<PAGE>
 
                                   FORM 10-Q
                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549



(Mark One)

( X )  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
       THE SECURITIES EXCHANGE ACT OF 1934
       For the quarterly period ended:  March 31, 1997

                                      OR

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

                       Commission file number:  0-21395

                       ALLIN COMMUNICATIONS 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.)

                 300 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 May 8, 1997

                        Common Stock,  5,184,067 Shares

                                      -1-
<PAGE>
 
                       Allin Communications Corporation

                                   Form 10-Q

                                     Index


Part I  -  Financial Information

           Item 1.  Financial Statements                                 Page 3 

           Item 2.  Management's Discussion and Analysis of Financial    Page 8
                    Condition and Results of Operations


Part II -  Other Information

           Item 6.  Exhibits and Reports on Form 8-K                     Page 15


Signatures                                                               Page 16

                                      -2-
<PAGE>
 
Part I - Financial Information

ALLIN COMMUNICATIONS CORPORATION & SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

                            (Dollars in thousands)
                         (Unaudited at March 31, 1997)

<TABLE> 
<CAPTION> 
                                                                   December 31,       March 31,
                                                                      1996              1997
                                                                 --------------    ---------------         
<S>                                                              <C>               <C>  
        ASSETS

Current assets:
    Cash and cash equivalents                                     $      16,227     $       10,674
    Accounts receivable                                                   1,169              3,171
    Inventory                                                                53                105
    Prepaid expenses                                                        477                934
                                                                 --------------    ---------------         
        Total current assets                                             17,926             14,884
                                                                                    
    Property and equipment, at cost:                                                
    Leasehold improvements                                                   48                  7
    Furniture and equipment                                               1,227              1,575
    On-board equipment                                                    4,312              4,849
    Construction-in-progress                                              2,329              3,030
                                                                 --------------    ---------------         
                                                                          7,916              9,461
    Less--accumulated depreciation                                         (911)            (1,206)
                                                                 --------------    ---------------         
                                                                          7,005              8,255
                                                                                    
    Assets held for resale                                                  624                ---
    Other assets, net of accumulated amortization of                                
        $728 and $1,264                                                   7,122              6,963
                                                                 --------------    ---------------         
                                                                                    
Total assets                                                      $      32,677     $       30,102
                                                                 ==============    ===============         



        LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
    Notes payable                                                 $          69     $           69
    Accounts payable                                                      1,768              1,976
    Accrued liabilities:
        Compensation and payroll taxes                                      233                405
        Other                                                               601                762
    Deferred revenues                                                       509                696
    Customer deposits                                                       695                ---
                                                                 --------------    ---------------         
        Total liabilities                                                 3,875              3,908

Series A convertible, redeemable preferred stock, par
    value $.01 per share - authorized 100,000 shares,
    issued and outstanding 25,000 shares                                  2,480              2,495

Shareholders' equity:
    Common stock, par value $.01 per share - authorized
        20,000,000 shares, issued and
        outstanding 5,184,067 shares                                         52                 52
    Additional paid-in-capital                                           37,905             37,905
    Deferred compensation                                                  (377)              (344)
    Retained deficit                                                    (11,258)           (13,914)
                                                                 --------------    ---------------         
        Total shareholders' equity                                       26,322             23,699
                                                                 --------------    ---------------         

Total liabilities and shareholders' equity                        $      32,677     $       30,102
                                                                 ==============    ===============         
</TABLE> 

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

                                      -3-
<PAGE>
 
ALLIN COMMUNICATIONS CORPORATION & SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

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

<TABLE> 
<CAPTION> 
                                                                      Three Months       Three Months
                                                                          Ended              Ended
                                                                        March 31,          March 31,
                                                                          1996               1997
                                                                     ---------------    ---------------
<S>                                                                  <C>                <C> 
Revenue                                                              $          79      $       4,082

Cost of sales                                                                   19              2,703
                                                                     ---------------    ---------------

Gross profit                                                                    60              1,379

Selling, general & administrative                                              759              4,148
                                                                     ---------------    ---------------

Loss from operations                                                          (699)            (2,769)

Interest expense (income), net                                                 201               (177)
                                                                     ---------------    ---------------

Loss before provision for income taxes                                        (900)            (2,592)

Provision for income taxes                                                     ---                ---
                                                                     ---------------    ---------------

Net loss                                                                      (900)            (2,592)

Accretion and dividends on preferred stock                                     ---                 64
                                                                     ---------------    ---------------

Net loss attributable to common shareholders                         $        (900)     $      (2,656)
                                                                     ===============    ===============

Net loss per common share                                             $      (0.35)     $       (0.51)
                                                                     ===============    ===============

Weighted average common and common equivalent
    shares outstanding during the period                                 2,603,385          5,184,067
                                                                     ---------------    ---------------
</TABLE> 

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

                                      -4-
<PAGE>
 
ALLIN COMMUNICATIONS CORPORATION & SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

                            (Dollars in thousands)
                                  (Unaudited)

<TABLE> 
<CAPTION> 
                                                                      Three Months       Three Months
                                                                          Ended              Ended
                                                                        March 31,          March 31,
                                                                          1996               1997
                                                                     ---------------    ---------------
<S>                                                                  <C>                <C> 
Cash flows from operating activities:
    Net loss                                                                  (900)            (2,592)
    Adjustments to reconcile net loss to net cash flows
       from operating activities:
        Depreciation and amortization                                           88                873
        Accrued interest on shareholder notes payable                          201                ---
        Amortization of deferred compensation                                  ---                 34
        Loss from sale of assets                                               ---                 17
    Changes in certain assets and liabilities:
        Accounts receivable                                                    (76)            (2,002)
        Inventory                                                              ---                (52)
        Prepaid expenses                                                       (12)              (457)
        Software development costs                                            (145)              (272)
        Other assets                                                           ---                495
        Accounts and notes payable                                             (37)               208
        Accrued liabilities                                                     72                330
        Deferred revenues                                                      ---                187
        Customer deposits                                                      ---               (695)
                                                                     ---------------    ---------------
       Net cash flows from operating activities                               (809)            (3,926)
                                                                     ---------------    ---------------

Cash flows from investing activities:
    Proceeds from sale of assets                                               ---                 23
    Capital expenditures                                                      (413)            (1,650)
                                                                     ---------------    ---------------
       Net cash flows from investing activities                               (413)            (1,627)
                                                                     ---------------    ---------------

Cash flows from financing activities:
    Proceeds from shareholder notes payable                                  1,085                ---
                                                                     ---------------    ---------------

Net change in cash and cash equivalents                                       (137)            (5,553)
Cash and cash equivalents, beginning of period                                 193             16,227
                                                                     ---------------    ---------------
Cash and cash equivalents, end of period                                        56             10,674
                                                                     ===============    ===============

</TABLE> 

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

                                      -5-
<PAGE>
 
               Allin Communications Corporation and Subsidiaries

                  Notes to Consolidated Financial Statements


1.  Basis of Presentation
    ---------------------

The information contained in these financial statements and notes for the three
month periods ended March 31, 1996 and 1997 should be read in conjunction with
the audited financial statements and notes for the years ended December 31, 1995
and 1996, contained in Allin Communication Corporation's (the "Company") Annual
Report on Form 10-K for the year ended December 31, 1996. 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.

Earnings Per Share

Earnings per share ("EPS") of common stock have been computed using the weighted
average number of common and common equivalent shares outstanding during the
period.  In periods the Company has losses, common share equivalents are not 
included as their inclusion would be anti-dilutive. For periods presented prior
to the Company's initial public offering, the weighted average number of common
and common equivalent shares include instruments convertible into common stock,
issued within one year of the initial public offering. Fully diluted EPS is
presented when it differs by more than three percent.

Financial Accounting Standards Board Statement No. 128, "Earnings Per Share"
("SFAS No. 128") was issued in February 1997 and is effective for fiscal years
beginning after December 15, 1997.  This statement, upon adoption, will require
all prior-period EPS to be restated, to conform to the provisions of the
statement.  This statement's objective is to simplify the computation of EPS and
to make the U. S. standard for EPS computations more compatible with that of the
International Accounting Standards Committee.  The Company will adopt SFAS No.
128 in fiscal 1998 and does not anticipate that the statement will have a
significant impact on its reported EPS. There are no differences in EPS
calculated under SFAS No. 128 and that presented in the Consolidated Statements
of Operations for the three month periods ended March 31, 1996 and 1997, as
calculated in accordance with Accounting Principals Bulletin No. 15, "Earnings
per Share."

Supplemental Disclosure Of Cash Flow Information

Cash payments for income taxes were $-0- and approximately $44,000 during the
three months ended March 31, 1996, and 1997, respectively.  Cash payments for
interest were $-0- and approximately $29,000 during the three months ended March
31, 1996, and 1997, respectively.

Inventory

Inventory, consisting principally of computer system hardware, components and
technical supplies, is stated at the lower of cost (determined on the first-in,
first-out method) or market.

                                      -6-
<PAGE>
 
2.  Line of Credit
    --------------

The Company has a financing agreement which provides for a line of credit that
permits maximum allowable borrowings of $7.5 million.  Borrowings bear interest
at either prime or Euro-rate plus 1-1/2% and are payable upon demand.  The
maturity date is May 31, 1997, and borrowings are guaranteed by certain
shareholders of the Company, for which they receive a guarantee fee equal to the
difference between 15% and the rate accrued on borrowings under the line of
credit.  No borrowings are permitted on the line of credit subsequent to
December 31, 1996.  There was no balance outstanding on the line of credit as of
that date or during the three months ended March 31, 1997.


3.  Equity Transactions
    -------------------

During the three months ended March 31, 1997, options to purchase 27,500 shares
of common stock were awarded under the Company's 1996 Stock Plan. There were no
other equity transactions.


4.  Subsequent Events
    -----------------

Subsequent to March 31, 1997, the following transaction has occurred:

i.  Creation and approval of the Company's 1997 Stock Plan under which up to
    300,000 shares of common stock to be awarded as stock options, stock
    appreciation rights, restricted shares and restricted units to officers,
    other employees, consultants and advisors (including non-employee
    directors) of the Company.

                                      -7-
<PAGE>
 
Item 2.


                       Allin Communications 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-month periods ended March 31, 1997 and 1996. This discussion
should be read in connection 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, 1996.

Overview

     Allin Communications Corporation (the "Company") was organized under the
laws of the State of Delaware in July 1996 to act as a holding Company for five
operating subsidiaries which will focus on particular aspects of the Company's
business: SeaVision, Inc., a Delaware corporation ("SeaVision"), PhotoWave,
Inc., a Delaware corporation ("Photowave"), SportsWave, Inc., a Pennsylvania
corporation ("SportsWave"), Kent Consulting Group, Inc., a California
corporation ("KCG"), and Netright, Inc., a California corporation ("Netright").
All such subsidiaries, as well as Allin Holdings Corporation, a Delaware
corporation and non-operating subsidiary, are wholly owned by the Company.
Unless the context otherwise requires, all references herein to the "Company"
refer to Allin Communications Corporation and its subsidiaries.

     Allin Communications Corporation is a media, technology and creative
services company, which combines advanced technology capabilities with focused
marketing skills in a variety of niche markets. The Company provides customized
ITV, digital imaging and other communications, information and media services to
users in the travel and leisure, sports marketing and promotion and other
industries. Many of these services are provided through the use of the Company's
proprietary interactive media and information platform which was created to run
on the Microsoft Windows NT operating system. The platform includes a multimedia
digital file server and Windows-based software applications, and features high
resolution and animated graphics, compressed full motion video, superior quality
audio and flexible input capacity. Unlike many other ITV platforms, the
Company's platform features rapid response and real time interfacing with a
variety of third party software and systems permitting the immediate execution
and confirmation of transactions. The platform, which received an applications
development award from Microsoft in 1995, can provide its media and imaging
services over a variety of network architectures, including the Internet,
telephone and cable television systems, and other public and private
communications networks. The Company maintains a constant focus on creating ITV
design features that emphasize ease of use and eye-catching graphics.

     The Company's ITV system offers customers a variety of interactive services
through 18 separate system modules.  Among the pay services that can be offered
are video-on-demand, music-on-demand, shopping, games of chance, event ticketing
and customized photographs using digital imaging technology.  Free-to-user
services include informational messages, account review and room service. While
free services do not currently provide revenue, they enhance the usefulness of
the system, afford the Company a competitive advantage in marketing its system,
attract users to other services offered on the Company's system and provide
potential sources of additional recurring revenue from sponsorship of various
services by advertisers and from transaction fees.  The ITV system can also
serve as a response-based marketing vehicle that can target specific audiences
for potential advertisers and can make available to service providers a variety
of other information, including activity reports and market research.

     The Company's ITV System permits a user to access the transactional and
other services offered on the system by using a handheld television remote
control to make selections from easy-to-use menus on a television screen that
may be located in a user's cruise ship cabin, hotel room or other individual
station, or in a centrally located kiosk. Users can limit access to various pay
services by utilizing lock out codes and password procedures. The system
currently operates in six languages: English, Spanish, French, Italian, German
and Portuguese.

                                      -8-
<PAGE>
 
     The Operating Subsidiaries. SeaVision was formed in June 1994 and focuses
on the travel and leisure industry. SeaVision became a subsidiary of the Company
in August 1996 through a merger. Its operations to date have involved the
development of an interactive media and information platform and the
installation and operation of ITV systems in the international cruise industry.
SeaVision has become a significant supplier of ITV systems to the cruise
industry. The Company has contracts in place to provide ITV services to each of
Carnival Cruise Lines, Celebrity Cruises, Inc., Cunard Lines Limited 
("Cunard"), Norwegian Cruise Lines and Royal Caribbean Cruises Ltd. and at March
31, 1997 had a total of seven systems in operation on cruise ships with an
annual capacity of approximately 664,000 passengers. In addition, SeaVision
offers shipboard systems integration services and in March 1997 completed
the installation of a new television distribution and broadcast system aboard
Cunard's Queen Elizabeth 2.

     PhotoWave was formed as a subsidiary of the Company in August 1996 to
pursue the development and marketing of digital imaging services, and currently
applies the Company's proprietary interactive media and information platform in
this emerging industry.

     SportsWave, formerly International Sports Marketing, Inc., was formed in
1989 and was acquired by the Company in November 1996. SportsWave provides a
full range of sports marketing and promotion services such as promotions,
premiums, corporate incentive programs and event marketing and licensing.
Additionally, SportsWave is currently developing adaptations of the Company's
interactive media and information platform for possible use in sports venues and
a mobile media center for deployment to sporting and other promotional events.

     In November 1996, Kent Consulting Group, Inc., an entity formed in 1994,
but which had been operating through a predecessor since 1983, merged with and
into a wholly owned subsidiary of the Company, which then changed its name to
Kent Consulting Group, Inc. KCG provides varied software design and network
solution services to corporate clients worldwide and supports the development
and technology efforts of the Company.

     Netright sells computer-related hardware and software, and was acquired by
the Company in November 1996 primarily to support the operations of the Company
through its purchasing capabilities and agreements with vendors. Netright's
operations are not material to the Company as a whole.

     The Company's historical results of operations reflect the operations of
SeaVision for the three-month period ended March 31, 1996 and for all companies
for the three month period ended March 31, 1997.


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

Three Months Ended March 31, 1997 compared to Three Months Ended March 31, 1996

     For the three month period ended March 31, 1997, the Company reported
revenue of $4,082,000 versus $79,000 for the three months ended March 31, 1996.
PhotoWave was formed in August 1996, and SportsWave, KCG and Netright were
acquired in November 1996. Accordingly a comparison of revenue for those
companies for the periods ended March 31, 1997 and March 31, 1996 is not
meaningful.

     As of March 31, 1997, SeaVision had installed its ITV system on nine cruise
ships and activated the system on seven ships with an annual passenger capacity
of approximately 664,000, based on their itineraries and passenger
configurations at that time. As of March 31, 1996, SeaVision had installed and
activated its ITV system on two cruise ships with an annual passenger capacity
of approximately 151,000.

     Total revenue for SeaVision for the three months ended March 31, 1997 was
$2,585,000 including $175,000 for pay-per-view movies, $105,000 for games of
chance, $2,203,000 for systems integration contracts, and $102,000 for
advertising and other revenue. For the period ended March 31, 1996, total
SeaVision revenue was $79,000, including $41,000 for pay-per-view movies, 
$37,000 for games of chance and $1,000 in other revenue.

                                      -9-
<PAGE>
 
     Direct Costs for SeaVision for the period ended March 31, 1997 were 
$1,701,000, including $68,000 for pay-per-view movies and $1,632,000 for systems
integration contracts. Direct costs for SeaVision the three months ended March
31, 1996 were $19,000 and related primarily to cost of sales for the video-on-
demand module.

     For the three months ended March 31, 1997, SportsWave realized revenues of
$733,000 and direct costs of  $508,000.  KCG, during the same period, recognized
revenues of  $693,000 with direct costs of $436,000.  NetRight had sales
totalling $65,000 with direct costs of $58,000.  PhotoWave realized $2,000 of
revenue during the period.

     During the three months ended March 31, 1997, selling, general and
administrative expenses, excluding depreciation and amortization, increased to
$3,275,000 from $671,000 for the corresponding period in 1996.  This increase
is attributable primarily to the costs of additional personnel as the Company
continued to move from the developmental stage to the implementation stage of
its ITV system as well as the addition of PhotoWave, SportsWave, KCG and
Netright. Included in selling, general and administrative expenses for the
three month period ended March 31, 1997 was $205,000 in research and development
expense. For the same period in 1996, no research and development expense was
recognized with $145,000 being capitalized. For the three months ended March 31,
1997, a total of $272,000 in research and development expense was capitalized 
related to PhotoWave operations.

     Depreciation and amortization expense increased to $873,000 during the
three months ended March 31, 1997 as compared to $88,000 in the corresponding
period in 1996, principally as a result of the completed installation of
additional ITV systems, $430,000 of amortization related to the November 1996
purchase of KCG and SportsWave, and $85,000 related to companies other than
SeaVision.

     The Company's operating loss was $2,769,000 for the three months
ended March 31, 1997, as compared to $699,000 for the three months ended March
31, 1996. This increase is attributable primarily to the costs of additional
personnel and infrastructure as the Company continued to move from the
developmental stage to the implementation stage of its ITV system in SeaVision
and supported the development of Photowave and SportsWave. The Company realized
net interest income of $177,000 for the three months ended March 31, 1997 as
compared to interest expense of $201,000 in the three months ended March 31,
1996, relating to accrued interest on stockholder loans, which was accrued but
unpaid during the period. The Company sustained a net loss of $2,592,000 during
the three months ended March 31, 1997, compared to a net loss of $900,000 for
the three months ended March 31, 1996, as a result of the increased operating
losses discussed above.

Liquidity and Capital Resources

     From its organization in June 1994 through May 31, 1996, the working
capital needs of the Company were funded through stockholder loans.  On May 31,
1996, SeaVision entered into a line of credit with Integra Bank (now National
City Bank).  The maximum amount of borrowing initially allowed under the line of
credit was $5 million, none of which was outstanding as of March 31, 1997.  On
October 28, 1996, the maximum amount of borrowing allowed under the line of
credit was increased to $7.5 million.  The amount outstanding at closing of the
initial public offering on November 6, 1996 was $6 million, which was repaid
coincident with the closing.  The initial funding under the line of credit
occurred May 31, 1996 and was in the amount of $4.3 million, $3.6 million of
which was used to repay a portion of the principal amount of stockholder loans.
The Company may choose between two rates of interest at each funding date, the
Prime Rate or the Euro-Rate (as defined in the Amended and Restated Line of
Credit Note dated October 28, 1996) plus one and one-half percent.  The
remaining amounts funded under the line of credit have been used as general
working capital in the operation of the Company. The line of credit expires on
May 31, 1997 and is guaranteed by certain stockholders of the Company.  The
guarantors are entitled to a guarantee fee from the Company equal to the
difference between 15% per annum and the rate which the Company is charged under
the terms of the line of credit.  No borrowings are permitted on the line of
credit subsequent to December 31, 1996.  There was no balance outstanding at
that date or at any time during the three months ended March 31, 1997. The 
Company is currently continuing negotiations with National City Bank and two 
other banks to provide a line of credit in an amount equal to or greater than 
the line of credit described above. There can be no assurances, however, that 
these negotiations will result in an extension of credit to the Company on terms
favorable to the Company or at all.


                                      -10-
<PAGE>
     At March 31, 1997, the Company had cash and liquid cash equivalents of
$10,674,000 available to meet its working capital and operational needs.

     The Company recognized an operating loss during the three months ended
March 31, 1997, and the Company's business will require substantial capital
investment on an ongoing basis to finance its expansion in the travel and
leisure industry and for the implementation of its business plans for PhotoWave
and the businesses acquired in November 1996. Capital expenditures were $1.7
million during the three months ended March 31, 1997. The Company expects to
incur capital expenditures of approximately $3.0 million during the remainder of
the year ending December 31, 1997 which is less than the original expectation
for 1997, as a result of an ongoing evaluation of the Company's business plan.
The actual amount and timing of the Company's capital expenditures will vary
(and such variations could be material) depending primarily upon the number of
new contracts, if any, for installation of its ITV systems and shipboard systems
integration entered into by the Company, the costs of such installations and the
rate of implementation of the PhotoWave and SportsWave business plans. The
Company currently intends to limit its cruise line installations to eleven
ships, which are expected to be completed before the end of the second quarter.
SeaVision currently is in the process of renegotiating its cruise line contracts
to include revenue from shore excursion ticket sales and other modifications
designed to improve SeaVisions ITV Platform revenue. If these negotiations are
successful, the Company will selectively continue cruise line installations.
There can be no assurances, however, that the Company will be able to
successfully renegotiate cruise line contracts for more favorable terms. The
Company has also sharply curtailed further development in SportsWave beyond the
current prototype of the VuWit project. The VuWit is a hand held wireless
interactive terminal intended for usage at arenas, stadiums and other sports
venues to retrieve sports scores and statistics, view other broadcast feeds and
advertisements, and purchase concession items. PhotoWave will emphasize
operational improvement of revenue from both its mobile digital platform as well
as fixed site event digital photography and curtail further development of its
technology until the revenue streams are proven.

     The Company believes, in light of the modifications to its business plan
discussed in the preceeding paragraph, that the net proceeds from its initial
public stock offering, together with available funds and cash flows expected to
be generated by operations, will be sufficient to meet its anticipated cash
needs for working capital and capital expenditures for at least the next 24
months. If cash generated by operations, together with the net proceeds of the
offering, were insufficient to satisfy the Company's cash requirement, the
Company would be required to consider other financing alternatives, such as
selling additional equity or debt securities or obtaining long or short-term
credit facilities, although no assurance can be given that the Company could
obtain such financing. Any sale of additional equity or convertible debt
securities would result in additional dilution to the Company's shareholders.

     SportsWave has been notified by the Major League Baseball Players Alumni
("MLBPA"), that MLBPA does not wish to renew its present contract with 
SportsWave, which expires on December 31, 1998. MLBPA has indicated, however,
that it is willing to negotiate a contract for the period beginning January 1,
1999. The Company intends to pursue negotiations with MLBPA for a contract 
renewal, although there can be no assurance that the Company will be successful 
or that the terms of any contract renewal will be favorable to the Company. The 
Company does not believe this matter will have a material adverse effect on the 
Company's business, financial condition or results of operations.


Special Note on Forward-Looking Statements

     Certain statements in the preceding discussion and analysis constitute
"forward-looking statements" within the meaning of the Federal Private
Securities Litigation Reform Act of 1995. Such forward-looking statements
involve known and unknown risks, uncertainties and other factors which may cause
the actual results, performance, or achievements of the Company to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements. Such factors include, among other
things:

                                      -11-
<PAGE>
 
     Limited Operating History. The Company was not organized until July 1996
and did not until November 1996 conduct any operations as a combined entity
consisting of the businesses of SeaVision, PhotoWave, SportsWave and KCG.
Furthermore, SeaVision has been in operation only since 1994 and has
concentrated on developing its media and information platform and ITV system and
on securing contracts to install and operate the ITV system on cruise ships. To
date, SeaVision is operating its ITV system in only seven installations, and as
a result, revenue generated by the ITV system has not been significant. Although
SeaVision, SportsWave and KCG have had prior relationships, there can be no
assurance that the Company will be able to integrate the businesses
successfully. Because SeaVision has only a limited operating history and the
Company has only a limited operating history as a combined entity, there can be
no assurance that the Company will succeed in implementing its strategy for
development and growth or that it will obtain financial returns sufficient to
justify its investment in the markets in which it participates.

     Recent Net Losses and Accumulated Deficit. The Company has sustained
substantial net losses during the years ended December 31, 1995 and 1996 and the
three months ended March 31, 1997 and, as of March 31, 1997, had an accumulated
deficit of $13.9 million. SeaVision has recognized net losses since inception in
1994 primarily because of the limited revenue generated during its start-up
phase. During the start-up phase, the Company has researched, developed and
installed the only ITV system presently in use in the cruise industry, and has
incurred substantial costs in doing so. The Company anticipates that it will
continue to incur losses at least through 1997, and there can be no assurance
that it will be able to achieve revenue growth or profitability on an ongoing
basis in the future.

     Risks Inherent in Development of New Products and Markets.  The Company's
strategy includes developing new applications for its interactive entertainment
and media and information technologies and entering new markets. This strategy
presents risks inherent in assessing the value of development opportunities, in
committing capital 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 unexpected delays or setbacks in developing new
applications of its technology. There can be no assurance that the Company's new
products and applications will generate additional revenue for the Company or
that the Company will successfully penetrate these additional markets.

     Dependence on Proprietary Technology; Absence of Patents.   The Company's
success is highly dependent upon its proprietary technology. 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.

                                      -12-
<PAGE>
 
     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 continued success will depend in part upon
its ability to identify promising emerging technologies and to develop, refine
and introduce high quality services 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.

     Need for Management of Growth. The Company's growth strategy will require
its management to conduct operations and respond to changes in technology and
the market, while substantially expanding operations and personnel. If the
Company's management is unable to manage growth 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, research and operational personnel for the management of
operations, development of new products and timely installation of its systems.
The loss of one or more of these individuals could have an adverse effect on the
Company's business and results of operations. The Company has in place key
person life insurance policies on certain of its key employees. 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.

     Dependence on Major League Sports. The Company's sports marketing and
promotion business conducted through SportsWave is dependent on the success and
continued popularity of major league sports. Factors which adversely affect
major league sports could also adversely affect the Company's business and
results of operations. For example, SportsWave's business was adversely impacted
by the players' strike and owners' lockout during the 1994 and 1995 Major League
Baseball seasons. There can be no assurance that there will be no strike or
other event with a similar adverse impact in the future involving one or more of
Major League Baseball, the National Football League, the National Basketball
Association or the National Hockey League.

     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 seasonal aspects of SportsWave's business.
Accordingly, quarterly revenues 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.

     Potential Impact of Privacy Concerns. One of the features of the Company's
ITV system is the ability to develop and maintain information regarding usage of
the system by cruise ship passengers and other parties. The perception by the
users of substantial security and privacy concerns, whether or not valid, may
cause users to resist providing the personal information that might be useful
for demographic purposes and may inhibit market acceptance and usage of the
Company's video systems. In the event such concerns are not adequately
addressed, the Company's business, financial condition and results of operations
could be materially adversely affected.

     Competitive Market Conditions. The market for interactive communications
and digital imaging is new, rapidly evolving and highly competitive. Many 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. There can 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.

                                      -13-
<PAGE>
 
     Government Regulation and Legal Uncertainties. The Company is subject, both
directly or indirectly, to various laws and governmental regulations relating to
its business. As a result of rapid technology growth and other related factors,
laws and regulations may be adopted which significantly impact the Company's
business.


Effect of Recently Issued Accounting Standards

     Financial Accounting Standards Board Statement No.128, "Earnings Per Share"
("SFAS No. 128") was issued in February 1997 and is effective for fiscal years
beginning after December 15, 1997.  This statement, upon adoption, will require
all prior-period earnings per share ("EPS") data to be restated, to conform to
the provisions of the statement.  This statement's objective is to simplify the
computation of EPS and to make the U.S. standard for EPS computations more
compatible with that of the International Accounting Standards Committee.  The
Company will adopt SFAS No. 128 in fiscal 1998 and does not anticipate that the
statement will have a significant impact on its reported EPS. There are no 
differences in EPS calculated under SFAS No. 128 and that presented in the 
Consolidated Statements of Operations for the three month periods ended March 
31, 1996 and 1997, as calculated in accordance with Accounting Principals 
Bulletin No. 15, "Earnings per Share."

     Financial Accounting Standards Board Statement No. 129, "Disclosure of
Information about Capital Structure" ("SFAS No. 129"), was issued in February
1997 and is effective for periods ending after December 15, 1997.  This
statement, upon adoption, will require all companies to provide specific
disclosure regarding the entity's capital structure.  SFAS No. 129 will specify
the disclosures, for all companies, including descriptions of the securities
comprising the capital structure and the contractual rights of the holders of
such securities.  The Company will adopt SFAS No. 129 in fiscal 1997 and does
not anticipate that the statement will have a significant impact on its
disclosures.

                                      -14-
<PAGE>
 
Part II - Other Information

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

         (a)  Exhibits.

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

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 March 31, 1997.

                                      -15-
<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 COMMUNICATIONS CORPORATION
                                  (Registrant)

Date: May 14, 1997                By:  /s/   Richard W. Talarico
                                       -------------------------
                                       Richard W. Talarico
                                       Chairman and Chief Executive Officer


Date: May 14, 1997                By:  /s/   Jon E. VanAmringe
                                       -----------------------
                                       Jon E. VanAmringe
                                       Chief Financial Officer

                                      -16-
<PAGE>
 
Allin Communications Corporation
Form 10-Q
March 31, 1997
Exhibit Index


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

11                Computation of Earnings per Share.

27                Financial Data Schedule

                                      -17-