferences
of the series set forth in the applicable Certificate of Designation.

Undesignated Preferred Stock

  The Board of Directors of the Company is authorized, without further action of
the stockholders, to issue up to 24,250 additional shares of preferred stock in
one or more classes or series and to fix the designations, powers, preferences
and the relative participating, optional or other special rights of the shares
of each series and any qualifications, limitations and restrictions thereon.
Any additional preferred stock issued by the Company may rank prior to the
Common Stock as to dividend rights, liquidation preference or both, may have
full or limited voting rights and may be convertible into shares of common
stock.

  The issuance of preferred stock could have the effect of making it more
difficult for a third party to acquire, or of discouraging a third party from
acquiring or seeking to acquire, a significant portion of the outstanding common
stock.

Certain Anti-Takeover Effects of Certificate and By-Laws Provisions

  Certain provisions of the Certificate and By-Laws summarized in the following
paragraphs may be deemed to have anti-takeover effects.  These provisions may
have the effect of discouraging a future takeover attempt which is not approved
by the Board of Directors but which individual Company stockholders may deem to
be in their best interests or in which stockholders may receive a substantial
premium for their shares over then-current market prices.  As a result,
stockholders who might desire to participate in such a transaction may not have
an opportunity to do so.  Such provisions also render the removal of the current
Board of Directors more difficult.

  Number of Directors; Removal; Filling Vacancies.  The Certificate and By-Laws
provide that the number of directors will be fixed from time to time with the
consent of the Board of Directors.  Moreover, the Certificate provides that
directors may only be removed with cause by the affirmative vote of the holders
of at least a majority of the outstanding shares of capital stock of the Company
then entitled to vote at an election of directors.  This provision prevents
stockholders from removing any incumbent director without cause and allows two-
thirds of the incumbent directors to fill any vacancies on the Board, not
already filled by the stockholders, without approval of stockholders until the
next annual meeting of stockholders at which directors are elected.

  Advance Notice of Nominations and Stockholder Proposals.  The By-Laws contain
a provision requiring advance notice by a stockholder of a proposal or director
nomination that such stockholder desires to present at any annual meeting of
stockholders, which would prevent a stockholder from making a proposal or a
director nomination at an annual meeting without the Company having advance
notice of the proposal or director nomination.  This provision could make a
change in control more difficult by providing the directors of the Company with
more time to prepare an opposition to a proposed change in control.

  Vote Requirement for Calling Special Meeting.  The By-Laws also contain a
provision requiring the vote of the holders of two-thirds of the outstanding
Common Stock in order to call a special meeting of stockholders.  This provision
would prevent a stockholder with less than a two-thirds interest from calling a
special meeting to consider a merger unless such stockholder had first obtained
adequate support from a sufficient number of other stockholders.

                                      -45-
<PAGE>

  Statutory Business Combination Provision.  The Company is subject to the
provisions of Section 203 ("Section 203") of the DGCL.  Section 203 provides,
with certain exceptions, that a Delaware corporation may not engage in any of a
broad range of business combinations with a person who is an "interested
stockholder" for a period of three years from the date that such person became
an interested stockholder unless:  (i) the transaction resulting in the person
becoming an interested stockholder, or the business combination, is approved by
the board of directors of the corporation before the person becomes an
interested stockholder; (ii) upon consummation of the transaction which resulted
in the stockholder becoming an interested stockholder,the interested stockholder
owned 85% or more of the voting stock of the corporation outstanding at the time
the transaction commenced (excluding shares owned by persons who are both
officers and directors of the corporation, and shares held by certain employee
stock ownership plans); or (iii) on or after the date the person becomes an
interested stockholder, the business combination is approved by the
corporation's board of directors and by the holders of at least 66 2/3% of the
corporation's outstanding voting stock at an annual or special meeting,
excluding shares owned by the interested stockholder.  Under Section 203, an
"interested stockholder" is defined (with certain limited exceptions) as any
person that is (i) the owner of 15% or more of the outstanding voting stock of
the corporation or (ii) an affiliate or associate of the corporation and was the
owner of 15% or more of the outstanding voting stock of the corporation at any
time within the three-year period immediately prior to the date on which it is
sought to be determined whether such person is an interested stockholder; and
the affiliates and associates of such person.

  A corporation may, at its option, exclude itself from the coverage of Section
203 by amending its certificate of incorporation or by-laws by action of its
stockholders to exempt itself from coverage, provided that such by-law or
charter amendment does not become effective until 12 months after the date it is
adopted.  Neither the Certificate nor the By-Laws contains any such exclusion.

Limitations on Liability and Indemnification of Directors and Officers

  Limitations on Liabilities.  Consistent with the DGCL, the Certificate
contains a provision eliminating or limiting liability of directors to the
Company and its stockholders for monetary damages arising from acts or omissions
in the director's capacity as a director.  The provision does not, however,
eliminate or limit the personal liability of a director (i) for any breach of
such director's duty of loyalty to the Company or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) for payment of unlawful dividends or unlawful
stock purchases or redemptions as provided in Section 174 of the DGCL or (iv)
for any transaction from which the director derived an improper personal
benefit.  This provision offers persons who serve on the Board of Directors of
the Company protection against awards of monetary damages resulting from
breaches of their fiduciary duty, except as indicated above.  As a result of
this provision, the ability of the Company or a stockholder thereof to
successfully prosecute an action against a director for a breach of his
fiduciary duties is limited.  However, the provision does not affect the
availability of equitable remedies such as an injunction or rescission based
upon a director's breach of his fiduciary duties.  The Commission has taken the
position that the provision will have no effect on claims arising under the
federal securities laws.

  Indemnification.  The Certificate and By-Laws provide for mandatory
indemnification rights to the maximum extent permitted by applicable law,
subject to limited exceptions, to any person who is involved in a legal
proceeding of any nature, by reason of the fact that he is or was a director or
officer of the Company, or while a director or officer of the Company, is or was
serving at the request of the request of the Company as a director, officer,
trustee, employee or agent of another corporation or enterprise.  Such
indemnification rights include reimbursement for expenses incurred by such
person in determining any such proceeding in advance of its final disposition in
accordance with the applicable provisions of the DGCL, provided that such person
delivers an understanding by or on behalf of such person to repay all amounts
advanced if it should ultimately be determined by final judicial decision that
such person is not entitled to be indemnified for such expenses.  The Company
also maintains directors' and officers' liability insurance.

  Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling the Company
pursuant to the foregoing provisions, the Company has been informed that in the
opinion of the Commission such indemnification is against public policy as
expressed in the Securities Act of 1933, as amended, and is therefore
unenforceable.

                                      -46-
<PAGE>

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

         (a)  Exhibits.

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


4.1      Second Amendment to Note and Loan and Security Agreement by and between
         Allin Corporation and S&T Bank, a Pennsylvania banking association.

11       Computation of Earnings per Share.

27       Financial Data Schedule

         (b)  Reports on Form 8-K.

         No report on Form 8-K was filed by the Company during the quarter
         ended September 30, 1999.

                                      -47-
<PAGE>

                                   Signatures


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


                              ALLIN CORPORATION
                              (Registrant)

Date: November 5, 1999   By:  /s/   Richard W. Talarico
                            ----------------------------
                            Richard W. Talarico
                            Chairman and Chief Executive Officer


Date: November 5, 1999   By:  /s/   Dean C. Praskach
                            ----------------------------
                            Dean C. Praskach
                            Chief Financial Officer and Chief Accounting Officer

                                      -48-
<PAGE>

Allin Corporation
Form 10-Q
September 30, 1999
Exhibit Index



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


4.1    Second Amendment to Note and Loan and Security Agreement by and between
       Allin Corporation and S&T Bank, a Pennsylvania banking association.

11     Computation of Earnings per Share

27     Financial Data Schedule

                                      -49-