<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, 2000

                                       OR

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

                        Commission file number:  0-21395

                               Allin Corporation
             (Exact name of registrant as specified in its charter)

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

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

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

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

                       ( X )    Yes             (   )    No

              Shares Outstanding of the Registrant's Common Stock

                             As of October 27, 2000

                        Common Stock,  6,953,114 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 17

                Condition and Results of Operations

         Item 3. Quantitative and Qualitative Disclosure about Market    Page 41
                 Sensitive Instruments


Part II -  Other Information

         Item 6.  Exhibits and Reports on Form 8-K                      Page  42

Signatures                                                              Page  43

                                      -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," 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,
                                                                                              1999                      2000
                                                                                      -------------------        -----------------
<S>                                                                                   <C>                        <C>
ASSETS

Current assets:
         Cash and cash equivalents                                                    $             1,888         $           1,443
         Accounts receivable, net of allowance for
                 doubtful accounts of $274 and $139                                                 4,134                     3,186
         Note receivable                                                                              ---                        14
         Note receivable from employee                                                                ---                        13
         Inventory                                                                                    741                     1,066
         Prepaid expenses                                                                             429                       277
                                                                                      -------------------         -----------------
                 Total current assets                                                               7,192                     5,999

Property and equipment, at cost:
Leasehold improvements                                                                                473                       478
Furniture and equipment                                                                             2,684                     3,037
On-board equipment                                                                                    951                       951
                                                                                      -------------------         -----------------
                                                                                                    4,108                     4,466
Less--accumulated depreciation                                                                     (2,607)                  ( 3,202)
                                                                                      -------------------         -----------------
                                                                                                    1,501                     1,264

Assets held for resale                                                                                 19                       109
Notes receivable from employees                                                                        17                       ---
Software development costs, net of accumulated
         amortization of $887 and $902                                                                 26                        10
Goodwill, net of accumulated amortization of
         $1,775 and $2,565                                                                         12,986                    12,196
Other assets, net of accumulated amortization of
         $522 and $708                                                                              2,285                     2,099
                                                                                      -------------------         -----------------

Total assets                                                                          $            24,026         $          21,677
                                                                                      ===================         =================

</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,
                                                                                1999                           2000
                                                                        ----------------------         ----------------------
<S>                                                                     <C>                            <C>
LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
         Current portion of notes payable                               $                   2          $                    2
         Bank lines of credit                                                             650                           1,565
         Accounts payable                                                                 665                           1,272
         Accrued liabilities:
                 Compensation and payroll taxes                                           615                             594
                 Dividends on preferred stock                                             865                           1,054
                 Other                                                                    756                             430
         Billings in excess of costs                                                      415                             245
         Deferred revenue                                                                 996                              56
                                                                        ----------------------         ----------------------
                 Total current liabilities                                              4,964                           5,218

Non-current portion of notes payable                                                    1,002                           1,000
Deferred income taxes                                                                      81                              81
Commitments and contingencies

Shareholders' equity:
         Preferred stock, par value $.01 per share, authorized
                 100,000 shares:
                 Series C redeemable preferred stock, designated,
                        issued and outstanding 25,000 shares                            2,500                           2,500
                 Series D convertible redeemable preferred stock,
                        designated, issued and outstanding
                        2,750 shares                                                    2,152                           2,152
                 Series E convertible redeemable preferred stock,
                        designated 2,000 shares, issued and
                        outstanding 1,926  and -0- shares                               1,926                             ---
                 Series F convertible redeemable preferred stock,
                        designated, issued and outstanding
                        1,000 shares                                                    1,000                           1,000
         Common stock, par value $.01 per share - authorized
                 20,000,000 shares, issued 5,995,830 and
                 6,953,114 shares                                                          60                              70
         Additional paid-in-capital                                                    40,198                          41,772
         Warrants                                                                         598                             598
         Retained deficit                                                             (30,428)                        (32,687)
         Treasury stock at cost, 8,167 common shares                                      (27)                            (27)
                                                                        ----------------------         ----------------------
Total shareholders' equity                                                             17,979                          15,378
                                                                        ----------------------         ----------------------

Total liabilities and shareholders' equity                              $              24,026          $               21,677
                                                                        ======================         ======================

</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,
                                                            1999               2000                 1999               2000
                                                      --------------     ---------------      ----------------    --------------
<S>                                                   <C>                <C>                  <C>                 <C>
Revenue                                               $        6,118     $         4,773      $        18,880     $       17,420

Cost of sales                                                  3,805               2,945               12,054             10,793
                                                      --------------     ---------------      ---------------     --------------

Gross profit                                                   2,313               1,828                6,826              6,627

Selling, general & administrative                              2,771               3,001                8,955              8,732
                                                      --------------     ---------------      ---------------    ---------------

Loss from operations                                            (458)             (1,173)              (2,129)            (2,105)

Interest expense, net                                             34                  47                  178                155
                                                      --------------     ---------------      ---------------    ---------------

Loss before provision for income taxes                          (492)             (1,220)              (2,307)            (2,260)

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

Loss after provision for income taxes                           (492)             (1,220)              (2,326)            (2,260)

Loss from non-consolidated corporation                            31                 ---                   67                ---
                                                      --------------     ---------------      ---------------    ---------------

Loss from continuing operations                                 (523)             (1,220)              (2,393)            (2,260)

Gain from discontinued operations                                ---                 ---                   (2)               ---
                                                      --------------     ---------------      ---------------    ---------------

Net loss                                                        (523)             (1,220)              (2,391)            (2,260)

Accretion and dividends on preferred stock                       152                 142                  546                449
                                                      --------------     ---------------      ---------------    ---------------

Net loss attributable to common shareholders          $         (675)    $        (1,362)     $        (2,937)   $        (2,709)
                                                      ==============     ===============      ===============    ===============

Loss per common share from continuing operations
         attributable to common shareholders -
         basic and diluted                            $        (0.11)    $         (0.21)     $         (0.49)   $         (0.44)
                                                      ==============     ===============      ===============    ===============

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

Net loss per common share attributable to common
         shareholders - basic and diluted             $        (0.11)    $         (0.21)     $         (0.49)   $         (0.44)
                                                      ==============     ===============      ===============    ===============

Weighted average shares outstanding
         - basic and diluted                               5,969,162           6,512,765            5,969,162          6,176,651
                                                      --------------     ---------------      ---------------    ---------------


</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,
                                                                                 1999                           2000
                                                                           ----------------              ----------------
<S>                                                                        <C>                           <C>
Cash flows from operating activities:
         Net loss                                                          $         (2,391)             $         (2,260)
         Adjustments to reconcile net loss to net cash flows
            from operating activities:
                 Depreciation and amortization                                        1,977                         1,607
                 Amortization of deferred compensation                                    3                           ---
                 Loss (gain) from writedown or sale of assets                            86                           (72)
                 Loss from non-consolidated corporation                                  67                           ---
                 Cost of fixed assets sold                                              102                           237
         Changes in certain assets and liabilities:
                 Accounts receivable                                                   (281)                          901
                 Inventory                                                             (355)                         (324)
                 Prepaid expenses                                                       (61)                          153
                 Assets held for sale                                                   (41)                         (109)
                 Billings in excess of costs                                           (475)                         (415)
                 Other assets                                                             6                            19
                 Accounts payable                                                       180                           607
                 Accrued liabilities                                                    392                          (338)
                 Income taxes payable                                                   (87)                          ---
                 Deferred revenues                                                    1,995                          (923)
                                                                           ----------------              ----------------
            Net cash flows from operating activities                                  1,117                          (917)
                                                                           ----------------              ----------------

Cash flows from investing activities:
         Proceeds from sale of assets                                                    36                           185
         Proceeds from note receivable related to
                 sale of subsidiary                                                     463                           ---
         Capital expenditures                                                          (283)                         (379)
                                                                           ----------------              ----------------
            Net cash flows from investing activities                                    216                          (194)
                                                                           ----------------              ----------------

Cash flows from financing activities:
         Net (repayment) borrowing on lines of credit                                (1,006)                          915
         Payment of dividends on preferred stock                                       (133)                         (247)
         Debt acquisition costs                                                          (3)                          ---
         Repayment of note payable                                                      (74)                          ---
         Repayment of capital lease obligations                                          (3)                           (2)
                                                                           ----------------              ----------------
            Net cash flows from financing activities                                 (1,219)                          666
                                                                           ----------------              ----------------

Net change in cash and cash equivalents                                                 114                          (445)
Cash and cash equivalents, beginning of period                                        2,510                         1,888
                                                                           ----------------              ----------------
Cash and cash equivalents, end of period                                   $          2,624              $          1,443
                                                                           ================              ================

</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, 1999 and 2000 should be
    read in conjunction with the audited financial statements and notes for the
    years ended December 31, 1998 and 1999, contained in Allin Corporation's
    (the "Company") Annual Report on Form 10-K for the year ended December 31,
    1999. The accompanying unaudited Consolidated Financial Statements have been
    prepared in accordance with accounting principles generally accepted in the
    United States and the rules and regulations of the Securities and Exchange
    Commission. These interim statements do not include all of the information
    and footnotes required for complete financial statements. It is management's
    opinion that all adjustments (including all normal recurring accruals)
    considered necessary for a fair presentation have been made; however,
    results for these interim periods are not necessarily indicative of results
    to be expected for the full year.

    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

    Adjustments to the gain on the September 1998 disposal of SportsWave, Inc.
    were recorded during the nine-month period ended September 30, 1999 and are
    presented after net loss from continuing operations.

    Use of Estimates in the Preparation of Financial Statements

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

    Revenue and Cost of Sales Recognition

    Allin Corporation of California ("Allin Consulting-California") and Allin
    Consulting of Pennsylvania, Inc. ("Allin Consulting-Pennsylvania") charge
    consulting fees to their clients for their technology consulting services.
    The majority of fees are charged on an hourly basis with revenue and related
    cost of sales recognized as services are performed. Revenue and cost of
    sales for fixed price projects are recognized on a percentage of completion
    basis.

    Allin Interactive Corporation's ("Allin Interactive") recognition method for
    revenue and cost of sales for systems integration services is determined
    based on the size and expected duration of the project. For systems
    integration projects in excess of $250,000 of revenue and expected to be of
    greater than 90 days duration, the Company recognizes revenue and cost of
    sales based on percentage of completion. 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 systems integration projects, revenue and cost of
    sales are recognized upon completion of the project. Revenue and cost of
    sales for fixed price consulting services are recognized on a percentage of
    completion basis. Time based consulting

                                      -8-
<PAGE>

    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 are 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.

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

    Earnings Per Share

    Earnings per share ("EPS") of common stock have been computed in accordance
    with Financial Accounting Standards Board Statement No. 128, "Earnings Per
    Share" ("SFAS No. 128"). The shares used in calculating basic and diluted
    EPS include the weighted average of the outstanding common shares of the
    Company, excluding 18,901 shares of outstanding restricted stock for the
    three- and nine-month periods ended September 30, 1999. The restriction on
    these shares of common stock lapsed in November 1999. The restricted stock,
    outstanding stock options, a convertible note 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 options and warrants
    to purchase shares that would have been considered in the calculation of
    diluted EPS, if their effect was not anti-dilutive, were 176,177 and 5,874
    for the three-month periods ended September 30, 1999 and 2000, respectively,
    and 75,351 and 35,881 for the nine-month periods ended September 30, 1999
    and 2000, 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 (determined on the average cost method) or
    market.

    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, 2000, the Company's Consolidated Balance Sheet includes
    a note payable which relates to the acquisition of Allin Consulting-
    California. The note payable is recorded at the face value of the
    instrument. The Company accrues interest at fixed rates and makes interest
    payments in accordance with the terms of the note. All other financial
    instruments are classified as current and will be utilized within the next
    operating cycle.

    Supplemental Disclosure Of Cash Flow Information

    Cash payments for income taxes were approximately $26,000 and $-0- during
    the three-month periods ended September 30, 1999 and 2000, respectively.
    Cash payments for

                                      -9-
<PAGE>

    interest were approximately $24,000 and $54,000 during the three months
    ended September 30, 1999 and 2000, respectively. Cash payments for dividends
    were approximately $51,000 and $88,000 during the three months ended
    September 30, 1999 and 2000, respectively. Dividends on preferred stock of
    approximately $138,000 and $128,000 were accrued but unpaid during the
    three-month periods ended September 30, 1999 and 2000, respectively.

    Cash payments for income taxes were approximately $223,000 and $7,000 during
    the nine-month periods ended September 30, 1999 and 2000, respectively. Cash
    payments for interest were approximately $148,000 and $497,000 during the
    nine months ended September 30, 1999 and 2000, respectively. Cash payments
    for dividends were approximately $133,000 and $247,000 during the nine
    months ended September 30, 1999 and 2000, respectively. Dividends on
    preferred stock of approximately $265,000 and $259,000 were accrued but
    unpaid during the nine-month periods ended September 30, 1999 and 2000,
    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 as of September
    30, 2000, from senior to junior, is Series F, Series D and Series C. As of
    September 30, 2000, the Company has outstanding 25,000, 2,750 and 1,000
    shares of Series C, D 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, respectively.

    On August 13, 2000, all of the 1,926 outstanding shares of the Company's
    Series E Convertible Redeemable Preferred Stock, along with approximately
    $14,000 of accrued but unpaid dividends automatically converted to 942,141
    shares of the Company's common stock. The rate of conversion was $2.06 per
    common share.

    On September 29, 2000, the Company accepted commitments for the purchase of
    125 shares of Series G Convertible Redeemable Preferred Stock and related
    warrants at a price of $10,000 per share of Series G preferred stock. The
    issuance of Series G preferred stock is subject to approval by the holders
    of the Company's common stock. The Company anticipates distribution of proxy
    solicitation materials and the holding of a special meeting of the
    stockholders during the fourth quarter of 2000 or early in the first quarter
    of 2001 to vote on this matter. If the issuance of the Series G preferred
    stock and related warrants is approved, the Company anticipates the receipt
    of net proceeds of approximately $1,200,000. If issued, the conversion
    prices of the Series G preferred stock will be as follows. Until and
    including the first anniversary of the issue date, each share of Series G
    preferred stock would be convertible into the number of shares of common
    stock determined by dividing 10,000 by the lesser of (i) $1.75, (ii) 85% of
    the average closing price of the common sock as reported by Nasdaq over the
    last five trading days prior to the issue date or (iii) 85% of the average
    closing price of the common stock as reported by Nasdaq over the last five
    trading days prior to the date of the conversion. After the first
    anniversary of the issue date, each share of Series G preferred stock held
    by each holder may be converted into the number of shares of common stock
    determined by dividing 10,000 by the lesser of (i) $1.75, (ii) 85% of the
    average closing price of the common stock as reported by Nasdaq over the
    last five trading days prior to the issue date or (iii) 85% of the average
    closing price of the common stock as reported by Nasdaq over the last five
    trading days prior to the first anniversary of the issue date. In any event,
    the minimum conversion price will be $.35. The Series G preferred stock, if
    issued, will earn dividends at a rate of eight percent per annum until the
    fifth anniversary of the issue date, after which the dividends will increase
    to twelve percent per annum. Dividends will be payable quarterly in arrears.

    If stockholder approval is obtained and the number of Series G preferred
    shares indicated above are issued, the Company also intends to issue to the
    holders of Series G preferred stock warrants to purchase an aggregate of
    714,281 shares of common stock. The warrants will be exercisable at $1.75
    per common share. The Company intends to allocate the proceeds of the
    offering between the Series G preferred stock and the related warrants.

                                      -10-
<PAGE>

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 $24,000 was recorded in July 2000
    to establish a liability for severance costs associated with the termination
    of services of a sales and managerial executive associated with the staffing
    services provided by the Company's Business Operations Solution Area.
    Associated expenses are reflected in selling, general & administrative
    expenses on the Consolidated Statement of Operations during that period. As
    of September 30, 2000, approximately $14,000 of the amount accrued under the
    July 2000 charge had been paid.

4.  Sale of Assets of Erie Computer Company

    On May 19, 2000, Allin Network sold certain assets utilized in its Erie,
    Pennsylvania operations, which used the tradename Erie Computer Company
    ("Erie Computer"), to Engage IT, Inc. ("Engage IT"). Purchase consideration
    included a note receivable for $30,000 payable over six months and accruing
    interest at 9% per annum. The note receivable was reduced by the portion of
    customer prepaid service contract fees applicable to the period subsequent
    to May 19, 2000. As of September 30, 2000, the outstanding balance of the
    note receivable was approximately $14,000. Engage IT is currently delinquent
    on the September and October 2000 note payments.


5.  Equity Transactions

    On August 13, 2000, the Company issued 942,141 shares of common stock for
    conversion of all of the 1,926 outstanding shares of the Company's Series E
    Convertible Redeemable Preferred Stock, with a liquidation preference of
    $1,000 per share, and approximately $14,000 of accrued but unpaid dividends
    on the Series E preferred stock. The conversion was based on a rate of
    approximately $2.06 per common share, which represented the average of the
    bid and asked prices of the common stock for the thirty days preceding
    August 13, 2000.

    Options to purchase a total of 112,750 shares of the Company's common stock,
    exercisable at an average exercise price of $1.99 per share, were awarded
    under the Company's 2000 Stock Plan during the three months ended September
    30, 2000. The exercise prices of the options were equal to the market prices
    at the dates of grant and range from $1.91 per share to $2.25 per share.
    Options to purchase a total of 82,750 shares will vest with respect to 20%
    of the shares subject to each grant on each of the first through fifth
    anniversaries of the grant date and the right to exercise options to
    purchase shares expires seven years from the grant date or earlier if the
    option holder ceases to be employed by the Company or a subsidiary. Of the
    remaining options granted, 10,000 vested immediately upon issuance, 10,000
    will vest May 15, 2001 and 10,000 will vest September 1, 2001. All of the
    options awarded remained outstanding at September 30, 2000.

    During the three months ended September 30, 2000, vested options to purchase
    1,640 shares and non-vested options to purchase 23,260 shares of common
    stock previously awarded under the Company's 1998 Stock Plan were forfeited
    under the terms of the Plan. Options granted under the 1998 Stock Plan to
    purchase 286,700 shares of common stock remain outstanding as of September
    30, 2000.

    During the three months ended September 30, 2000, vested options to purchase
    80 shares and non-vested options to purchase 10,240 shares of common stock
    previously awarded under the Company's 1997 Stock Plan were forfeited under
    the terms of the Plan. Options granted under the 1997 Stock Plan to purchase
    255,830 shares of common stock remain outstanding as of September 30, 2000.

                                      -11-
<PAGE>

    During the three months ended September 30, 2000, vested options to purchase
    150 shares and non-vested options to purchase 5,100 shares of common stock
    previously awarded under the Company's 1996 Stock Plan were forfeited under
    the terms of the Plan. Options granted under the 1996 Stock Plan to purchase
    197,300 shares of common stock remain outstanding as of September 30, 2000.

6.  Revolving Credit Loan

    On October 1, 1998, the Company and S&T Bank, a Pennsylvania banking
    association, entered into a Loan and Security Agreement, under which S&T
    Bank agreed to extend the Company a revolving credit loan. The original term
    of the revolving credit loan was one year and it has subsequently been
    renewed for two annual periods. The current expiration date of the revolving
    credit loan is September 30, 2001. Borrowings may be made under the S&T Loan
    Agreement for general working capital purposes. The maximum borrowing
    availability under the revolving credit loan is the lesser of $5,000,000 or
    eighty-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, 2000, maximum borrowing availability under the revolving
    credit loan was approximately $1,806,000. The outstanding balance as of
    September 30, 2000 was $1,565,000. Loans made under the revolving credit
    loan bear interest at the bank's prime interest rate plus one percent. As of
    September 30, 2000, the rate of interest on the revolving credit loan was
    10.50%.

    The revolving credit loan includes provisions granting S&T Bank a security
    interest in certain assets of the Company including its accounts receivable,
    equipment, lease rights for real property, and inventory of the Company and
    its subsidiaries. The revolving credit loan also includes reporting
    requirements regarding annual and monthly financial reports, accounts
    receivable and payable statements, weekly borrowing base certificates and
    audit reports. The revolving credit loan also includes various covenants
    relating to matters affecting the Company including insurance coverage,
    financial accounting practices, audit rights, prohibited transactions,
    dividends and stock purchases. The covenants also include a cash flow to
    interest ratio of not less than 1.0 to 1.0. Cash flow is defined as
    operating income before depreciation, amortization and interest. The cash
    flow coverage ratio is measured for each of the Company's fiscal quarters.
    S&T Bank waived the cash flow covenant requirement for the fiscal quarter
    ended September 30, 2000, which the Company would not have otherwise met.
    The waiver has also been extended for the fiscal quarter ended December 31,
    2000. The Company is in compliance with all other covenants as of September
    30, 2000.

7.  Industry Segment Information

    Basis for Determining Segments

    The Company follows Financial Accounting Standards Board Statement No. 131,
    "Disclosures about Segments of an Enterprise and Related Information" ("SFAS
    No. 131") as the basis for determining its segments. SFAS No. 131 introduces
    a new model for segment reporting called the "management approach". The
    management approach is based on the way the chief operating decision maker
    organizes segments within a company for making decisions and assessing
    performance. Segments to be reported will fall under two groups, Solution
    Area Services and Ancillary Services & Product Sales. The Company's
    operations and management's evaluations are primarily oriented around five
    solution areas: Information Technology Infrastructure, Business Operations,
    Knowledge Management, Electronic Business and Interactive Media. Solution
    Area Services comprise the substantial majority of the Company's current
    activities and are most closely associated with its strategic focus of being
    a solutions-oriented information technology consulting company. Grouping the
    solution area services in segment reporting emphasizes their commonality of
    purpose in meeting the core marketing strategy of the Company. In connection
    with its solutions-oriented services, clients will request that the Company
    also provide technology-related products necessary for implementation or
    ongoing use of technology solutions recommended and implemented by the
    solution areas. To ensure client satisfaction, the Company maintains an
    ancillary capability to provide product sales of information system
    hardware, software

                                      -12-
<PAGE>

    and equipment and supplies utilized by interactive media systems. The
    Company also continues to own and operate two interactive television systems
    as a result of a discontinued operating model. The segment group Ancillary
    Services & Product Sales will include these activities which are ancillary
    to or outside of the Company's current strategic focus.

    The reportable segments reflect aggregated solution area activity across the
    Company's subsidiaries due to the similarity in nature of services,
    production processes, types of customers and distribution methods for each
    solution area. Segments grouped as Solution Area Services include
    Information Technology Infrastructure, Business Operations, Knowledge
    Management, Electronic Business and three segments related to the
    Interactive Media Solution Area: Interactive Media Consulting, Interactive
    Media Systems Integration and Digital Imaging Systems Integration. Segments
    grouped as Ancillary Services & Product Sales include Interactive Television
    Transactional Revenue & Management Fees, Digital Photography Product Sales,
    Information System Product Sales and Other Services.

    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, 1999         30, 2000         30, 1999         30, 2000
                                               --------------------------------------------------------------------
<S>                                              <C>              <C>               <C>             <C>
Solution Area Services:
Information Technology Infrastructure                    $1,047            $  978         $ 3,180          $ 2,617
Business Operations                                       2,649             1,570           9,452            5,532
Knowledge Management                                        181               183             386              877
Electronic Business                                          48               236              78              788
Interactive Media:
    Interactive Media Consulting                            256               298             720              802
    Interactive Media Systems Integration                   883               979           1,457            3,329
    Digital Imaging Systems Integration                     234               176           1,135            1,691
                                              --------------------------------------------------------------------
Total Solution Area Services                             $5,298            $4,420         $16,408          $15,636

Ancillary Services & Product Sales:
Interactive Television Transactional Revenue
 & Management Fees                                       $  427            $   88         $ 1,453          $   346
Digital Imaging Product Sales                               269               190             494              818
Information System Product Sales                             45                36             294              403
Other Services                                               79                39             231              217
                                              --------------------------------------------------------------------
Total Ancillary Services & Product Sales                 $  820            $  353         $ 2,472          $ 1,784
                                              --------------------------------------------------------------------


Consolidated Revenue from External Customers
                                                         $6,118            $4,773         $18,880          $17,420
                                              ====================================================================
</TABLE>

                                      -13-
<PAGE>

    Certain of the Company's segments have also performed services for related
    entities in other segments. All revenue recorded for these services is
    eliminated in consolidation. The Company does not break down solution area
    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          Three               Nine            Nine
                                                         Months         Months             Months          Months
                                                         Ended          Ended               Ended           Ended
                                                       September      September           September       September
(Dollars in thousands)                                 30, 1999        30, 2000           30, 1999         30, 2000
                                              ----------------------------------------------------------------------
<S>                                              <C>               <C>               <C>              <C>
Solution Area Services                                      $ 69               $35             $214             $178
Ancillary Services & Product Sales                            49                 3              203              109
                                              ----------------------------------------------------------------------

Total Revenue from Related Entities in Other
 Segments                                                   $118               $38             $417             $287
                                              ======================================================================
</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            Months          Months            Months
                                                         Ended             Ended           Ended            Ended
                                                       September          September       September       September
(Dollars in thousands)                                 30, 1999           30, 2000        30, 1999         30, 2000
                                              ----------------------------------------------------------------------
<S>                                             <C>               <C>               <C>              <C>
Solutions Area Services:
Information Technology Infrastructure                    $  492             $  604          $1,439            $1,502
Business Operations                                         743                420           2,746             1,528
Knowledge Management                                         70                 73             154               372
Electronic Business                                          25                104              40               386
Interactive Media:
    Interactive Media Consulting                            150                200             407               504
    Interactive Media Systems Integration                   410                255             505             1,328
    Digital Imaging Systems Integration                      47                 45             242               348
                                              ----------------------------------------------------------------------
Total Solution Area Services                             $1,937             $1,701          $5,533            $5,968

Ancillary Services & Product Sales:
Interactive Television Transactional Revenue
 & Management Fees                                       $  349             $   58          $1,234            $  234
Digital Imaging Product Sales                                35                 27              67               115
Information System Product Sales                              5                  5              46               105
Other Services                                              (13)                37             (54)              205
                                              ----------------------------------------------------------------------
Total Ancillary Services & Product Sales                 $  376             $  127          $1,293            $  659
                                              ----------------------------------------------------------------------

Consolidated Gross Profit                                $2,313             $1,828          $6,826            $6,627
                                              ======================================================================
</TABLE>

                                      -14-
<PAGE>

   Assets

   Information on total assets attributable to segments is as follows:

<TABLE>
<CAPTION>
                                                                                  Total Assets
(Dollars in thousands)                                                   ------------------------------
As of September 30                                                              1999             2000
                                                                         ------------------------------
<S>                                                                      <C>              <C>
Solution Area Services:
    Information Technology Infrastructure                                      $ 7,306          $ 6,557
    Business Operations                                                         11,423            9,995
    Knowledge Management                                                           122              254
    Electronic Business                                                            242              481
    Interactive Media:
        Interactive Media Consulting                                               237              231
        Interactive Media Systems Integration                                    1,077              920
        Digital Imaging Systems Integration                                        770            1,001
                                                                     ----------------------------------
Total Solution Area Services                                                   $21,177          $19,439

Ancillary Services & Product Sales:
    Interactive Television Transactional Revenue & Management Fees             $   813          $   284
    Digital Imaging Product Sales                                                  381              564
    Information System Product Sales                                                65               76
    Other Services                                                                 126              146
                                                                     ----------------------------------
Total Ancillary Services & Product Sales                                       $ 1,385          $ 1,070

Corporate                                                                        2,622            1,168
                                                                     ----------------------------------

Consolidated Total Assets                                                      $25,184          $21,677
                                                                     ==================================
</TABLE>

                                      -15-
<PAGE>

Report of Independent Public Accountants


To the Shareholders of Allin Corporation:

We have reviewed the accompanying condensed consolidated balance sheet of Allin
Corporation (a Delaware corporation) and subsidiaries as of September 30, 2000,
the related condensed consolidated statements of income for the three and nine-
month periods ended September 30, 2000 and 1999, and the condensed consolidated
statements of cash flows for the nine-month periods ended September 30, 2000 and
1999. These financial statements are the responsibility of the Company's
management.

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

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

We have previously audited, in accordance with auditing standards generally
accepted in the United States, the consolidated balance sheet of Allin
Corporation and subsidiaries as of December 31, 1999 (not presented herein) and,
in our report dated March 8, 2000, we expressed an unqualified opinion on that
statement. In our opinion, the information set forth in the accompanying
condensed consolidated balance sheet as of December 31, 1999 is fairly stated,
in all material respects, in relation to the consolidated balance sheet from
which it has been derived.


/s/ Arthur Andersen LLP

Pittsburgh, Pennsylvania
October 25, 2000


                                      16
<PAGE>

Item 2.



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


     The following discussion and analysis by management provides information
with respect to the Company's financial condition and results of operations for
the three- and nine-month periods ended September 30, 2000 and 1999.  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, 1999,
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 "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, uncertainty as to the Company's
future profitability; fluctuations in operating results, accumulated deficit,
and liquidity; risks associated with the Company's limited operating history
under new marketing strategies, the need for management of growth and geographic
expansion; dependence on key personnel; the risks inherent in development of new
products and markets; competition in the Company's existing and potential future
lines of business and rapidly changing technology 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 teams with businesses to help them transform the promise of the
internet into practical business realities through five interrelated solution
areas:  Information Technology Infrastructure, Business Operations, Knowledge
Management, Electronic Business and Interactive Media.  The Company offers
Microsoft-focused technology consulting, application development and systems
integration services specializing in Windows NT-based and Windows 2000-based
software.  The Company maintains a customer-oriented focus in its marketing
strategy and operations.  The Company is intent on building long-term customer
relationships by providing value in the form of solutions that address specific
customer information technology needs.  In 1998, 1999 and 2000, 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, 2000, the
organizational legal structure consists of Allin Corporation, five wholly owned
operating subsidiaries and one wholly owned non-operating subsidiary.  The
operating subsidiaries are Allin Corporation of California ("Allin Consulting-
California"), Allin Consulting of Pennsylvania, Inc. ("Allin Consulting-
Pennsylvania"), Allin Interactive Corporation ("Allin Interactive"), Allin
Digital Imaging Corp. ("Allin Digital Imaging") and Allin Network Products, Inc.
("Allin Network").  Allin Holdings Corporation ("Allin Holdings") is a non-
operating subsidiary that provides treasury management services to the Company.
Allin Consulting-California and Allin Network are California corporations, Allin
Consulting-Pennsylvania is a Pennsylvania corporation and Allin Interactive,
Allin Digital and Allin Holdings are Delaware corporations.  The Company
utilizes the trade-names Allin Consulting, Allin Interactive, and Allin Digital
Imaging in its operations.  The Company is headquartered in Pittsburgh,
Pennsylvania and operates additional offices in San Jose and Walnut Creek,
California and Ft. Lauderdale, Florida.

                                      -17-
<PAGE>

     As noted previously, the Company's operations and marketing strategy are
oriented around five interrelated solution areas.  A brief description of each
solution area is as follows:

 .  The Information Technology Infrastructure Solution Area focuses on the
   underlying platforms and operating systems necessary to take advantage of the
   latest 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, monitoring
   and support of customer operating systems, management and maintenance of
   database platforms, messaging systems, information system security solutions
   such as firewalls and proxy servers, help desk support and application
   services such as message queing and transaction servers.

 .  The Business Operations Solution 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. The Company's Business Operations Solution Area also
   provides consulting and development for mainframe systems and specialized
   consulting services for the banking industry.

 .  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 Solution 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 Interactive Media Solution Area focuses on the Company's expertise in the
   digital media applications including streaming video, interactive television
   and digital imaging solutions. Interactive Media delivers business-to-
   business and business-to-consumer E-Commerce platforms. Interactive Media
   performs services on both a consulting and systems integration basis.

     The operations of each solution area are discussed in more detail below in
this Overview of Organization, Products & Markets.

     The solution area structure is defined more by a customer's use of the
services than the technological disciplines utilized in the engagement.
Management believes that this fosters a customer-oriented focus.  The Company is
intent on building long-term customer relationships by providing value in the
form of solutions that address specific customer information technology needs.
Solution area sales and operational personnel must understand a customer's
business issues to provide a customized solution for their particular needs.
The ability of customers to manage information has become a prerequisite for
their success.  A company's knowledge capital has become increasingly critical
in allowing it to react more quickly to customer needs, bring products to market
with greater speed and respond more completely and competitively to changing
business conditions.  The growing influence of the Internet in the business
arena is also fundamentally changing how businesses interact with customers and
suppliers.  The Company believes that the effective delivery of customer-
oriented technology solutions will foster the growth of long-term customer
relationships with ongoing service opportunities.  There can be no assurance,
however, that the Company will realize revenue at current or increased levels in
future periods as a result of its strategy.

     The Company's target market is emerging small- and medium-sized businesses
seeking to achieve a competitive advantage through technology.  The Company
believes that businesses with annual revenue ranging from $250 million to $1
billion afford the Company the best opportunities to offer solutions creating
value for the customers and to foster the development of long-term business
relationships.  Management believes customers of this size are more likely to
utilize Microsoft-oriented information technology than larger organizations and
that they typically have less sophisticated internal technical resources.  The
Company will not, however, limit its marketing and sales efforts solely to
customers of this size.  A major marketing initiative for 2000 is building
awareness among businesses in the Company's target market that the Company is an
organization focused on the realities of the Internet and Internet-based
business solutions.  The Information Technology Infrastructure, Business
Operations, Knowledge Management and Electronic Business Solution Areas target
horizontal markets, meaning businesses

                                      -18-
<PAGE>

across a broad spectrum of industries. Interactive Media targets certain
vertical markets where the Company believes industry conditions are conducive to
acceptance of the Company's services, including the cruise, healthcare,
education and professional photography markets. Solution area services comprise
the substantial majority of the Company's current activities, are most closely
associated with its strategic focus and have a commonality of purpose in meeting
the core strategic objectives of the Company.

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

     Management views services delivered through the managed or co-managed
methods as being solutions-oriented services because the Company is fully or
partially responsible for development and implementation of technology-based
solutions to customers' business problems.  Services delivered under the managed
or co-managed methods are viewed as the most consistent with the Company's
overall marketing strategy and business objectives.  References in this report
to solutions-oriented services mean services delivered through the managed or
co-managed methods.  Currently, virtually all of the services of the Knowledge
Management, Electronic Business and Interactive Media Solution Areas and a
substantial majority of the services of the Information Technology
Infrastructure Solutions Area are solutions-oriented services because they are
delivered on the managed or co-managed methods.  The substantial majority of
current services performed by the Business Operations Solutions Area are
delivered on the staffing method.  The Company's long-term marketing strategy
will seek development of additional solutions-oriented business in all solutions
areas.  During the first half of 2000, the Knowledge Management, Electronic
Business and Interactive Media solutions-oriented services received the
strongest marketing efforts because the Company's management believed they
offered the best short-term growth prospects and due to management's desire to
broaden the Company's service offerings.  During the second half of 2000,
Information Technology Infrastructure solutions-oriented services are receiving
strong marketing emphasis as well as Knowledge Management, Electronic Business
and Interactive Media due to management's belief that market adoption of
Microsoft Corporation's ("Microsoft") Windows 2000 and Exchange 2000 products
will generate increased demand for Information Technology Infrastructure
services.

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

 .  The Solution Vision phase delivers a Vision document that articulates the
   ultimate goals for the solution and provides clear direction to measure
   success as well as defining the scope of the solution and the boundaries of
   the project. The Solution Vision includes a risk/return assessment and a
   project plan for the remaining phases.

                                      -19-
<PAGE>

 .  The Solution Design phase culminates in the delivery and acceptance of the
   design specifications including functional specifications, system design and
   quality assurance considerations, test plan and the project plan and schedule
   for solution development.

 .  The Solution Development phase culminates in the initial delivery of a
   functionally complete solution, ready for pilot usage.

 .  The Solution Deployment phase begins with a pilot and culminates in the
   production release of the installed system, training and documentation and
   conversion of, or integration with, existing systems.

     The iterative nature of the Allin Solutions Framework has led to the
development of standardized turnkey service products, the Allin Solution
Products, that are offered on a fixed-fee basis.   Allin Solution Products allow
new or existing customers to leverage the Company's expertise for technology
assessments on a cost-controlled basis.  The Company's management believes the
Allin Solution Products will be effective introductory products to establish
relationships with new customers.  Many of the Allin Solution Products are
diagnostic in nature, allowing for demonstration of the Company's technological
expertise while identifying opportunities for implementation of more
comprehensive solutions.

     The Company has established operating relationships with some of the
leading suppliers of information technology products to complement its solution
area services.  Foremost among these is the operating relationship with
Microsoft.  Both of the Company's Allin Consulting subsidiaries are certified as
Microsoft Solutions Provider Partners. Allin Consulting is also a member of
Microsoft's Infrastructure and Knowledge Management Partner Advisory Councils.
Council members are a select group of Microsoft Solution Providers with a
successful history of implementing Microsoft information technology who work
closely with Microsoft to provide guidance on key issues that ultimately shapes
Microsoft's channel-based strategy for delivering customer solutions and
services.  The Company's role as a member of these Advisory Councils has also
positioned it to quickly develop solutions expertise in new Microsoft
technologies such as Windows 2000.  The Company intends to continue its
specialization in Microsoft-based technology products.

     Technology infrastructure is comprised of three significant components: the
physical network, the operating system and back-office applications.  The
physical network component deals with network design, network security, local
and remote access and Internet connectivity.  The operating system encompasses
all aspects of the design and implementation of a network operating system
including protocol design, policies, profiles, desktop standards, client
installation/imaging and backup schemas.  Back-office operations encompass the
design and installation of communications servers, database servers and
application servers.  Information Technology Infrastructure Solution Area
services focus on the proper selection, implementation and management of the
underlying platforms driving customers' information systems.  Services include
design, configuration, implementation, monitoring 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
Information Technology Infrastructure Solution Area services for the
client/server environment maintain a focus on Microsoft BackOffice technology
including Windows 2000, Windows NT Server, SQL Server, SNA Server, Systems
Management Server, Exchange Server and Internet Information Server.  This
solution area also creates network solutions that integrate Unix, Lotus, Oracle,
Novell and IBM mainframe systems with Windows NT-based networks.

     The Business Operations Solution Area provides custom software development
services for the client/server environment, offering a full spectrum of services
including business requirements analysis, data modeling and design, project and
technical management, programming, documentation and support.  The Business
Operations Solution 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.  Additionally, Business Operations 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.

     The Knowledge Management Solution Area focuses on five knowledge services,
collaboration, content and document management, business intelligence, search
and delivery and workflow, which enhance an organization's ability to
disseminate knowledge.  These services provide tools to empower customer
personnel with business

                                      -20-
<PAGE>

intelligence for fast and effective decision making. Knowledge Management
designs and implements solutions establishing collaborative systems that enable
enterprise-wide users to innovate through threaded decisions, document
management and workflow. Knowledge Management's solutions enable all functional
areas of an enterprise to monitor key business indicators such as sales orders,
schedules and customer requests through a knowledge base consisting of
relational data, e-mail messages, files and dynamic web content.

     The Electronic Business Solution Area provides solutions implementing
revenue-generating customer-accessible E-commerce applications, business-to-
business extranets and internally-focused intranets.  Solutions are developed
that address E-business implementation issues such as cost, value, security,
integration and interoperability.  Electronic Business develops solutions based
on Microsoft's Internet Explorer which allows software systems that support many
features of traditional client/server applications while reducing development
and deployment costs.  Electronic Business utilizes the latest Microsoft web
development tools, such as Visual Studio to develop cost effective, scalable
solutions. Electronic Business solutions include company web sites, web
catalogues, web-based customer support information, commerce enabled web
storefronts, and intranet and extranet serving of corporate databases.

     The Company's Interactive Media Solution Area utilizes the Company's
expertise in digital media applications to provide solutions based on streaming
of media, interactive television and digital imaging.  These solutions utilize
advanced technology and can help customers utilize the power of the Internet to
differentiate products and services.  Interactive Media delivers business-to-
business and business-to-consumer E-commerce platforms currently focused on four
vertical target markets:  the cruise industry, healthcare, education and
professional photography.  Interactive Media consulting services specialize in
interactive media design and specification and application development.
Management believes that the Interactive Media Solution Area is a leader in the
development of interactive television platforms.  Interactive Media currently
offers systems integration services for installation of business-to-consumer E-
commerce platforms featuring new hardware configurations utilizing state of the
art equipment from On Command Corporation ("On Command").  The On Command
equipment offers substantial functionality improvements over end-user and head
end components previously used in the Company's interactive television systems.

     The Interactive Media Solution Area also provides comprehensive systems
integration services in digital imaging technology to the professional
photography industry.  The Company believes that the Internet will be a driving
force accelerating a market trend in the professional photography industry
toward digital imaging.  The Company believes that its Interactive Media
Solution Area is on the forefront of developing Internet-based business-to-
business and business-to-consumer E-commerce solutions for the professional
photography industry.  The Company's Portraits Online proprietary Internet-based
portrait viewing and selling system allows photography customers to view and
order their portraits online at the studio following their portrait session.  In
addition, the system gives the consumer the ability to access and order their
images via the studio's Portraits Online Internet site.  There can be no
assurance, however, that competing or superior digital imaging products or
systems will not emerge which may adversely impact the Company.  The Company's
management believes the brand name "Allin Digital" utilized for its digital
imaging systems integration services has become recognized within the
professional photography industry as associated with high levels of
technological expertise and customer service.  The Interactive Media Solutions
Area's marketing strategy for digital imaging services is consequently shifting
to more closely focus on high value-added integration projects including
Portraits Online technology.  Management believes the strategic shift allows the
prospect of improved margin on digital imaging services, although there can be
no assurance that such improved margin will be realized, or that market forces
within the professional photography industry will generate sufficient demand for
high value-added services to support profitable operations.

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

                                      -21-
<PAGE>

  .  The Company continues to derive revenue for transactional interactive
     services such as pay-per-view movies and video gaming from interactive
     television operations on two cruise ships. Operations of this type
     originated when the Company followed an owner-operator model from 1995 to
     1997 for its interactive television system operations. The Company expects
     that interactive television transactional revenue to be realized in 2000
     will be significantly reduced from previous levels due to a reduction in
     the number of systems operated on this basis.

  .  Customers' operation of digital imaging systems involves the continual
     usage of consumables such as photographic paper, photographic ribbons and
     compact discs. Studios will also from time to time purchase additional
     equipment to enhance the capabilities of systems already installed or in
     response to increasing business volume. The Company views being a source of
     digital consumable supplies and ongoing equipment upgrades as an aid in
     maintaining the relationships it establishes with its digital imaging
     systems integration customers.

  .  The Company's information system product sales historically have been
     primarily obtained in connection with technology consulting engagements
     carried out by the Company's solution areas. The Company views being a
     source of information system products as a complementary service to
     solution area customers and as an aid in maintaining established
     relationships.

  .  Other services include several types of revenue not included in solution
     area revenue due to a lack of consistency with core solution area
     objectives, but which derive from activities peripheral to solution area
     activity. Examples of the types of revenue included are placement fees and
     Internet hosting fees.

Results of Operations

Three Months Ended September 30, 2000 Compared to Three Months Ended September
30, 1999

Revenue

     The Company's total revenue for the three months ended September 30, 2000
was $4,773,000, a decrease from total revenue of $6,118,000 for the three months
ended September 30, 1999.  The decrease of $1,345,000, or 21%, is attributable
primarily to a decrease in revenue for the Business Operations Solution Area of
$1,079,000 during the three months ended September 30, 2000 as compared to the
three months ended September 30, 1999 due to an industry-wide decline in the
demand for staffing-based services and the Company's strategic shift to
emphasizing the development of solutions-oriented services.  Ancillary Services
& Product Sales also experienced a significant decline in revenue of $467,000
during the third quarter of 2000 as compared to the third quarter of 1999,
primarily due to a decrease in transactional revenue and management fees
realized from operation of interactive television systems.  Significant revenue
increases of $268,000 were realized collectively between the Company's
Electronic Business and Interactive Media Solution Areas, which offset a portion
of the declines in revenue for the Business Operations Solution Area and
Ancillary Services & Product Sales.  The Company's management believes that the
third quarter 2000 revenue is consistent with the Company's strategic emphasis
on promoting solutions-oriented services.  The substantial majority of
Information Technology Infrastructure, Knowledge Management, Electronic Business
and Interactive Media Solution Area services are performed on the managed or co-
managed delivery methods which are most consistent with the Company's strategic
objectives.  Revenue for these solution areas increased by $201,000 during the
three months ended September 30, 2000 as compared to the three months ended
September 30, 1999.

     The Company's solution areas recognized revenue, after elimination of
intercompany sales, of $4,420,000 during the three months ended September 30,
2000, including $978,000 for Information Technology Infrastructure, $1,570,000
for Business Operations, $183,000 for Knowledge Management, $236,000 for
Electronic Business and $1,453,000 in Interactive Media.  Comparable solution
area revenue for the three months ended September 30, 1999 was $5,298,000 in
total, including $1,047,000 from Information Technology Infrastructure,
$2,649,000 from Business Operations, $181,000 from Knowledge Management $48,000
from Electronic Business and $1,373,000 from Interactive Media.

     Information Technology Infrastructure revenue decreased $69,000, or 7%, in
the three months ended September 30, 2000 as compared to the three months ended
September 30, 1999.  Since mid-1999, the Company has strategically reoriented
its solutions-oriented consulting offerings from primarily Information
Technology Infrastructure to a broader array of services.  The sales staff most
strongly emphasized development of Knowledge

                                      -22-
<PAGE>

Management, Electronic Business and Interactive Media revenue during most of
this period in order to broaden the Company's revenue base. The Company's
management believes the introduction of Microsoft's Windows 2000 and Exchange
2000 products have generated recent growth in Information Technology
Infrastructure revenue resulting in third quarter 2000 revenue approaching the
third quarter 1999 level. There can be no assurance, however, that the Company
will realize increases in, or maintain current levels of, revenue in the
Information Technology Infrastructure Solution Area in the future.

     The substantial decrease in Business Operations revenue of $1,079,000, or
41%, in the three months ended September 30, 2000 as compared to the three
months ended September 30, 1999 is attributable to significant declines
experienced due to industry trends during 1999 and 2000 resulting in a decline
in the demand for staffing-based services and from the Company's strategic shift
to emphasizing the development of solutions-oriented operations under the
managed or co-managed delivery methods.  The majority of Business Operations
consulting has historically been delivered through the staffing model including
most of Business Operations' mainframe computer services and specialized banking
industry consulting services.  The Company's shift in strategy toward solutions-
oriented services has also increased the emphasis placed by the sales staff on
revenue development in other solution areas.

     The Knowledge Management Solution Area experienced an increase in revenue
of $2,000, or 1%, in the three months ended September 30, 2000 as compared to
the three months ended September 30, 1999.  Management believes the performance
of this solution area since initiation of operations in 1999 confirms that a
market exists for solutions based on key knowledge services including
collaboration, content and document management, business intelligence, search
and delivery and workflow.  Management believes the business opportunities
obtained to date for Knowledge Management services have been consistent with the
Company's solutions-oriented strategy.  There can be no assurance, however, that
the Company will realize increases in, or maintain current levels of, Knowledge
Management revenue in the future.

     The Electronic Business Solution Area recorded a revenue increase of
$188,000, or 392% for the three months ended September 30, 2000 as compared with
the three months ended September 30, 1999.  As was discussed in the Industry
Overview - Technology Consulting Services section in Part 1 - Business of the
Company's Annual Report on Form 10-K for the year ended December 31, 1999, the
Internet is viewed by industry analysts as the next significant wave of
technological and business innovation, with Internet-related business activity
expected to grow significantly over the early years of the 2000's.  Internet-
based technology consulting is also expected to share in the rapid growth.  The
Company's management believes that the compelling market forces represent an
opportunity for growth in Electronic Business and that the revenue realized in
third quarter of 2000 as compared to the third quarter of 1999 supports this
assessment.  The Company is committed to further development of this solution
area in 2000 and 2001 with additional technical and sales resources.  There can
be no assurance, however, that the Company will realize revenue equal to or
greater than current levels for its Electronic Business Solution Area in the
future.

     Interactive Media Solution Area revenue totaled $1,453,000 for the three
months ended September 30, 2000, including $298,000 for interactive media
consulting, $979,000 for interactive media systems integration and $176,000 for
digital imaging systems integration.  Comparable Interactive Media revenue for
the three months ended September 30, 1999 was $1,373,000 in total, including
$256,000 for interactive media consulting, $883,000 for interactive media
systems integration, and $234,000 for digital imaging systems integration.  The
increase in revenue for this solution area was 6% comparing the third quarter of
2000 to the third quarter of 1999.

     Revenue for Interactive Media consulting services increased by $42,000, or
16%, comparing the third quarter of 2000 to the third quarter of 1999.  Services
provided include application design and development for business-to-consumer E-
business platforms.  The Company's management believes the growth of interactive
media technology in the markets targeted by the Interactive Media Solution Area
and the Company's extensive experience with interactive technology continue to
offer the opportunity for revenue growth. There can be no assurance, however,
that the Company's Interactive Media Solution Area will realize consulting
revenue equal to or greater than current levels in the future.

     Revenue for Interactive Media systems integration services increased by
$96,000, or 11%, in the three months ended September 30, 2000 as compared to the
three months ended September 30, 1999.  The most

                                      -23-
<PAGE>

significant source of revenue during the third quarter of 2000 was the
interactive television system being installed on the Royal Caribbean Cruise
Lines, Ltd. ("Royal Caribbean") ship Explorer of the Seas.

     Digital imaging systems integration revenue decreased by $58,000, or 25%,
in the three months ended September 30, 2000 as compared to the three months
ended September 30, 1999.  As was noted in the Overview of Organization,
Products & Markets, the Interactive Media Solutions Area initiated a shift in
marketing strategy for digital imaging services in the third quarter of 2000 to
more closely focus on high value-added integration projects including Portraits
Online technology.  Management believes the strategic shift allows the prospect
of improved margin on digital imaging services in the future, although there can
be no assurance that such improved margin will be realized, or that market
forces within the professional photography industry will generate sufficient
demand for high value-added services to support profitable operations
Management believes, however, that the effort devoted to developing and
implementing the strategy changes adversely impacted revenue production in the
third quarter of 2000.

     The Company recognized revenue for ancillary services and product sales of
$353,000 during the three months ended September 30, 2000, including $88,000 for
interactive television transactional revenue, $190,000 for digital imaging
product sales, $36,000 for information system product sales and $39,000 for
other services.  Ancillary services and product sales revenue of $820,000 was
recognized during the three months ended September 30, 1999, including $427,000
for interactive television transactional revenue & management fees, $269,000 for
digital imaging product sales, $45,000 for information system product sales and
$79,000 for other services.

     Interactive television transactional revenue & management fees decreased by
$339,000, or 79%, in the three months ended September 30, 2000 as compared to
the three months ended September 30, 1999.  The revenue decrease is attributable
to the Company's transition from an owner-operator model for interactive
television systems to a systems integration and consulting services model.
During the third quarter of 1999, the Company earned transactional revenue and
management fees from seven shipboard interactive television systems for a
portion or all of the quarter.  During the third quarter of 2000, transactional
revenue was earned from only two systems. Management fees were not earned during
2000 on the systems remaining in operation.  The Company believes the
transactional revenue realized from these remaining systems justifies their
continued operation.  Digital imaging product sales decreased by $79,000, or
29%, in the third quarter of 2000 as compared to the third quarter of 1999.  The
Company is de-emphasizing isolated sales of digital imaging products as a part
of the strategic changes in its digital imaging operations.  Information system
product sale revenue decreased by $9,000 in the three months ended September 30,
2000 as compared to the three months ended September 30, 1999.  Revenue from
other services decreased by $40,000 in the third quarter of 2000 as compared to
the third quarter of 1999.  Revenue from the latter two segments was
insignificant in both periods.

Cost of Sales and Gross Profit

     The Company recognized cost of sales of $2,945,000 during the three months
ended September 30, 2000 as compared to $3,805,000 during the three months ended
September 30, 1999.  The decrease in cost of sales of $860,000 resulted
primarily from a $756,000 decrease in cost of sales for the Company's Business
Operations Solution Area, which was attributable to the substantial revenue
decrease in this solution area comparing the third quarter of 2000 to the third
quarter of 1999.  Gross profit of $1,828,000 was recognized for the three months
ended September 30, 2000 as compared to $2,313,000 for the three months ended
September 30, 1999, a decrease of $485,000, or 21%.

     The Company's solution areas recorded a total of $2,719,000 for cost of
sales during the three months ended September 30, 2000, including $374,000 for
Information Technology Infrastructure, $1,150,000 for Business Operations,
$110,000 for Knowledge Management, $132,000 for Electronic Business and $953,000
for Interactive Media.  Comparable cost of sales for the three months ended
September 30, 1999 was $3,361,000 in total, including $555,000 for Information
Technology Infrastructure, $1,906,000 for Business Operations, $111,000 for
Knowledge Management, $23,000 for Electronic Business and $766,000 for
Interactive Media.  Increases or decreases in cost of sales are also
attributable to the factors that resulted in changes in revenue for these
services, including growth in the solutions-oriented consulting and systems
integration services provided by the Electronic Business and Interactive Media
Solution Areas and the decline in Business Operations services provided on a
staffing delivery method.  Gross profit for the Company's solution areas for the
three months ended September 30, 2000 was $1,701,000,

                                      -24-
<PAGE>

including $604,000 for Information Technology Infrastructure, $420,000 for
Business Operations, $73,000 for Knowledge Management, $104,000 for Electronic
Business and $500,000 for Interactive Media. Comparable gross profit for the
three months ended September 30, 1999 was $1,937,000 in total, including
$492,000 for Information Technology Infrastructure, $743,000 for Business
Operations, $70,000 for Knowledge Management, $25,000 for Electronic Business
and $607,000 for Interactive Media. The primary factor in the decrease in
solution area gross profit of $236,000 in the third quarter of 2000 as compared
to the third quarter of 1999 was the substantial decline in gross profit of
$323,000 from Business Operations consulting. The gross profit generated by the
other solution areas increased by $87,000 comparing the third quarter of 2000 to
the third quarter of 1999. The solution areas' collective improvement in gross
profit as a percentage of revenue was approximately 2% period to period which
partially mitigated the decline in revenue.

     Information Technology Infrastructure gross profit increased $112,000 in
the three months ended September 30, 2000 as compared to the three months ended
September 30, 1999.  The Company experienced a 23% increase in gross profit in
the third quarter of 2000 as compared to the third quarter of 1999 despite a 7%
revenue decline.  The increase in gross profit as a percentage of revenue was
realized through growth in high-margin solutions-oriented projects, in part
attributable to growth in demand for services related to the introduction of
Microsoft's Windows 2000 and Exchange 2000 products.

     The Business Operations Solution Area experienced a decrease in gross
profit of $323,000 in the three months ended September 30, 2000 as compared to
the three months ended September 30, 1999.  The Company attributes the decline
to lessened demand for mainframe-oriented technology services and the Company's
specialized bank consulting services consistent with an overall industry trend
away from technology consulting services provided on a staffing model.  The
Company is also emphasizing other solutions-oriented services more strongly in
its sales and marketing efforts.

     The Knowledge Management Solution Area realized a gross profit increase of
$3,000 in the three months ended September 30, 2000 as compared to the three
months ended September 30, 1999.  The increase represents an increase in gross
profit as a percentage of revenue of 1% on comparable period-to-period revenue
levels.

     The Electronic Business Solution Area realized an increase in gross profit
of $79,000, or 316%, in the third quarter of 2000 as compared to the third
quarter of 1999.  The Company has added technical and sales resources to this
solution area in 2000 because of management's belief that there will be
substantial market-driven growth in the demand for Internet-based technology
services in the early years of the 2000's.  Management believes that the third
quarter 2000 results indicate the continued progress of the Electronic Business
Solution Area toward becoming a significant source of high-margin growth for the
Company.  There can be no assurance, however, that the Company will be able to
realize continued growth in revenue or gross profit from its Electronic Business
Solution Area services.

     Cost of sales for the Interactive Media Solution Area was $953,000 in total
for the three months ended September 30, 2000, including $98,000 for interactive
media consulting, $724,000 for interactive media systems integration and
$131,000 for digital imaging systems integration.  Interactive Media cost of
sales for the three months ended September 30, 1999 was $766,000 in total,
including $106,000 for interactive media consulting, $473,000 for interactive
media systems integration and $187,000 for digital imaging systems integration.
Interactive Media Solution Area gross profit was $500,000 for the three months
ended September 30, 2000, including $200,000 for interactive media consulting,
$255,000 for interactive media systems integration and $45,000 for digital
imaging systems integration.  Interactive Media gross profit was $607,000 for
the three months ended September 30, 1999, including $150,000 for interactive
media consulting, $410,000 for interactive media systems integration and $47,000
for digital imaging systems integration.  The decrease in gross profit is
attributable to the inclusion in the third quarter of 1999 of a portion of the
gross profit of approximately $248,000 resulting from the sale of four
interactive television systems to Celebrity Cruises, Inc. ("Celebrity").  These
systems had previously been owned and operated by Allin Interactive since the
installation of the systems at various times from 1995 to 1997.  Consequently,
the equipment had been substantially depreciated during the period of Allin
Interactive's ownership, resulting in an unusually low system cost upon sale.

     Cost of sales for the Company's ancillary services and product sales was
$226,000 for the three months ended September 30, 2000, including $30,000 for
pay-per-view movies associated with interactive television

                                      -25-
<PAGE>

transactional revenue, $163,000 for digital imaging product sales, $31,000 for
information system product sales and $2,000 for other services. Cost of sales
for ancillary services and product sales was $444,000 for the three months ended
September 30, 1999, including $78,000 for pay-per-view movies, $234,000 for
digital imaging product sales, $40,000 for information system product sales and
$92,000 for other services. Gross profit on ancillary services and product sales
was $127,000 for the three months ended September 30, 2000, including $58,000
for interactive television transactional revenue, $27,000 for digital imaging
product sales, $5,000 for information system product sales and $37,000 for other
services. Gross profit for ancillary services and product sales was $376,000 for
the three months ended September 30, 1999, including $349,000 for interactive
television transactional revenue and management fees, $35,000 for digital
imaging product sales, $5,000 for information system product sales and a gross
loss of $13,000 for other services. The decline in gross profit of $291,000 on
interactive television transactional revenue and management fees was primarily
attributable to the reduction in the number of operating ship systems from seven
to two.

Selling, General & Administrative Expenses

     The Company recorded $3,001,000 in selling, general & administrative
expenses during the three months ended September 30, 2000 as compared to
$2,771,000 during the three months ended September 30, 1999, an increase of
$230,000, or 8%.  Several factors contributed to the increase in selling,
general and administrative expenses.  Since mid-1999, the Company has invested
significantly in sales and delivery resources for its solutions-oriented
operations, which has improved the Company's operational, managerial and
marketing capabilities.  The investments have also resulted in increased
compensation expense in the third quarter of 2000 as compared to the third
quarter of 1999.  Another contributing factor to the selling, general &
administrative expense increase is higher recruitment costs in 2000.  The
increasing proportion of solutions-oriented consulting services in the Company's
operations has required a greater need for operational personnel with superior
technical knowledge and capabilities, with a resultant increase in recruiting
costs for the Company.  The Company plans to continue investments in those
segments of its business that management believes are most closely aligned with
the Company's strategic objectives.

     During the third quarter of 2000, the Company recorded an accrual of
approximately $24,000 for severance costs associated with a sales and managerial
executive associated with the staffing services provided by the Company's
Business Operations Solution Area .  There was no comparable expense during the
third quarter of 1999.

     Depreciation and amortization were $530,000 for the three months ended
September 30, 2000 as compared to $730,000 for the three months ended September
30, 1999.  The decline is due to the inclusion of depreciation expense during
the third quarter of 1999 for four shipboard interactive television systems sold
to Celebrity.

     Research and development expense included in selling, general &
administrative expenses was $17,000 for the three months ended September 30,
2000 as compared to $27,000 for the three months ended September 30, 1999.
Research and development activity during the third quarter of 2000 was carried
out by the Interactive Media Solution Area and included continuing development
of the Portraits Online Internet-based E-Commerce platform and development
activities associated with On Command's equipment platform, which is utilized by
the Company for interactive media systems integration projects.

Net Income or Loss

     For the three months ended September 30, 2000, the Company recorded a net
loss of $1,220,000, as compared to a net loss of $523,000 for the three months
ended September 30, 1999.  The increased net loss resulted from both significant
declines in revenue and gross profit in the third quarter of 2000 as compared to
the third quarter of 1999 and an increase in selling, general & administrative
expenses from period-to-period.  The result was an overall profitability decline
of $697,000, or 133%.

                                      -26-
<PAGE>

Results of Operations

Nine Months Ended September 30, 2000 Compared to nine Months Ended September 30,
1999

Revenue

     The Company's total revenue for the nine months ended September 30, 2000
was $17,420,000, as compared to total revenue of $18,880,000 for the nine months
ended September 30, 1999, a decrease of $1,460,000, or 8%.  The revenue decline
included offsetting effects of substantial revenue increases or decreases for
certain solution areas and other segments of the Company's operations.  The
Interactive Media Solution Area recorded a revenue increase of $2,510,000 during
the first nine months of 2000 as compared to the first nine months of 1999 due
to substantial revenue increases from sales of shipboard interactive television
systems and digital photography systems integration projects.  The Electronic
Business and Knowledge Management Solution Areas collectively recorded a revenue
increase of $1,201,000 in comparing the nine months ended September 30, 2000 to
the nine months ended September 30, 1999.  The Company's management believes
these results are consistent with the Company's strategy to promote the
development of solutions-oriented technology consulting services.  The revenue
increases realized by these solution areas were more than offset by declines in
other solution areas and in ancillary services.  The Business Operations
Solution Area experienced a decline in revenue of $3,920,000 during the nine
months ended September 30, 2000 as compared to the nine months ended September
30, 2000 due to an industry-wide decline in the demand for staffing-based
services and the Company's strategic shift to emphasize the development of
solutions-oriented services.  Information Technology Infrastructure also
experienced a decline in revenue of $563,000 during the nine months ended
September 30, 2000 as compared to the nine months ended September 30, 1999.  A
substantial revenue decrease of $1,107,000 was also noted in comparing
Interactive Television Transactional Revenue & Management Fees for the nine
months ended September 30, 1999 to the nine months ended September 30, 2000
primarily due to a reduction in the number of operating ship systems.

     The Company's solution areas recognized revenue, after elimination of
intercompany sales, of $15,636,000 during the nine months ended September 30,
2000, including $2,617,000 for Information Technology Infrastructure, $5,532,000
for Business Operations, $877,000 for Knowledge Management, $788,000 for
Electronic Business and $5,822,000 in Interactive Media.  Comparable solution
area revenue for the nine months ended September 30, 1999 was $16,408,000 in
total, including $3,180,000 from Information Technology Infrastructure,
$9,452,000 from Business Operations, $386,000 from Knowledge Management, $78,000
from Electronic Business, and $3,312,000 from Interactive Media.

     Information Technology Infrastructure revenue decreased $563,000, or 18%,
in the nine months ended September 30, 2000 as compared to the nine months ended
September 30, 1999.  The decline is attributable to several factors.  Allin
Consulting-California experienced a significant decline in its technical
workforce of close to 10% during the second quarter of 2000 due to a client
hiring several of Allin Consulting-California's consultants in violation of
agreement terms.  This loss in workforce reduced the Company's capacity for
Information Technology Infrastructure engagements during the second quarter,
when the majority of the decline was realized.  Beginning in mid-1999, the
Company has also strategically reoriented its solutions-oriented consulting
offerings from primarily Information Technology Infrastructure to a broader
array of services.  The solutions-oriented sales staff emphasized development of
Knowledge Management and Electronic Business revenue during this time in order
to broaden the Company's revenue base.  The Company's management believes market
forces are offering opportunities for increased Information System
Infrastructure sales in the future, including the introduction of Windows 2000
and Exchange 2000 and the need for companies to improve their technical
infrastructure to support Internet-driven business capabilities.  There can be
no assurance, however, that the Company will realize increases in, or maintain
current levels of, revenue in the Information Technology Infrastructure Solution
Area in the future.

     The substantial decrease in Business Operations revenue of $3,920,000, or
41%, in the nine months ended September 30, 2000 as compared to the nine months
ended September 30, 1999 is attributable to significant declines experienced due
to industry-wide declines in the demand for technology staffing services and
from the Company's strategic shift to emphasizing the development of solutions-
oriented operations under the managed or co-managed delivery methods.  The
majority of Business Operations consulting has historically been delivered
through the staffing model including most of Business Operations' mainframe
computer services and specialized banking

                                      -27-
<PAGE>

industry consulting services. As was discussed in the Industry Overview -
Technology Consulting Services section in Item 1 - Business of the Company's
Annual Report on Form 10-K for the year ended December 31, 1999, the Year 2000
problem negatively impacted demand for technology consulting services industry-
wide throughout 1999. The largest declines in demand for technology consulting
services were noted for technology staffing operations. Business Operations
revenue has not recovered from this industry trend in 2000, as the level of
demand for staffing services continued to be low. The Company's shift in
strategy toward solutions-oriented services has also increased the emphasis
placed by the sales staff on revenue development in other solution areas.

     The Knowledge Management Solution Area experienced an increase in revenue
of $491,000, or 127%, in the nine months ended September 30, 2000 as compared to
the nine months ended September 30, 1999.  The second quarter of 1999 was the
initial period of operations for the Knowledge Management Solution Area, so 1999
revenue included six months' activity as compared to nine months' activity
during 2000.  Management believes the performance of this solution area in its
operations to date confirms that a market exists for solutions based on key
knowledge services including collaboration, content and document management,
business intelligence, search and delivery and workflow.  Management believes
the business opportunities obtained to date for Knowledge Management services
have been consistent with the Company's solutions-oriented strategy and have
contributed to the increase in solutions-oriented revenue realized in the first
nine months of 2000 as compared to the first nine months of 1999.  There can be
no assurance, however, that the Company will realize increases in, or maintain
current levels of, Knowledge Management revenue in the future.

     The Electronic Business Solution Area recorded a revenue increase of
$710,000, or 910%, for the nine months ended September 30, 2000 as compared with
the nine months ended September 30, 1999.  The Company's management believes
that growth of Internet-related business activity is creating compelling market
forces driving an opportunity for growth in the types of Internet-based
technology consulting services offered by the Electronic Business Solution Area.
The Company is committed to further development of this solution area during the
remainder of 2000 and 2001 with additional technical and marketing resources.
There can be no assurance, however, that the Company will realize revenue equal
to or greater than current levels for its Electronic Business Solution Area in
the future.

     Interactive Media Solution Area revenue totaled $5,822,000 for the nine
months ended September 30, 2000, including $802,000 for interactive media
consulting, $3,329,000 for interactive media systems integration and $1,691,000
for digital imaging systems integration.  Comparable Interactive Media revenue
for the nine months ended September 30, 1999 was $3,312,000 in total, including
$720,000 for interactive media consulting, $1,457,000 for interactive media
systems integration, and $1,135,000 for digital imaging systems integration.
The increase in revenue was 76% for this solution area comparing the first nine
months of 2000 to the first nine months of 1999.

     Revenue for Interactive Media consulting services increased by $82,000, or
11%, comparing the first nine months of 2000 to the first nine months of 1999.
Services provided include application design and development for business-to-
consumer E-business platforms.  The majority of the consulting revenue derived
in the first nine months of 1999 related to application development for the
interactive television system for the Royal Caribbean ship Voyager of the Seas.
This was the first system developed for this cruise line utilizing the On
Command hardware platform, which resulted in a sizeable engagement for
applications development.  Revenue recorded in the first nine months of 2000 has
come from a more diverse base of projects including development of cruise and
healthcare industry interactive media applications and from maintenance and
support for previously installed interactive systems.  The Company's management
believes the growth of interactive media technology in the markets targeted by
the Interactive Media Solution Area and the Company's extensive experience with
interactive technology continue to offer the opportunity for revenue growth.
There can be no assurance, however, that the Company's Interactive Media
Solution Area will realize consulting revenue equal to or greater than current
levels in the future.

     Revenue for Interactive Media systems integration services increased by
$1,872,000, or 128%, in the nine months ended September 30, 2000 as compared to
the nine months ended September 30, 1999.  A substantial portion of the increase
in revenue in the first nine months of 2000 was the result of revenue
recognition from the 1999 sale of four shipboard interactive television systems
to Celebrity.  The Celebrity ship systems had been installed from 1995 to 1997
on an owner-operator model followed by the Company at that time.  Revenue from
the Celebrity system sales was recognized over the minimum period of a related
maintenance obligation for the systems, which began upon the system sales in
August and September 1999 and ended March 17, 2000.  The revenue

                                      -28-
<PAGE>

increase is also attributable to the inclusion of interactive media systems
integration projects for healthcare and educational institutions in the first
nine months of 2000. There were no comparable projects in these targeted
industries in the first nine months of 1999.

     Digital imaging systems integration revenue increased by $556,000, or 49%,
in the nine months ended September 30, 2000 as compared to the nine months ended
September 30, 1999.  The Company's management believes the increase in revenue
resulted from the efforts of a larger internal sales force and greater industry
recognition of the Company's services as a result of advertising and trade show
presentations, which the Company's management believes are creating brand
awareness for Allin Digital in the portrait photography industry.  The Company
revised its marketing strategy for digital imaging systems integration services
during the third quarter of 2000 to more closely focus on high value-added
projects including business-to-business and business-to-consumer E-commerce
solutions.

     The Company recognized revenue for ancillary services and product sales of
$1,784,000 during the nine months ended September 30, 2000, including $346,000
for interactive television transactional revenue, $818,000 for digital imaging
product sales, $403,000 for information system product sales and $217,000 for
other services.  Ancillary services and product sales revenue of $2,472,000 was
recognized during the nine months ended September 30, 1999, including $1,453,000
for interactive television transactional revenue & management fees, $494,000 for
digital imaging product sales, $294,000 for information system product sales and
$231,000 for other services.

     Interactive television transactional revenue decreased by $1,107,000, or
76%, in the nine months ended September 30, 2000 as compared to the nine months
ended September 30, 1999.  The revenue decrease is attributable to the Company's
transition from an owner-operator model for interactive television systems to a
systems integration and consulting services model.  The Company began 1999
operating interactive television systems on eight ships and ended the year
operating two of the systems.  Management fees were not earned during 2000 on
the systems remaining in operation.  The Company believes the transactional
revenue realized from these remaining systems justifies their continued
operation.  Digital imaging product sales increased by $324,000, or 66%, in the
first nine months of 2000 as compared to the first nine months of 1999.  The
Company derives the majority of this revenue from the sale of consumable
products and equipment utilized in the digital photography process to customers
for which the Company had previously installed a digital imaging system.  The
increase in revenue in the 2000 period resulted from a substantially larger base
of customers with installed systems than had been present in the 1999 period.
Revenue increases for this segment may not continue to be realized, however, as
isolated sales of digital imaging products are being de-emphasized under the new
marketing strategy for the professional photography vertical market.
Information system product sale revenue increased by $109,000, or 37%, in the
nine months ended September 30, 2000 as compared to the nine months ended
September 30, 1999.  The most significant factor contributing to the increase
was the inclusion of approximately four months' operating activity in 2000 for
the Company's Erie Computer operations, prior to the sale of assets related to
these operations in May 2000.  A substantial portion of Erie Computer's revenue
was derived from information system product sales.  Revenue from other services
decreased by $14,000 in the first nine months of 2000 as compared to the first
nine months of 1999.

Cost of Sales and Gross Profit

     The Company recognized cost of sales of $10,793,000 during the nine months
ended September 30, 2000 as compared to $12,054,000 during the nine months ended
September 30, 1999.  The decrease in cost of sales of $1,261,000, or 10%,
resulted from a combination of significant increases or decreases among the
Company's solution areas.  The rate of decrease in cost of sales of 10% exceeded
the rate of decrease in revenue, which was 8%.  The Company's management
attributes this to the strategic shift in emphasis from lower-margin services
based on a staffing delivery model to higher-margin solutions-oriented services.
Gross profit of $6,627,000 was recognized for the nine months ended September
30, 2000 as compared to $6,826,000 for the nine months ended September 30, 1999,
a decrease of $199,000, or 3%.

     The Company's solution areas recorded a total of $9,668,000 for cost of
sales during the nine months ended September 30, 2000, including $1,115,000 for
Information Technology Infrastructure, $4,004,000 for Business Operations,
$505,000 for Knowledge Management, $402,000 for Electronic Business and
$3,642,000 for Interactive Media.  Comparable cost of sales for the nine months
ended September 30, 1999 was $10,875,000 in total, including $1,741,000 for
Information Technology Infrastructure, $6,706,000 for Business Operations,
$232,000 for

                                      -29-
<PAGE>

Knowledge Management, $38,000 for Electronic Business and $2,158,000 for
Interactive Media. Increases or decreases in cost of sales are also attributable
to the factors that resulted in changes in revenue for these services, including
growth in the solutions-oriented consulting and systems integration services
provided by the Knowledge Management, Electronic Business and Interactive Media
Solution Areas, the decline in Business Operations services provided on a
staffing delivery method and the decline in Information Technology
Infrastructure consulting due to a loss in workforce capacity and broadening of
marketing focus. Gross profit for the Company's solution areas for the nine
months ended September 30, 2000 was $5,968,000, including $1,502,000 for
Information Technology Infrastructure, $1,528,000 for Business Operations,
$372,000 for Knowledge Management, $386,000 for Electronic Business and
$2,180,000 for Interactive Media. Comparable gross profit for the nine months
ended September 30, 1999 was $5,533,000 in total, including $1,439,000 for
Information Technology Infrastructure, $2,746,000 for Business Operations,
$154,000 for Knowledge Management, $40,000 for Electronic Business and
$1,154,000 for Interactive Media. The primary factor in the increase in solution
area gross profit of $435,000 in the first nine months of 2000 as compared to
the first nine months of 1999 was the strategic transition toward higher-margin
solutions-oriented services. The Company experienced substantial growth in
revenue from solutions-oriented services provided by the Knowledge Management,
Electronic Business and Interactive Media solution areas, which replaced
substantial lost revenue in staffing-oriented services provided by the Business
Operations Solutions Area. The net result of the transition was an 8% increase
in solution area gross profit for the first nine months of 2000 as compared to
the first nine months of 1999 despite a 5% decrease in solution area revenue.

     Information Technology Infrastructure gross profit increased $63,000 in the
nine months ended September 30, 2000 as compared to the nine months ended
September 30, 1999.  The Company experienced a 4% increase in gross profit in
the first nine months of 2000 as compared to the first nine months of 1999
despite an 18% revenue decline.  The increase in gross profit as a percentage of
revenue was realized through growth in high-margin solutions-oriented projects
for the Company's Pittsburgh operations and through growth in demand for
services related to the introduction of Microsoft's Windows 2000 and Exchange
2000 products.

     The Business Operations Solution Area experienced a decrease in gross
profit of $1,218,000 in the nine months ended September 30, 2000 as compared to
the nine months ended September 30, 1999.  The Company attributes the decline to
lessened demand for mainframe-oriented technology services and the Company's
specialized bank consulting services consistent with an overall industry trend
away from technology consulting services provided on a staffing model.  The
Company is also emphasizing other solutions-oriented services more strongly in
its sales and marketing efforts.

     The Knowledge Management Solution Area realized a gross profit increase of
$218,000, or 142%, in the nine months ended September 30, 2000 as compared to
the nine months ended September 30, 1999.  Knowledge Management operations were
initiated by the Company in the second quarter of 1999, so the gross profit for
2000 represents nine months' activity as compared to six months' activity for
1999.  Knowledge Management services are being actively marketed by the Company
consistent with the Company's strategy of developing solutions-oriented
consulting services.  The Company's Management believes the growth in gross
profit is a result of the marketing effort for solutions-oriented services,
although there can be no assurance that increases in gross profit will continue
to be realized for the Knowledge Management Solution Area.

     The Electronic Business Solution Area realized an increase in gross profit
of $346,000, or 865%, for the first nine months of 2000 as compared to the first
nine months of 1999.  The Company has added technical and marketing resources to
this solution area in 2000 because of management's belief that there will be
substantial market-driven growth in the demand for Internet-based technology
services in the early years of the 2000's.  Management believes that the 2000
results to date indicate the continued progress of the Electronic Business
Solution Area toward becoming a significant source of high-margin growth for the
Company.  There can be no assurance, however, that the Company will be able to
realize continued growth in revenue or gross profit from its Electronic Business
Solution Area services.

     Cost of sales for the Interactive Media Solution Area was $3,642,000 in
total for the nine months ended September 30, 2000, including $298,000 for
interactive media consulting, $2,001,000 for interactive media systems
integration and $1,343,000 for digital imaging systems integration.  Interactive
Media cost of sales for the nine months ended September 30, 1999 was $2,158,000
in total, including $313,000 for interactive media consulting, $952,000 for
interactive media systems integration and $893,000 for digital imaging systems
integration.  Interactive

                                      -30-
<PAGE>

Media Solution Area gross profit was $2,180,000 for the nine months ended
September 30, 2000, including $504,000 for interactive media consulting,
$1,328,000 for interactive media systems integration and $348,000 for digital
imaging systems integration. Interactive Media gross profit was $1,154,000 for
the nine months ended September 30, 1999, including $407,000 for interactive
media consulting, $505,000 for interactive media systems integration and
$242,000 for digital imaging systems integration. The increase in gross profit
is attributable to the inclusion of gross profit from two major shipboard and
several smaller healthcare and education systems integration projects in 2000 as
compared to one major shipboard project in 1999. Another factor contributing to
the increase was a larger portion of the gross profit realized on the sale of
the four previously installed shipboard interactive television systems to
Celebrity recorded in the first nine months of 2000 than in the first nine
months of 1999.

     Cost of sales for the Company's ancillary services and product sales was
$1,125,000 for the nine months ended September 30, 2000, including $112,000 for
pay-per-view movies associated with interactive television transactional
revenue, $703,000 for digital imaging product sales, $298,000 for information
system product sales and $12,000 for other services.  Cost of sales for
ancillary services and product sales was $1,179,000 for the nine months ended
September 30, 1999, including $219,000 for pay-per-view movies, $427,000 for
digital imaging product sales, $248,000 for information system product sales and
$285,000 for other services.  Gross profit on ancillary services and product
sales was $659,000 for the nine months ended September 30, 2000, including
$234,000 for interactive television transactional revenue, $115,000 for digital
imaging product sales, $105,000 for information system product sales and
$205,000 for other services.  Gross profit for ancillary services and product
sales was $1,293,000 for the nine months ended September 30, 1999, including
$1,234,000 for interactive television transactional revenue and management fees,
$67,000 for digital imaging product sales, $46,000 for information system
product sales and a gross loss of $54,000 for other services.  The decline in
gross profit of $1,000,000 on interactive television transactional revenue and
management fees was primarily attributable to the reduction in the number of
operating ship systems from as high as eight during the nine months ended
September 30, 1999 to two during the nine months ended September 30, 2000.

Selling, General & Administrative Expenses

     The Company recorded $8,732,000 in selling, general & administrative
expenses during the nine months ended September 30, 2000 as compared to
$8,955,000 during the nine months ended September 30, 1999, a decrease of
$223,000, or 2%.  Significant factors contributing to the decline in selling,
general and administrative expenses were lower expenses related to the
management and administration of the Company's staffing-oriented consulting
services and interactive television transactional operations, lower depreciation
and amortization and the inclusion of significant accruals for lease termination
costs and a significant writedown of assets related to Allin Consulting-
Pennsylvania's former office in Pittsburgh in the nine months ended September
30, 1999.  Partially offsetting these factors which have resulted in lower
selling, general & administrative expenses in 2000 has been the Company's
continued investment in sales, marketing and delivery resources for its
solutions-oriented operations.  The Company plans to continue investments in
those segments of its business that management believes are most closely aligned
with the Company's strategic objectives.

     During the nine months ended September 30, 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 during this period.  The assets written down were
disposed of or were not utilized subsequent to the move.  During the first nine
months of 1999, the Company also recorded an accrual of approximately $116,000
for estimated lease termination costs for office space formerly occupied by
Allin Consulting-Pennsylvania.

     During the nine months ended September 30, 2000, a severance accrual of
approximately $104,000 was recorded as a result of the termination of services
of three managerial and sales personnel associated with the staffing services
provided by the Company's Business Operations Solution Area.  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
then President.

     There were also several unusual items impacting selling, general &
administrative expenses in the nine months ended September 30, 2000.  The
Company incurred expenses of approximately $111,000 in connection with an
abandoned acquisition candidate.  A loss of approximately $69,000 was recorded
on the sale of assets related to

                                      -31-
<PAGE>

the operations of Erie Computer Company. Partially offsetting these losses and
overall selling, general & administrative expenses was a gain of approximately
$137,000 related to Allin Digital's sale of stock held in PhotoWave, Inc., a
non-consolidated corporation.

     Depreciation and amortization were $1,607,000 for the nine months ended
September 30, 2000 as compared to $1,977,000 for the nine months ended September
30, 1999.  The decline is due to the inclusion of depreciation expense during
the first nine months of 1999 for four shipboard interactive television systems
sold to Celebrity in August and September 1999.

     Research and development expense included in selling, general &
administrative expenses was $39,000 for the nine months ended September 30, 2000
as compared to $46,000 for the nine months ended September 30, 1999.  Research
and development activity during the first nine months of 2000 was carried out by
the Interactive Media Solution Area and included continuing development of the
Portraits Online(TM) Internet-based E-Commerce platform and development
activities associated with On Command's equipment platform, which is utilized by
the Company for interactive media systems integration projects.

Net Income or Loss

     For the nine months ended September 30, 2000, the Company recorded a net
loss of $2,260,000, as compared to a net loss of $2,391,000 for the nine months
ended September 30, 1999.  An improvement in the Company's profitability of
$131,000 was realized despite a $1,460,000 decline in revenue.  The primary
factor in the profitability improvement was the reduction in selling, general &
administrative expenses of $223,000, as discussed above.

Liquidity and Capital Resources

  At September 30, 2000 the Company had cash and liquid cash equivalents of
$1,443,000 available to meet its working capital and operational needs.  The net
change in cash from December 31, 1999 was a decrease of $445,000.  The net cash
used during the nine months ended September 30, 2000 resulted primarily from the
loss from operations and working capital adjustments, partially funded by
increased borrowings on the Company's line of credit.

     The Company recognized a net loss for the nine months ended September 30,
2000 of $2,260,000.  The Company recorded non-cash expenses of $1,772,000 for
depreciation, amortization of software development costs and other intangible
assets and cost of fixed assets sold, net of a $72,000 gain on sale of assets,
resulting in a net cash use of $488,000 related to the income statement.
Working capital adjustments resulted in a net cash use of $429,000.  Among the
working capital adjustments resulting in the net cash use were decreases of
$923,000 in deferred revenue related to revenue recognition for the Celebrity
system sales, $415,000 in billings in excess of costs related to Interactive
Media systems integration costs and $338,000 in accrued liabilities primarily
due to payment of accrued interest on the a note payable related to the
acquisition of Allin Consulting-California and an increase in inventory of
$324,000.  Working capital adjustments resulting in net cash provided included a
reduction in accounts receivable of $901,000 and an increase in accounts payable
of $607,000.  The net result of the income statement activity and working
capital adjustments was a net cash use of $917,000 related to operating
activities.

     The net cash provided from financing activities of $666,000 during the nine
months ended September 30, 2000 resulted from borrowings on the Company's line
of credit, offset by payments for preferred stock dividends and capital lease
obligations.  The net cash used of $194,000 for investing activities during the
nine months ended September 30, 2000 was for capital expenditures, net of
proceeds from the sale of assets.

  The Company's common stock is listed on The Nasdaq Stock Market's ("Nasdaq")
National Market (the "National Market"). Nasdaq requires that several criteria
be met on an ongoing basis for continued designation of the Company's common
stock as a National Market security, including maintenance of tangible net
assets of at least $4,000,000. As of September 30, 2000, the Company had net
tangible assets of approximately $3,183,000. The Company has had difficulty
maintaining the Nasdaq net tangible asset requirement for two main reasons. The
first is that the Company is a services business and as such does not maintain
large amounts of fixed assets. Accordingly, the assets of the services
businesses that the Company has acquired have been comprised mostly of

                                      -32-
<PAGE>

goodwill, an intangible asset that does not count toward the net tangible asset
calculation.  The second reason is that the Company has been in transition to a
solutions-oriented consulting model and continues to sustain net losses, which
reduce the Company's net tangible asset base.  The Company believes that it is
currently in compliance with the National Market criteria other than the
required level of net tangible assets.

  By November 2000, the Company must present to Nasdaq, and Nasdaq must accept,
a plan for the Company to come into compliance with and maintain the level of
net tangible assets required for continued designation of the common stock as a
National Market security. On September 29, 2000, the Company accepted
commitments from certain of its existing executive officers, directors and/or
stockholders to purchase 125 shares of Series G Convertible Redeemable Preferred
Stock and related Series G Warrants for $10,000 per share of Series G preferred
stock, subject to the Company's obtaining stockholder approval of the issuance
of the Series G preferred stock and warrants. Under the Nasdaq stockholder
approval policy applicable to the Company, stockholder approval is required for
certain plans or arrangements involving the issuance or potential issuance of
shares of common stock which will have, upon issuance, voting power equal to or
in excess of 20% of the voting power outstanding before such issuance or
involving a number of shares equal to or in excess of 20% of the number of
shares outstanding before such issuance. The potential issuance of shares of
common stock underlying the Series G preferred stock and the related warrants
would exceed 20% both of the voting power and the number of shares of common
stock outstanding prior to the issuance of such securities. Therefore, the
Company intends to seek stockholder approval of the issuance of the Series G
preferred stock and related warrants. The Company will not issue any Series G
preferred stock or related warrants that would exceed Nasdaq's 20% thresholds
unless and until both issuances are approved by the holders of the common stock.
The Company anticipates holding a Special Meeting of Stockholders during
December 2000 or January 2001 to vote on approval of the issuance of the Series
G preferred stock and related warrants.

     If stockholder approval is obtained, the Company expects to receive net
proceeds of approximately $1,200,000 from the issuance of the Series G preferred
stock and the related warrants.  The issuance of the Series G preferred stock
and related warrants, together with certain business prospects that may or may
not be realized, constitute the Company's plan.  The Company's management
believes that it is in the Company's best interests to raise funds at this time
through the issuance of the Series G preferred stock and related warrants to
improve the Company's liquidity position and to facilitate the Company's ability
to achieve and maintain the $4,000,000 level of net tangible assets required for
continued inclusion of the common stock in The Nasdaq's National Market.  Losing
the designation as a National Market security would likely reduce the liquidity
of the common stock and could limit the Company's ability to raise equity
capital.

  Even if the stockholders approve the issuance of the Series G preferred stock
and related warrants, there can be no assurance that Nasdaq will accept the
Company's plan to come into compliance with the National Market criteria so that
the common stock will continue to be designated as a National Market security.
There can also be no assurance that the Company would be able to maintain
compliance with Nasdaq's tangible net asset requirement on an ongoing basis
thereafter should the Company's plan be accepted.  In such events, the Company
expects that it would pursue, but would not be guaranteed to obtain, designation
of the common stock as a Nasdaq SmallCap security.  Criteria for continued
listing as a SmallCap security include issuer net tangible assets of at least
$2,000,000.

  If issued, the holders of Series G preferred stock will be entitled to
receive, when and as declared by the Company's Board of Directors, cumulative
quarterly cash dividends at the rate of eight percent of the liquidation value
thereof per annum.  The dividend rate will increase to twelve percent of the
liquidation value thereof on the fifth anniversary of the issuance date.

     On August 13, 2000, all of the then outstanding 1,926 shares of the
Company's Series E Convertible Redeemable Preferred Stock, having a liquidation
preference of $1,000 per share, and approximately $14,000 of accrued but unpaid
dividends automatically converted into 942,141 shares of the Company's common
stock.  The number of shares of common stock issued was based upon the
conversion terms 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 of Allin Corporation.  The rate of conversion was approximately
$2.06 per share of common stock.

                                      -33-
<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.  The S&T Loan Agreement has subsequently been renewed in 1999 and
2000.  The expiration date of the S&T Loan Agreement is September 30, 2001.  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, 2000, maximum borrowing availability under the S&T Loan Agreement
was approximately $1,806,000.  The outstanding balance as of September 30, 2000
was $1,565,000.

  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 2000, the applicable
interest rate ranged from 9.50% to 10.50%, which was in effect at September 30,
2000.  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
$63,000 in interest expense related to this revolving credit loan for the nine
months ended September 30, 2000.  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, the Second Amendment to Note and Loan and Security Agreement filed as
Exhibit 4.1 to the Company's Report on Form 10-Q for the quarterly period ended
September 30, 1999.  The covenant concerning dividends and purchases of stock
prohibits the Company from declaring or paying cash dividends or redeeming,
purchasing or otherwise acquiring outstanding shares of any class of the
Company's stock, except for dividends payable in the ordinary course of business
on the Company's Series D and F preferred shares, or on Series G preferred
shares upon issuance, 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 cash flow coverage
ratio is measured for each of the Company's fiscal quarters.  S&T Bank waived
the cash flow covenant requirement for the fiscal quarters ended June 30 and
September 30, 2000, which covenant the Company would not have otherwise met.
S&T Bank has also extended the waiver for the fiscal quarter ended December 31,
2000.   The Company was in compliance with all other covenants as of September
30, 2000.  The S&T Loan Agreement also includes reporting requirements regarding
annual and monthly financial reports, accounts receivable and payable
statements, weekly borrowing base certificates and audit reports.

  As of September 30, 2000, the Company had outstanding $2,500,000 in
liquidation preference of Series C Redeemable Preferred Stock.  There is no
mandatory redemption date for the Series C preferred stock.  Accrued but unpaid
dividends on the Series C preferred stock were approximately $967,000 as of
September 30, 2000 and approximately $997,000 as of November 8, 2000.  Series C
preferred stock earns dividends at the rate of 8% of the liquidation value
thereof per annum, compounded quarterly, until June 30, 2006, when the Company
will be obligated to pay accrued dividends, subject to legally available funds.
Any accrued dividends on the Series C preferred stock not paid by this date will
compound thereafter at a rate of 12% of the liquidation value thereof per annum.
After June 30, 2006, dividends on the Series C preferred stock will accrue and
compound at a rate of 12% per annum and will be payable quarterly, subject to
legally available funds.  The Company's current credit agreement with S&T Bank
prohibits payment of dividends on Series C preferred stock during the term of
the agreement.

                                      -34-
<PAGE>

     As of September 30, 2000, the Company had outstanding 2,750 shares of the
Company's Series D Convertible Redeemable Preferred Stock having a liquidation
preference of $1,000 per share.  There is no mandatory redemption date for the
Series D preferred stock.  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% of the
liquidation value thereof 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, 2000 and approximately $4,000 as of November 8, 2000.

     As of September 30, 2000, the Company had outstanding 1,000 shares of the
Company's Series F Convertible Redeemable Preferred Stock having a liquidation
preference of $1,000 per share.  There is no mandatory redemption date for the
Series F preferred stock.  Series F preferred stock is convertible to the
Company's common stock until the earlier of May 31, 2004 or the Company's
redemption of the Series F preferred shares.  Until and including May 31, 2004,
Series F preferred stock will be convertible into 508,647 shares of the
Company's common stock, the number of shares obtained by dividing 1,000 by
$1.966, 85% of the closing price of the common stock as reported by Nasdaq on
the last trading date prior to the first anniversary of the date of issuance of
the Series F preferred stock.  Series F preferred stock earns dividends at the
rate of 7% of the liquidation value thereof per annum.  Dividends are payable
quarterly on the 15th of the first month of each calendar quarter subject to
legally available funds.  Dividends accrued for seven months during 1999 are not
required to be paid prior to redemption, if any.  Unpaid dividends compound
quarterly.  Accrued but unpaid dividends on Series F preferred stock were
approximately $59,000 as of September 30, 2000 and approximately $49,000 as of
November 8, 2000.

     The order of liquidation preference of the Company's outstanding preferred
stock, from senior to junior, is Series F, Series D and Series C.  The S&T Loan
Agreement prohibits the Company from declaring or paying dividends on any shares
of its capital stock, except for current dividends payable in the ordinary
course of business on the Company's Series D and F preferred stock.  Each of the
Certificates of Designation governing the Series C, D and F preferred stock
prohibits the Company from declaring or paying dividends or any other
distribution on the common stock or any other class of stock ranking junior as
to dividends and upon liquidation unless all dividends on the senior series of
preferred stock for the dividend payment date immediately prior to or concurrent
with the dividend or distribution as to the junior securities are paid or are
declared and funds are set aside for payment.  It is anticipated that, if
issued, Series G preferred stock will be senior in liquidation preference to
Series C and D preferred stock, but junior to Series F.  The recent renewal of
the S&T Loan Agreement through September 30, 2001 anticipates the potential
issuance of Series G preferred stock and permits the payment of dividends in the
ordinary course of business for the Series G preferred shares.

     In connection with the Company's original sale of Series B Redeemable
Preferred Stock in August 1998, which was subsequently exchanged for Series D
preferred stock, 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 closing for the acquisition of Allin Consulting-Pennsylvania.
The exercise price may be paid in cash or by delivery of a like value, including
accrued but unpaid dividends, of Series C Redeemable Preferred Stock.

     The Company has 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, the outstanding principal balance of the note is $1,000,000.
The principal balance of the note is due April 15, 2005.  The note provides for
interest at the rate of 7% per annum from the acquisition date of November 6,
1996.  In accordance with the terms of the note, accrued interest as of May 31,
1999 of approximately $390,000 was paid on April 1, 2000.  Quarterly interest
payments began April 15, 2000.  Approximately $76,000 of interest is accrued,
but unpaid, as of September 30, 2000.

     The agreement for the Company's November 1998 acquisition of MEGAbase, Inc.
("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

                                      -35-
<PAGE>

beginning January 1, 1999 and ending December 31, 1999. Any contingent payment
due was originally to have been paid no later than March 31, 2000, however, the
Company and Gerow were not, at that time, able to reach agreement on the
calculation of the Development Practice Gross Margin due to disagreement over
interpretation of its definition per the purchase agreement. The Company and
Gerow have recently reached a verbal settlement concerning the amount of
contingent payments to be made. The contemplated settlement would require the
Company to pay Gerow $60,000 and to issue to Gerow 14,225 shares of its common
stock. The actual settlement, however, is contingent on the Company and Gerow
reaching a definitive settlement agreement.

     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 the contingent payments
anticipated to be made by the Company to Gerow 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 incurred approximately $39,000 in research and development
expense for the nine months ended September 30, 2000.  The Interactive Media
Solution Area's research and development activity included ongoing development
of functional and graphical improvements to the Portraits Online(TM) Internet-
based E-Commerce platform and development activities associated with On
Command's equipment platform, which is utilized by the Company for interactive
media systems integration projects. Forecasts for the fourth quarter of 2000 and
2001 indicate expected research and development expenditures related to these
Interactive Media research and development projects to be approximately $13,000
and $50,000, respectively. 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, 2000 were
approximately $379,000 and included furniture and leasehold improvements related
to the opening of the Company's Walnut Creek, California office, the purchase of
enterprise resource planning software and computer hardware, software and
communications equipment for the Company's periodic upgrading of technology.
Forecasts for the fourth quarter of 2000 and the year 2001 indicate expected
capital expenditures of approximately $100,000 and $590,000, respectively,
primarily for computer hardware, software and communications equipment for the
Company's periodic upgrading of technology. Business conditions and management's
plans may change during the remainder of 2000 and 2001, so there can be no
assurance that the Company's actual amount of capital expenditures will not
exceed the planned amount.

     The Company believes that available funds and cash flows expected to be
generated by the issuance, if approved by the stockholders, of Series G
preferred stock and related warrants and the Company's current operations will
be sufficient to meet its anticipated cash needs for working capital and capital
expenditures for its existing operations for at least the next twelve months.
As discussed above, the S&T Loan Agreement expires September 30, 2001.  Should
the holders of the Company's common stock not approve of the issuance of Series
G preferred stock and related warrants, the Company believes 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 nine 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.

                                      -36-
<PAGE>

Special Note on Forward Looking Statements

     This Management's Discussion and Analysis and other sections of this Report
on Form 10-Q contain forward-looking statements that are based on current
expectations, estimates and projections about the industries in which the
Company operates, management's beliefs and assumptions made by management.
Words such as "expects," "anticipates," "intends," "plans," "believes,"
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.

     Nasdaq Stock Market Requirements.  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, including a net tangible assets
requirement of $4,000,000 and a minimum bid price requirement of $1.00. The
Company is not in compliance currently with the net tangible assets requirement.
As of September 30, 2000, the Company's net tangible assets were approximately
$3,183,000. The Company is currently seeking to correct this shortfall through
sale of an additional series of preferred stock, Series G Convertible Redeemable
Preferred Stock. The subscribers for the Series G preferred stock would also
receive warrants to purchase additional common shares. Issuance of the Series G
preferred stock and associated warrants is subject to approval of the holders of
the Company's common shares. The Company intends to hold a special meeting of
its Stockholders in December 2000 or January 2001 to vote on these matters. If
approved, the Company anticipates receiving net proceeds of approximately
$1,200,000 from the sale of Series G preferred stock and associated warrants. If
the issuance of Series G preferred stock and associated warrants is not
approved, the Company will likely seek to have the common stock re-listed on the
Nasdaq Stock Market's SmallCap Market, although Nasdaq could, at its discretion,
decline to designate the common stock as a Small Cap security. Also, should the
Company return to compliance with the net tangible assets requirement for
National Market listing through sale of additional preferred stock or otherwise,
there can be no assurance the Company will be able to meet the National Market
listing criteria on an ongoing basis.

     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.

     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 solution areas meeting customer needs
for information technology infrastructure, business operations, knowledge
management, electronic business 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 and
the first nine months of 2000, particularly for staffing for mainframe computer
systems and its specialized banking industry services.  Business Operations
activity in future periods under the staffing model is expected to continue to
decline as a result of both industry trends and the Company's marketing focus on
solutions-oriented projects.  While the Company obtained revenue growth in the
first nine of 2000 from the solutions-oriented operations of the Knowledge
Management, Electronic Business and Interactive Media Solution Areas, there can
be no assurance that the Company will be successful at growing

                                      -37-
<PAGE>

solutions-oriented revenue in any of its solution areas in the future or that
any growth obtained will offset or exceed the 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. During the third quarter of 2000, the Company has also implemented
changes to the Interactive Media Solutions Area's marketing strategy for digital
imaging systems integration services. Interactive Media intends to more closely
focus on high value-added integration projects including Portraits Online(TM)
technology. Management believes the strategic shift allows the prospect of
improved margin on digital imaging services, although there can be no assurance
that such improved margin will be realized. 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.

     Revenue and Gross Profit Recognition for Celebrity Interactive Television
System Sales.  During August 1999, Allin Interactive entered an agreement with
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.  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
sold.  Under the maintenance agreement between Allin Interactive and Celebrity,
Allin Interactive was obligated to provide ongoing technical support for the
four interactive television systems sold to Celebrity, as well as a fifth system
previously sold to Celebrity, for a minimum period of six months following
completion of all system sales and transfers of operational responsibility.  The
minimum maintenance period ended March 17, 2000.  Revenue for the four
interactive television system sales was recognized over the minimum period of
the maintenance agreement concurrent with Allin Interactive's minimum technical
maintenance obligation.  These system sales reflected unusually high gross
profit since the related equipment cost had been depreciated during the period
that Allin Interactive owned and operated the systems.  Gross profit realized
from future Interactive Media systems integration projects is likely to decline
as a percentage of revenue from that realized in 1999 and 2000 due to inclusion
of revenue and gross profit related to the Celebrity ship system sales in those
periods.

     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 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.  There can also be no
assurance that the Company would be able to successfully integrate any business
acquired with the other businesses of the Company.  The Company markets
interactive media projects and its specialized bank consulting services
nationally and undertakes projects throughout the United States as obtained.  If
the Company's management is unable to manage growth, if any, effectively, the
Company's 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 timely installation of
systems.  The loss of one or more of these individuals could have an adverse
effect on the Company's business and results of operations.  The Company depends
on its continued ability to attract and retain highly skilled and qualified
personnel.  There can be no assurance that the Company will be successful in
attracting and retaining such personnel.

     Competitive Market Conditions.  The technology consulting industry 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 media and digital

                                      -38-
<PAGE>

imaging systems integration services is new and rapidly evolving. The types of
interactive media 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.

     Historical Net Losses and Accumulated Deficit.  The Company sustained
substantial net losses during the years ended December 31, 1996, 1997, 1998 and
1999, and the nine months ended September 30, 2000. As of September 30, 2000,
the Company had an accumulated deficit of $32,687,000.  The Company anticipates
that it may incur net losses at least through the remainder of 2000 and all or a
portion of 2001, 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.  The Company's cash resources and cash flow generated from
operations have been adequate to meet its needs to date, but there can be no
assurance that a prolonged downturn in operations or business setbacks to the
Company's operating entities will not result in working capital shortages which
may adversely impact the Company's operations.  The liquidity risk has been
mitigated somewhat by the Company obtaining a line of credit facility for its
short term working capital needs.  The Company's line of credit facility expires
September 30, 2001.  Failure of the Company to renew its existing credit
facility beyond September 30, 2001 or replace it with another facility with
similar terms may adversely impact the Company's operations in the future.

     Risks Inherent in Development of New Markets.  The Company's strategy
includes attempting to develop an ongoing business base for its interactive
media systems integration and consulting services in the healthcare and
education industries.  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.
There can be no assurance that the Company will be successful at establishing an
ongoing base of revenue in these new markets, or that any contracts 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
components from On Command to be utilized in interactive system installations,
which the Company believes 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
applications 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.

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

                                      -39-
<PAGE>

applications or proprietary information could have a material adverse effect on
the Company's business, financial condition and results of operations.

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

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

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

Effect of Recently Issued Accounting Standards

     In 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, 2000 would be immaterial.

     In December 1999, the Securities and Exchange Commission ("SEC") released
Staff Accounting Bulletin No. 101, Revenue Recognition ("SAB No. 101"), to
provide guidance on the recognition, presentation and disclosure of revenue in
financial statements.  SAB No. 101 explains the SEC's general framework for
revenue recognition.  SAB No. 101 does not change existing literature on revenue
recognition, but rather clarifies the SEC's position on preexisting literature.
SAB No. 101 must be adopted by the Company by December 31, 2000.  While the
Company has not completed its review of the effects of SAB No. 101, management
does not presently believe that its adoption will have a significant impact on
financial position or results of operations.

     In September 2000, Emerging Issues Task Force ("EITF") Issue 00-10
Accounting for Shipping and Handling Fees and Costs ("EITF No. 00-10"), was
released to address the income statement classification for shipping and
handling fees and costs by companies that record revenue based on the gross
amount billed to customers.  EITF No. 00-10 provides consensus that amounts
billed to a customer in a sale transaction related to shipping and handling
represent revenue earned for the goods provided and should be classified as
revenue.  EITF No. 00-10 provides that the classification of shipping and
handling costs is an accounting policy decision that should be disclosed in
accordance with Accounting Principles Board Opinion No. 22 Disclosure of
Accounting Policies.  The implementation date for EITF No. 00-10 is the fourth
quarter of a SEC registrant's fiscal year beginning after December 15, 1999
(that is December 31, 2000 for companies with calendar years).  The Company's
current treatment of revenue and cost of sales for shipping and handling fees is
consistent with EITF No. 00-10.

                                      -40-
<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.

                                      -41-
<PAGE>

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 September 30, 2000.

                                      -42-
<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)


<TABLE>
<S>                           <C>
Date: November 8, 2000        By:  /s/   Richard W. Talarico
                                   --------------------------
                                   Richard W. Talarico
                                   Chairman and Chief Executive Officer


Date: November 8, 2000        By:  /s/   Dean C. Praskach
                                   ----------------------
                                   Dean C. Praskach
                                   Chief Financial Officer and Chief Accounting Officer

</TABLE>

                                      -43-
<PAGE>

Allin Corporation
Form 10-Q
September 30, 2000
Exhibit Index



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


11              Computation of Earnings per Share

27              Financial Data Schedule