<PAGE>

                    U.S. SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                                  FORM 10-KSB

                    ANNUAL REPORT UNDER SECTION 13 OR 15(d)
                    OF THE SECURITIES EXCHANGE ACT OF 1934

(X)Annual report under Section 13 or 15(d) of the Securities Exchange Act of
1934
For the fiscal year ended March 31, 1999 or
( )Transition report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the transition period from       to

                       Commission file number: 001-11747

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

                       THE ASHTON TECHNOLOGY GROUP, INC.
                (Name of small business issuer in its charter)

              Delaware                                 22-6650372
   (State or other jurisdiction of        (I.R.S. Employer Identification No.)
   incorporation or organization)

                         1900 Market Street, Suite 701
                       Philadelphia, Pennsylvania 19103
              (Address of principal executive offices) (Zip Code)

                          Issuer's telephone number:
                                (215) 751-1900

        Securities registered under Section 12(b) of the Exchange Act:
                                     None

        Securities registered under Section 12(g) of the Exchange Act:
                         Common Stock, par value $.01
                   Redeemable Common Stock Purchase Warrants
                               (Title of Class)

  Check whether the Issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the Issuer was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes (X) No ( ).

  Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B contained in this form, and no disclosure will be contained,
to the best of Issuer's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. (X)

  Issuer's revenue for the fiscal year ended March 31, 1999 was $1,434,438.

  The aggregate market value of the voting and non-voting common equity held
by non-affiliates of the Issuer computed by reference to the price at which
the common equity was sold on NASDAQ on June 21, 1999 was $197,540,742.

  The number of shares outstanding of the registrant's Common Stock, $.01 par
value, was 20,569,172 at March 31, 1999, and 23,062,079 at June 21, 1999.

  Documents incorporated by reference into Part III of this 10-KSB: Issuer's
Definitive Proxy Statement for its 1999 Annual Meeting of Stockholders to be
filed not later than 120 days after the end of the fiscal year.
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                               TABLE OF CONTENTS

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                                                                           Page
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PART I...................................................................    1

ITEM  1.DESCRIPTION OF BUSINESS..........................................    1
ITEM  2.DESCRIPTION OF PROPERTY..........................................   11
ITEM  3.LEGAL PROCEEDINGS................................................   11
ITEM  4.SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..............   11

PART II..................................................................   12

ITEM  6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS...........................................   13
ITEM  7.FINANCIAL STATEMENTS.............................................   18
ITEM  8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE............................................   38

PART III.................................................................   39

ITEM  9.DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT...............   39
ITEM 10.EXECUTIVE COMPENSATION...........................................   39
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT..   39
ITEM 12.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...................   39

PART IV..................................................................   40

ITEM 13. EXHIBITS, FINANCIAL STATEMENTS, SCHEUDLES AND AND REPORTS ON
         FORM 8-K........................................................   40

SIGNATURES...............................................................   43
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                          FORWARD-LOOKING STATEMENTS

  Certain statements in this Form 10-KSB constitute "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933,
as amended (the "Securities Act"), and Section 21E of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements involve known
and unknown risks, uncertainties and other important factors that could cause
the actual results, performance or achievements of the Company to differ
materially from any future results, performance or achievements expressed or
implied by such forward-looking statements. Such risks, uncertainties and
other important factors include, among others: dependence on arrangements with
self-regulatory organizations; dependence on proprietary technology;
technological changes and costs of technology; industry trends; competition;
ability to develop markets; changes in business strategy or development plans;
availability, terms and deployment of capital; availability of qualified
personnel; changes in government regulation; general economic and business
conditions; and other factors referenced in this Form 10-KSB. Such forward-
looking statements speak only as of the date of this Form 10-KSB. For
discussion of the factors that might cause performance of the Registrant to
differ with actual results. The Company expressly disclaims any obligation or
undertaking to disseminate any updates or revisions to any forward-looking
statement contained herein to reflect any change in the Company's expectations
with regard thereto or any change in events, conditions or circumstances on
which any such statement is based.

                                    PART I

ITEM 1. DESCRIPTION OF BUSINESS

Introduction

  The Ashton Technology Group, Inc. ("ATG(TM)", the "Company", "Ashton", or
the "Registrant") is primarily engaged in the development and
commercialization of online transaction systems for participants in the U.S.
and international financial markets. The Company was founded in 1994 to take
advantage of commercial opportunities through the application of advanced
telecommunication and computing technologies to the area of financial
electronic commerce ("e-commerce"). The Company is currently organized as a
holding company with four subsidiaries:

    1) Universal Trading Technologies Corporation ("UTTC(TM)").

    2) Gomez Advisors, Inc. ("Gomez").

    3) Electronic Market Center, Inc. ("EMC").

    4) ATG(TM) International, Inc. ("ATG(TM) International").

  During the fiscal year ended March 31, 1999, Gomez generated all of the
Company's revenues. During the year ended March 31, 1998, the Company sold
Computer Science Innovations, Inc. ("CSI(R)"). The sale has been presented as
discontinued operations. Had CSI(R)'s results been consolidated during the
year ended March 31, 1998, CSI(R) would have generated over 90% of the
Company's consolidated revenue. Following the sale of CSI(R), Gomez (see
"Gomez Advisors, Inc.") has been the Company's sole source of revenue.

ATG(TM)

  ATG(TM) focuses on the development and application of the Company's data and
information security technologies and initiatives for the future electronic
distribution of the Company's electronic information and transaction based
products and services. ATG(TM)'s products and services are being designed to
provide the elements of confidentiality, integrity, non-repudiation, access
control and auditability that are necessary to allow the use of both "open"
and proprietary networks in the conduct of financial e-commerce.

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  ATG(TM)'s transaction systems incorporate or plan to incorporate the
Company's core areas of technological expertise, which include:

  .  Internet and Extranet technologies and systems;

  .  Electronic authentication, encryption and trusted systems providing high
     grade data and information security;

  .  Online transaction systems for use through traditional communication
     channels and through the Internet;

  .  Advanced computing technologies (including neural networks and other
     forms of artificial intelligence to provide analytical tools for
     prediction and decision support which are being implemented in future
     products).

  As ATG(TM)'s information and transaction systems are developed, ATG(TM)
intends to, on an unconsolidated basis, generate revenue from licensing and
royalty payments for the use and operation of the systems by its subsidiaries.

  CSI(R) was a subsidiary of the Company. CSI(R) was incorporated in Florida
in March 1983 and specialized in utilizing computer technologies and
sophisticated mathematical techniques to address complex information retrieval
and management problems. On November 6, 1997, ATG(TM) sold CSI(R) to George H.
Milligan and Susanne L. Cavadeas, as Trustees of the Trust Created by The
Computer Science Innovations, Inc. Leveraged ESOP, for $1,723,000, payable as
follows: (1) repayment of a $500,000 loan plus interest of $28,875, (2)
$600,000 in cash, and (3) a five year 8 1/4% note of $594,125. Financial
information related to CSI(R) has been presented as discontinued operations
(see "Item 7. Notes to Consolidated Financial Statements").

Universal Trading Technologies Corporation

  UTTC(TM)'s business is to market and operate electronic pricing and
transactional systems for the securities market. UTTC(TM) will collect
transaction fees from trades executed through its systems. UTTC(TM)'s target
customers are exchanges, institutions, money managers, broker-dealers, and
other members of the professional investment community. These professional
investors may benefit from UTTC(TM)'s proprietary technologies and pricing
mechanisms which will enable them to trade efficiently and cost effectively in
an electronic global trading environment which features:

  .  Absolute anonymity;

  .  Exchange-standard surveillance;

  .  Advanced computer and telecommunications technologies;

  .  Global accessibility through the MCI/Worldcom network as well as through
     the Internet;

  .  Total data security through the use of encryption, electronic
     authentication and firewalls;

  .  Seamless integration into major customers' trading and investment
     management platforms; and

  .  Electronic connection to pre-trade analytics and information, trade
     execution, and post-trade clearing and settlement mechanisms.

  UTTC(TM) has developed its first trading module, the volume weighted average
price ("VWAP(R)") trading system ("VTS(TM)"), an electronic securities pricing
and transaction system for trading exchange listed and NASDAQ National Market
securities (see "VWAP(R)").

UTTC(TM) Subsidiaries

 REB Securities, Inc.

  REB Securities, Inc. ("REB") is a wholly owned broker-dealer subsidiary of
UTTC(TM). REB was formed in April 1998 in order to pursue launching the
VTS(TM) on the Philadelphia Stock Exchange ("PHLX") through a

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broker-dealer in order to provide full supervision and regulation as a broker-
dealer. On October 20, 1998, REB's membership application was approved by the
PHLX subject to acquisition of a seat on the PHLX. REB will operate as the
facilities manager for the VTS(TM) and will not engage in any other broker-
dealer activities. On March 5, 1999, REB received approval from the National
Association of Securities Dealers ("NASD") to operate as a registered broker-
dealer. On April 1, 1999, REB obtained a PHLX membership seat thereby
triggering its admission on the PHLX.

 Croix Securities, Inc.

  Croix Securities, Inc. ("Croix") was formed in February 1999 as a wholly
owned subsidiary of UTTC(TM). Croix is initially expected to act as an
introducing broker on behalf of institutions trading through VTS(TM). Croix
may expand its operation to provide electronic broker-dealer services, which
include the development of research and analytical products to banks, broker-
dealers, insurance companies, and other financial intermediaries. In May 1999,
Croix filed applications with the PHLX and NASD to operate as a registered
broker-dealer. There can be no assurance that Croix will be able to obtain all
the necessary approvals to operate as a broker-dealer.

 NextExchange Inc.

  The Company formed NextExchange, Inc. ("NextExchange") in February 1999 as a
wholly owned subsidiary of UTTC(TM). NextExchange plans to avail itself of the
opportunities made available as a result of the SEC's recently articulated
support for non-mutualized, "for profit" exchanges. NextExchange intends to
register itself with the SEC as a fully electronic national securities
exchange. NextExchange will be designed and developed to trade equities,
options, and other derivative securities. The Company is currently in the
process of determining the funding required to design, develop and commence
operation of NextExchange. There can be no assurance that the Company will be
able to finance the development or to actually deploy NextExchange.

  On June 4, 1999, UTTC(TM) completed a private placement of 145,700 shares of
convertible preferred stock for $2,000,000 (see "Item 6. Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Subsequent Events").

Electronic Market Center, Inc.

  In June 1998, the Company formed Electronic Market Center, Inc. as a wholly
owned subsidiary of ATG(TM). The Company expects to utilize this subsidiary to
design, develop, operate and market the Company's electronic distribution
channel for a full range of financial products and services called the
electronic market center ("eMC(TM)"). The Company intends to design eMC(TM)
for interactive market access by member users and to provide a global
electronic distribution channel for all types of financial products and
services. The Company is currently in the process of raising capital to
complete the design and commence development of eMC(TM). Although the Company
has designed the specifications for the eMC(TM) and has developed a business
plan for the operation of eMC(TM), there can be no assurance that the Company
will be able to finance the development or to actually develop such a finance
system.

ATG(TM) International, Inc.

  The Company formed ATG(TM) International, Inc. as a wholly owned subsidiary
in July 1998 to explore opportunities for marketing and licensing the
Company's products and services abroad. The international markets represent
potentially significant growth opportunities for the application of ATG(TM)'s
technology and skills in the development of proprietary online transaction
systems for global financial markets. In November 1997, the Company entered
into a strategic initiative with Tianjin New Hong Chen Technology & Trading
Company to introduce its online trading technology and systems to the
financial markets in China. The Company continues to pursue opportunities to
deploy its trading systems in China and Canada. As joint ventures and
strategic alliances with parties in Canada, China and elsewhere are developed,
the investments in the joint ventures or strategic alliances may be held
directly by ATG(TM) instead of ATG(TM) International, Inc. On June 4, 1999,
the Company entered into a letter of intent to create a joint venture company
with eTK, a wholly owned subsidiary of Thomson Kernaghan & Co., Ltd. ("TK"), a
Canadian investment dealer, to cultivate the application of VTS(TM) in Canada.

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Gomez Advisors, Inc.

  Gomez Advisors, Inc. ("Gomez") was formed in May 1997 as a subsidiary of the
Company together with Julio Gomez, John Robb, and Dr. Alex Stein to provide
independent advice with respect to online investing and provide clients in the
financial services industry with consulting advice concerning the use of the
Internet as a tool for establishing electronic client relationships,
marketing, and the interactive distribution of securities.

  From its inception in May 1997 through March 1999, Gomez primarily derived
revenues from consulting contracts with e-commerce businesses. Consulting
revenues constituted 99% of total revenues for the period from inception to
March 31, 1998 and 65% of total revenues for the fiscal year ended March 31,
1999. In March 1999, Gomez began selling subscription-based research services
and products to e-commerce businesses. Accordingly, the Company expects
Gomez's consulting revenues to decrease substantially as a percentage of its
total revenues.

  Gomez is a provider of Internet-based products and services to consumers and
businesses in select e-commerce industries. Gomez delivers interactive content
that provides decision support for consumers and businesses to more
efficiently engage in e-commerce. Gomez provides the following categories of
products and services:

  .  consumer-focused products and services delivered via its gomez.com Web
     site; and

  .  business-focused products and services delivered via its GomezPro Web
     site.

  Through its consumer-focused Web site at www.gomez.com, Gomez provides e-
commerce consumers with research and data services to assist them in all
aspects of the e-commerce purchasing decision. On gomez.com, Gomez provides
Scorecard rankings of businesses in specific e-commerce markets, editorial and
educational content and navigation and search capabilities that help consumers
optimize their e-commerce experience. Through gomez.com, Gomez derives
advertising and sponsorship revenues and transaction-based revenues, paid on
either a fixed-fee or percentage-of-transaction basis, for leads generated or
transactions initiated through gomez.com.

  With GomezPro, Gomez has built upon its e-commerce consumer-based expertise
to offer e-commerce businesses useful products and services that enable its
clients to more effectively understand the competitive e-commerce environment.
Currently Gomez offers GomezPro services for businesses in the online
brokerage and banking industries. Gomez is in the process of expanding these
services to all e-commerce segments for which it generates consumer-focused
Scorecards. The services offered to e-commerce businesses through the GomezPro
site consist of (a) GomezPro Research Station, (b) GomezPro advanced data
services and tools and (c) GomezPro business-to-business services. Gomez
generates subscription revenues to gain access to the GomezPro site and
Research Station, and it charges additional fees to subscribe to the GomezPro
advanced data services and tools. In addition, Gomez generates listing fees
and sponsorship revenues through its business-to-business services.

  On April 24, 1999, Gomez completed a private placement of 1,100,000 shares
of convertible preferred stock at $5.00 per share and realized gross proceeds
of $5,500,000 (see "Item 6. Management's Discussion and Analysis of Financial
Condition and Results of Operations--Subsequent Events").

VWAP(R)

  The VTS(TM) is the first product designed and developed by UTTC(TM). VTS(TM)
(version 2.x) is a facility of the PHLX. It is a fully automated system that
permits its participants to buy, sell, or short-sell VTS(TM)-eligible
securities before the market opens (pre-open) at the VWAP(R). The VWAP(R) is
the average price for a specific stock, weighted by the volume of shares of
that stock traded "regular way" during the day on all security exchanges
throughout the United States as reported to the Consolidated Tape. VTS(TM) is
short-sell exempt allowing submission of sell orders to the pre-open VWAP(R)
matching session.

  Participants may submit large-sized orders and execute large-sized trades
without market impact because of the end-to-end anonymity of the system that
electronically protects the participant's identity, order, match (trade),

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residual (if any), and contra-side identity all the way through the settlement
and clearing process. The Company believes that there are no other trading
systems that provide this degree of end-to-end anonymity. Participants are
electronically informed of their (binding) matches and residuals (if any) at
approximately 9:20 AM EST, and are informed of the associated VWAP(R) pricing
at approximately 4:20 PM EST, shortly after the VWAP(R) calculations are
completed for the day. The pre-open VWAP(R), as provided only by VTS(TM),
provides "mutual satisfaction" and "best execution" within a highly liquid,
totally anonymous, electronic trading environment and should be distinguished
from time-sliced or volume-weighted composite prices that do not provide
assurances of such advantages. PHLX transaction fees, the only cost other than
clearing and settlement, for using the system are low and competitive due to
the low manual overhead associated with this fully automated, high capacity,
and highly reliable electronic matching system.

  VTS(TM) is available to exchanges, broker/dealers, institutions, money
managers, and other financial intermediaries and end users. Interested firms
must enroll with REB or the PHLX in order to become active participants in the
VTS(TM) matching sessions that will occur once the system is operational,
every trading day automatically at 9:15 AM EST. Non-members must arrange for a
PHLX/SCCP member to sign a simple one page "bilateral give-up clearing
agreement" to obtain direct access to VTS(TM). The system has been designed to
afford a variety of electronic access mechanisms so that participating firms
and their trading room environments can easily and securely integrate to
VTS(TM) using VTS(TM)-supplied, global, secure, communications services, as
well as FIX pathways and the Internet. Participants need only read the VTS(TM)
"shrink wrap" license agreement to utilize VTS(TM)-supplied software,
hardware, and communications pathways.

  For all VWAP(R) match executions, VTS(TM) will provide automated post-market
clearing and settlement. This is accomplished via a straight-through process
engineered to electronically provide necessary transaction data directly to
each clearing firm and to protect contra-side identity by inserting the SCCP
omnibus account in the middle of each transaction.

The Philadelphia Stock Exchange Agreement

  On April 22, 1995, the PHLX and UTTC(TM) agreed to integrate and deploy the
VTS(TM) system as a new trading product of the PHLX. On September 18, 1995,
UTTC(TM) and PHLX memorialized the agreement in a formal contract for a term
of five years commencing from the date VTS(TM) becomes operational on the
PHLX. Pursuant to the letter agreement, UTTC(TM) designed and built the
VTS(TM) and holds all proprietary right, title and interest in the system. The
PHLX was responsible for filing a rule change with the SEC seeking regulatory
approval of the VTS(TM).

  On October 28, 1997, the PHLX submitted to the SEC an amendment to its
original request for rule change, which was required because of the elapsed
time since the original submission in April 1996 and to reflect enhancements
made by UTTC(TM) to VTS(TM). On December 31, 1997, the SEC republished the
rule and amendments in the Federal Register. On March 24, 1999, the SEC
approved the rule, as amended.

  The Company and the PHLX have completed joint, full-scale production testing
of the VTS(TM) and PHLX systems. The VTS(TM) is operationally ready and
management anticipates it will commence live customer operation as a facility
of the PHLX during its fiscal year ended March 31, 2000 (see "Item 6.
Management's Discussion and Analysis of Financial Condition and Results of
Operations"). There can be no assurance however, that the operation of VTS(TM)
will commence or, if so, when it will commence. The Company's revenue will
depend on the volume of securities traded on the VTS(TM), the PHLX's and
UTTC(TM)'s marketing capabilities, and user acceptance of the VTS(TM).
National and international economic and political conditions and broad trends
may also affect securities trading volumes. Any one or all of these factors
could result in lower share volumes offered through the VTS(TM) and could
adversely impact the Company"s results of operations once the VTS(TM) becomes
operational. Variations in transaction volume could result in significant
volatility in operating results.

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Government Regulation

  The Company, its subsidiaries and its transaction systems are or will be
subject to significant government regulation, under both federal and state
laws, and self-regulatory organization ("SRO") oversight. The SEC is primarily
responsible for the administration of federal securities law while SROs are
responsible for the day-to-day regulation of their broker-dealer members. SROs
are charged with protecting the interests of the investing public and the
integrity of the securities markets. Originally, the VTS(TM) system had been
developed as a facility of the PHLX, an SRO, and is subject to regulatory
approval by the SEC. Section 19(b) of the Exchange Act and Rule 19b-4
promulgated thereunder requires the PHLX to file any proposed rules changes
with the SEC. The concept of the VTS(TM) system, which would constitute a new
PHLX facility accompanied by new PHLX rules, was filed as a proposed rule
change (the "Rule Change proposal"). In this regard, PHLX management was
authorized by its Board of Governors to submit a proposed rule change filing
relating to the VTS(TM) system with the SEC, which published a notice of the
terms of the substance of the proposed rule change on September 4, 1996 and
gave interested persons an opportunity to submit written data, views, and
arguments concerning such proposed rule change. In order to approve the
proposed Rule Change, the SEC determined that the VTS(TM) filing is consistent
with the purposes of the Exchange Act, particularly Section 6 of the Exchange
Act, which provides standards governing the rules of national securities
exchanges. The SEC recently adopted amendments to Rule 19b-4 and Regulation
ATS under the Exchange Act that will impact how the Company launches new
trading systems and products (see "Exchange Regulation and New Regulation
ATS").

  Broker-dealers such as REB and Croix are subject to regulation related to
all aspects of the securities business, including sales methods, record
keeping, capital structure, and conduct of directors, officers and employees.

  The Company plans to operate NextExchange as a registered national
securities exchange pursuant to Section 6 under the Exchange Act. Registered
exchanges are subject to pervasive federal regulatory responsibilities,
including filing and receiving approval of any rule changes with the SEC
before any rule policy and/or practice of the exchange may be implemented.
Registered exchanges are SRO's and accordingly, must establish comprehensive
surveillance programs to oversee trading by their broker-dealer members.
NextExchange intends to capitalize on the SEC's view supporting the concept of
for-profit, non-member owned exchanges (see "Exchange Regulation and New
Regulation ATS").

  The Company is unable to currently predict whether additional regulations
will be adopted which could have a material impact on the Company, its
products, its business partners, or its customers.

Exchange Regulation and New Regulation ATS

  The Company believes the business and regulatory environment for introducing
new trading systems has become more flexible based on proposals adopted by the
SEC in December 1998 regarding alternate trading systems ("ATSs") and exchange
pilot trading systems. On April 16, 1998, the SEC proposed new rules and rule
amendments that would permit ATSs to choose whether to register as national
securities exchanges, or to register as broker-dealers which must comply with
additional requirements depending on their activities and trading volume.
Additionally, the SEC proposed to exclude from rule filing requirements
certain pilot trading systems to be launched by registered national securities
exchanges and associations.

  On December 2, 1998, the SEC adopted new rules and rule amendments, which
were similar to the proposed ATS regulations. The ATS regulations and Pilot
Rule were published in the Federal Register on December 11, 1998. Most of
these new regulations became effective on April 20, 1999. The ATS regulations
will permit, among other things, ATSs to choose whether to register as
national securities exchanges or to register as broker-dealers. In addition,
the SEC proposed regulatory amendments that will permit registered exchanges
such as the PHLX to introduce pilot trading systems for up to two years
without preliminary SEC approval, the Pilot Rule.

  It is the Company's belief that the SEC underscored the importance of the
new regulatory structure as a result of ATSs' growing importance in executing
transactions in both listed and NASDAQ securities. The SEC

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cited that ATSs execute approximately 20 percent of the volume in NASDAQ
securities and four percent of volume in listed securities. The SEC projected
that these figures will triple in the next three years. In summary, the
Company believes the implications of the new regulatory market structure
include:

  .  Regulation ATS requirements are fewer and less burdensome for start-up
     ATSs reflecting their smaller initial volume levels. ATSs with larger
     volumes are now subject to regulations approaching those imposed upon
     registered exchanges.

  .  The SEC supported the concept that an exchange may be operated as a for-
     profit, non-member enterprise and that an existing exchange could
     relinquish its registered exchange status to operate a broker-dealer
     ATS.

  .  The SEC expressed a clear view that new technology and global
     competition are driving the new regulatory structure.

Competition

  The Company and its subsidiaries operate in several competitive markets.
ATG(TM)'s competition in the commercial markets principally comes from larger,
better-established companies, many of, which have financial, sales and
marketing resources substantially greater than ATG(TM). In online trading
systems, the VTS(TM) system will compete with other electronic trading
systems, including Reuters Group PLC's Instinet system, Investment Technology
Group, Inc.'s POSIT system and Optimark Technologies, Inc.'s Optimark system.
The Company believes that competitive criteria include quality of trade
execution, pricing and reliability of post-execution processing and settlement
operations. The VTS(TM) system will also compete with various national and
regional securities exchanges for trade execution services.

  UTTC(TM)'s success is heavily dependent upon the acceptance of the VTS(TM)
by institutional investors. Failure to obtain such acceptance could result in
lower share volumes and a lack of liquidity on the VTS(TM). Market and
customer acceptance of the VTS(TM) will depend upon, among other things,
VTS(TM)'s operational performance, which has not yet been tested in the
environment of live trading activity. In addition, once operational, the
VTS(TM)'s institutional customers may reduce or discontinue the use of the
VTS(TM) at any time. While the Company's management continues to solicit
customers to use the VTS(TM) there can be no assurance that UTTC(TM) will
attract a sufficient number of customers to the VTS(TM). Failure to market and
introduce the VTS(TM) or to obtain a critical threshold level of trading
volume could result in a material adverse effect on UTTC(TM) and the
consolidated operations of the Company.

  Gomez competes in the market for research products and advisory services
directly with other independent providers of such services, including, The
Gartner Group, Jupiter Communications, Forrester Research, Inc. and McKinsey &
Company, Inc. Gomez also competes directly and indirectly for online
advertising and sponsorship revenues with established search engines, such as
Yahoo, Excite and Lycos, and other Web sites, especially sites that provide e-
commerce consumer information, such as www.BizRate.com, www.CompareNet.com and
www.gotoNET.com.

  The trade execution and analytical services to be offered by Croix will
compete with services offered by leading brokerage firms and other information
service and transaction processing firms.

Product Development

  The Company continues to invest in the enhancement, marketing and deployment
of the VTS(TM) as well as pursuing opportunities to deploy the Company's
trading systems in the Asian and Canadian markets. The Company's efforts are
focused on (i) enhancements to the VTS(TM), (ii) funding and development of
the eMC(TM) and (iii) development of the electronic Options Exchange System
("eOX(TM)"), an electronic crossing network for derivative products. The
Company also continues to refine the design requirements and evaluate market
acceptance of the electronic Auction System ("eAS(TM)") and the electronic
Public Limit Order Book ("ePLOB(TM)"). It is envisioned that these systems
will form the technical backbone of NextExchange.

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  The technologies underlying the Company's products and services are subject
to rapid evolution and change. ATG(TM)'s future success depends upon the
Company's ability to respond quickly and successfully to technological
advances by developing and introducing new and improved products and services.
The Company may not be able to respond to such advances. Competitors,
including those with greater financial and other resources, could also succeed
in developing technologies, products, or services that could directly compete
with the Company's products.

  As a developing company, which has had a limited operating history, the
Company is subject to the risks and difficulties common to new businesses. The
Company was founded in 1994 as a development stage company with no operating
history. Until recently, the Company's revenue was generated primarily by
CSI(R). Because CSI(R) no longer fit into the Company's long-term strategic
plan involving e-commerce, the Company sold CSI(R) on November 6, 1997. Since
then, the Company's only other source of revenue has been Gomez, which was
formed on May 22, 1997. The Company's revenue for the year ended March 31,
1999 was $1,434,438. The Company has never realized any operating profit and
has generated a significant accumulated deficit as a result of the reported
losses.

Proprietary Rights

  ATG(TM)'s success depends to some degree on the protection of its
proprietary rights. ATG(TM) and its subsidiaries regard their respective
products as proprietary and rely primarily on a combination of patent,
trademark, copyright, trade secret protection, employee and third party
confidentiality and non-disclosure agreements, license agreements, and other
federal and state intellectual property protection methods to protect the
proprietary rights. Neither ATG(TM), UTTC(TM) nor Gomez currently holds any
material patents or has filed for copyright protection. UTTC(TM) has filed
"intent-to-use" or "actual use" documents with the U.S. Patent & Trademark
Office for all of the Company's products presently available or currently
being developed. In April, 1999, The Dover Group, Inc. ("Dover") assigned all
right, title, and interest to the registered mark "VWAP(R)" to UTTC(TM) for a
nominal consideration (see "Item 7. Notes to Consolidated Financial
Statements"). Accordingly, UTTC(TM) has the exclusive ownership interest in
the "VWAP(R)" mark. UTTC(TM)'s products are generally licensed to customers on
a "right to use" basis pursuant to a non-transferable license that generally
restricts the customer's use to internal purposes.

                 CAPITALIZATION AND OWNERSHIP OF SUBSIDIARIES

Initial Public Offering

  On May 2, 1996, ATG(TM) completed an initial public offering (the
"Offering") of 2,472,500 shares of common stock, par value $0.01 per share
(the "Common Stock") at an initial public offering price of $4.50 per share
and 2,472,500 redeemable common stock purchase warrants at $.25 per warrant.
The Common Stock and the warrants are separately tradable. As a result of the
Offering, the Company received net proceeds of approximately $10,395,000 (see
"Item 6. Management's Discussion and Analysis of Financial Condition and
Results of Operations--Subsequent Events").

ATG(TM) Series A and Series B Private Placement and Exchange Offer

  On September 18, 1997, the Company commenced a private offering and exchange
offer pursuant to which it offered to certain investors (i) shares of its
Series A Convertible PIK Preferred Stock (with a liquidation preference of
$10.00 per share) (the "Series A Preferred"); (ii) shares of its Series B
Convertible Preferred Stock (with a liquidation preference of $10.00 per
share) (the "Series B Preferred"); and (iii) the opportunity to exchange (the
"Exchange Offer") up to 300,000 shares of its Series B Preferred for up to
$3,000,000 of convertible and non-convertible notes issued by UTTC(TM) (the
"UTTC(TM) Notes"). The Series A Preferred pays cumulative dividends semi-
annually at an annual rate of $0.50 per share and is payable in cash or
additional shares of Series A Preferred until February 15, 2000. Each holder
of shares of Series A Preferred has the right to convert each share of Series
A Preferred into: (i) ten shares of Common Stock; and (ii) one two-year
warrant to

                                       8
<PAGE>

purchase three shares of the common stock, par value $0.01 per share, of
UTTC(TM) (the "UTTC(TM) Common Stock"), with an exercise price of $0.75 per
share, subject to adjustment. The Series B Preferred pays cumulative dividends
semi-annually at an annual rate of $0.90 per share. Each holder of shares of
Series B Preferred has the right to convert each share of Series B Preferred
into: (i) six shares of Common Stock; and (ii) one two-year warrant to
purchase two shares of UTTC(TM) Common Stock, with an exercise price of $0.75
per share, subject to adjustment.

  The Company sold 250,000 shares of its Series A Preferred at $10.00 per
share, and realized gross proceeds of $2,500,000. The Series A Preferred
offering closed on January 15, 1998. The Company closed the Exchange Offer
transaction after receiving the tender of $2,975,000 of the UTTC(TM) Notes for
which the Company issued 297,500 shares of Series B Preferred Stock. The
Company sold 290,000 shares of Series B Preferred. The sale of the Series B
Preferred closed on May 6, 1998. The Company realized gross proceeds of
$2,900,000. The Company incurred transaction costs in connection with the
issuance of the Series A Preferred and the Series B Preferred, as well as the
issuance of the Series C Preferred described below, in the aggregate amount of
approximately $1,445,000.

  ATG(TM) owns approximately 94% of the outstanding common stock of UTTC(TM).
During the fiscal year ended March 31, 1998, ATG(TM) increased its ownership
of UTTC(TM) from 80% to 96% by receiving: (i) approximately 6,000,000 shares
of UTTC(TM) Common Stock in connection with the Exchange Offer; (ii)
approximately 4,800,000 shares of UTTC(TM) Common Stock for the payment of
certain guaranteed obligations; (iii) 3,000,000 shares of UTTC(TM) Common
Stock for existing development advances; and (iv) 5,000,000 shares of UTTC(TM)
Common Stock for $2.5 million of the proceeds from the Series B Offering.
During the fiscal year ended March 31, 1999, ATG(TM)'s ownership of UTTC(TM)
decreased to 94% due the settlement with David Rosensaft ("Rosensaft") whereby
UTTC(TM) issued 416,667 shares of UTTC(TM) Common Stock to Rosensaft (see
"Item 7. Financial Statements").

ATG(TM) Series C Convertible Preferred Stock

  On January 27, 1998, the Company completed the sale of 100,000 shares of the
Series C Convertible Preferred Stock to a group of foreign investors (the
"Series C Investors"), with a liquidation preference of $10.00 per share (the
"Series C Preferred"), for an aggregate purchase price of $1,000,000. Holders
of shares of Series C Preferred had the right to convert each share of Series
C Preferred into one share of Common Stock at the defined floating conversion
price which amounted to $1.51 per share. In addition, the Series C Investors
received warrants exercisable into an aggregate of 100,000 shares of Common
Stock at an exercise price of $1.70 for a period of five years.

  As of March 31, 1998, 50,000 shares of the Series C Shares were converted
into 281,071 shares of Common Stock. Between March 31 and April 21, 1998, the
remainder of the shares Series C Preferred were converted into 314,342 shares
of Common Stock. The fees paid for the Series C Shares were as follows: 5,000
Series C Shares, $50,000, and a warrant to purchase 100,000 shares of Common
Stock at 105% of Market Price to Settondown Capital International Ltd. (the
"Placement Agent").; In addition, the Company paid $50,000 and granted an
option to purchase 150,000 shares of Common Stock at $1.875 per share to
Adirondack Capital L.L.C. ("Adirondack"), whose managing director is a
director of the Company, for services in structuring the offering.

ATG(TM) Series D and E Convertible Preferred Stock; Private Equity Line of
Credit

  On April 3, 1998 (the "Subscription Date"), the Company entered into a
Private Equity Line of Credit Agreement (the "Private Equity Agreement") with
a group of accredited investors (the "Private Equity Investors") which
provides for an aggregate commitment of $18,000,000 to the Company. On the
Subscription Date the Private Equity Investors purchased three shares of
Series D Convertible Preferred Stock (the "Series D Preferred"), with a
liquidation preference of $1,000,000 per share, for an aggregate purchase
price of $3,000,000. The Company also agreed to promptly file a registration
statement with the SEC under the Securities Act,

                                       9
<PAGE>

registering shares of Common Stock issuable in connection with the
transactions contemplated by the Private Equity Agreement (the "Registration
Statement"), whereby the Private Equity Investors purchased two shares of
Series E Convertible Preferred Stock (the "Series E Preferred") with a
liquidation preference of $1,000,000 per share for an aggregate purchase price
of $2,000,000. Following the purchase of the Series E Preferred and subject to
the satisfaction of certain other conditions, the Company may from time to
time put (each, a "Put") to the Private Equity Investors shares of the Common
Stock for an aggregate Put price of $13,000,000. The Put price per share is an
amount equal to 85% of the average of the lowest bid prices of such Common
Stock over the seven day period beginning three days before and ending three
days after the Company gives notice of a Put. On the completion of each Put,
the Company has agreed to pay the Placement Agent an amount equal to 5% in
cash of the amount of each Put and has agreed to pay a fee of 5% in cash to
Adirondack.

  The Private Equity Investors are not obligated to purchase any Put shares
unless, among other things, (i) the Registration Statement is effective, (ii)
the Company is listed and its Common Stock is trading on a national exchange
or quotation system, (iii) the closing bid price of the Common stock on the
day immediately preceding such purchase is at least $1.50 per share, and (iv)
the Common Stock has traded at an average volume of at least 25,000 shares a
day for the thirty trading days preceding such purchase. The Company currently
meets all the conditions listed in the Private Equity Agreement.

  The conversion price of the Series D Preferred is an amount equal to 75% of
the average closing bid price per share over the five days preceding the
conversion date (the "Market Price"). The conversion price of the Series E
Preferred is 80% of the Market Price. Each of the Series D Preferred and
Series E Preferred (i) ranks pari passu with the other authorized preferred
stock of the Company and (ii) is entitled to a cumulative dividend of 8% per
annum on its respective liquidation preference. As of March 31, 1999, all
outstanding shares of Series D and Series E Preferred have been converted into
4,430,579 shares of Common Stock.

  On the Subscription Date, the Private Equity Investors received warrants
(each, a "Warrant") to purchase up to an aggregate of 250,000 shares of Common
Stock and additional Warrants to purchase up to an aggregate of 100,000 of
such shares on July 15, 1998.The Warrants are exercisable for five years at an
exercise price of $4.58. All the warrants were exercised during April 1999.

  On the Subscription Date, the Company paid the Placement Agent, a fee of (i)
$150,000, (ii) 0.15 shares of Series D Preferred, (iii) a Warrant, on the same
terms as the Warrants issued to the Private Equity Investors, to purchase up
to 190,000 shares of Common Stock and (iv) 20,000 shares of Common Stock and
(v) attorneys fees of $30,000. In addition,,and the Company paid a fee of
$150,000 and granted an option to purchase 450,000 shares of Common Stock at
$1.875 per share to Adirondack, for its assistance in structuring the
transaction. Upon the completion of the purchase of shares of Series E
Preferred, the Company paid the Placement Agent (i) an amount equal to 5% of
the proceeds of such purchase, (ii) 0.1 shares of Series E Preferred, and
(iii) a Warrant to purchase up to 60,000 shares of the Common Stock. In
addition, the Company paid an amount equal to 5% of the proceeds of such
purchase to Adirondack. On the completion of each Put by the Company pursuant
to the Series E Agreement, the Company has agreed to pay the Placement Agent
an amount equal to 5% of the proceeds of each such Put.

Gomez Recapitalization and Private Placement

  Prior to January 22, 1999, Gomez operated as a wholly owned subsidiary of
ATG(TM). Upon Gomez's formation in May 1997, ATG(TM) paid $25,000 to Gomez as
consideration for 1,000 shares of its common stock and also agreed to provide
additional funding for Gomez's operations in the amount of $1,475,000. By
January 22, 1999, ATG(TM) had fully funded its commitment to Gomez. On January
22, 1999, an Exchange Agreement was entered into by and between Gomez,
ATG(TM), certain persons affiliated with Gomez, and certain persons affiliated
with ATG(TM). Pursuant to the Exchange Agreement:

  .  ATG(TM) exchanged all of its rights and interest in the $1,475,000 of
     loans made by ATG(TM) to Gomez for an additional 59,000 shares of Gomez
     common stock and subsequently exchanged all 60,000 shares of Gomez
     common stock that it held for 4,905 shares of Gomez Series A Preferred
     Stock;

                                      10
<PAGE>

  .  Julio Gomez, John Robb, and Dr. Alexander Stein (collectively "The Gomez
     Founders") exchanged options to purchase 3,000,000 shares of Gomez
     common stock and paid $.01 per share for 2,103,000 shares of Gomez
     common stock;

  .  The Gomez Founders exchanged options to purchase 2,000,000 shares of
     Gomez common stock for an option to purchase 3,003,000 shares of Gomez
     common stock at $.011 per share pursuant to the Gomez 1999 Long-Term
     Incentive Plan; and

  .  Certain officers and directors of ATG(TM) exchanged options to purchase
     1,500,000 shares of Gomez's common stock and paid $.01 per share for
     1,631,000 shares of restricted Gomez common stock.

  Upon completion of an initial public offering of Gomez common stock, each
outstanding share of Gomez Series A Preferred Stock will be automatically
converted into 1,000 shares of Gomez common stock.

  On April 24, 1999, Gomez completed a private placement of 1,100,000 shares
of Redeemable Convertible Series B Preferred Stock ("Gomez Series B Preferred
Stock") for $5,500,000. The Gomez Series B Preferred Stock ranks senior to the
Gomez Series A Preferred Stock and pays cumulative dividends semi-annually at
an annual rate of 6% of its liquidation preference and is payable in cash or
additional shares of Gomez Series B Preferred until April 2002. At any time
after April 2002, and if an initial public offering registration statement has
not been filed with the SEC, holders of 67% of the outstanding shares of Gomez
Series B Preferred Stock can request all such shares to be redeemed. Each
holder of shares of Gomez Series B Preferred Stock has the right to convert
each share of Gomez Series B Preferred Stock into one share of Gomez common
stock. Upon the consummation of an initial public offering, each share of
Gomez Series B Preferred Stock will automatically convert into one share of
Gomez common stock. In addition, Gomez paid a fee of $50,000 to Adirondack,
for its assistance in structuring the transaction.

  Upon completion of the Exchange and the private placement, ATG(TM) had 70%
of the total voting equity ownership of Gomez. Assuming conversion of all
shares of the Gomez Series A and Gomez Series B Preferred Stock, ATG(TM) would
own approximately 50.4% of the total outstanding shares of Gomez common stock.

Employees

  As of March 31, 1999, the Company and its subsidiaries employed a total of
52 people.

ITEM 2. DESCRIPTION OF PROPERTY

  ATG(TM) and UTTC(TM) lease approximately 10,000 square feet of office space
at 1900 Market Street, Suite 701, Philadelphia, Pennsylvania 19103. Gomez
leases 5,000 square feet of office space at 97 Lowell Road, Suite A-13,
Concord, Massachusetts 01742. Management believes that the Company will need
additional space as it expands. Management believes, however, that it will be
able to obtain additional space as needed on commercially reasonable terms.

ITEM 3. LEGAL PROCEEDINGS

  None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

  A Special Meeting of Stockholders was held on May 29, 1998 for the purpose
of considering and voting upon: (i) increasing the number of authorized shares
of Common Stock from 20,000,000 to 60,000,000; (ii) increasing the number of
authorized shares of ATG(TM) preferred stock from 1,000,000 to 3,000,000; and
(iii) authorizing the issuance of Common Stock pursuant to certain put rights
and upon the conversion or exercise, as the case may be, of ATG(TM)'s Series D
Preferred, Series E Preferred and warrants to purchase shares of Common Stock
issued pursuant to the Private Equity Agreement dated April 3, 1998. All three
items were approved by the security holders at the May 29, 1998 Special
Meeting of Stockholders.

                                      11
<PAGE>

                                    PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

  On May 2, 1996, ATG(TM) completed an initial public offering of 2,472,500
shares of common stock ("Common Stock") at an offering price of $4.50 per
share and 2,472,500 redeemable common stock purchases warrants ("Warrants") at
$0.25 per warrant. The Common Stock and the Warrants are traded on the NASDAQ
Small Cap Market under the symbols, ASTN and ASTNW, respectively. The
following sets forth the initial offering, high and low prices for the Common
Stock during the periods indicated:

<TABLE>
<CAPTION>
                                                                     High   Low
                                                                     ----- -----
   <S>                                                               <C>   <C>
   1999
     First Quarter.................................................. $4.09 $1.91
   1998
     Fourth Quarter................................................. $3.16 $1.09
     Third Quarter.................................................. $3.63 $1.38
     Second Quarter................................................. $4.13 $2.03
     First Quarter.................................................. $4.38 $1.13
   1997
     Fourth Quarter................................................. $2.13 $0.81
     Third Quarter.................................................. $2.75 $0.81
     Second Quarter................................................. $4.13 $2.38
     First Quarter.................................................. $7.69 $3.00

  The following sets forth the initial offering, high and low prices for the
Warrants during the periods indicated:

<CAPTION>
                                                                     High   Low
                                                                     ----- -----
   <S>                                                               <C>   <C>
   1999
     First Quarter.................................................. $1.88 $0.63
   1998
     Fourth Quarter................................................. $1.63 $0.50
     Third Quarter.................................................. $1.38 $0.25
     Second Quarter................................................. $1.63 $0.75
     First Quarter.................................................. $1.88 $0.19
   1997
     Fourth Quarter................................................. $1.00 $0.19
     Third Quarter.................................................. $1.38 $0.38
     Second Quarter................................................. $2.25 $1.06
     First Quarter.................................................. $3.25 $1.63
</TABLE>

  On March 31, 1999, the closing price of the Common Stock was $3.66 and the
closing price of the Warrants was $1.63.

  As of March 31, 1999, there were approximately 281 holders of record of
Common Stock in "Street Name" representing approximately 11,600 stockholders
and approximately 134 holders of record of Warrants in "Street Name".

  During the past three fiscal years, the Company has issued five classes of
convertible preferred stock (see Item 1. "Description of the Business--
Capitalization and Ownership of Subsidiaries").

  No dividends have been declared on the Common Stock through March 31, 1999
and the Board of Directors has no current intention to declare or pay
dividends on the Common Stock in the foreseeable future.

                                      12
<PAGE>

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
        RESULTS OF OPERATIONS

  The following discussion of the Company's results of operations and
liquidity and capital resources should be read in conjunction with the
consolidated financial statements and related notes of the Company for the
fiscal years ended March 31, 1998 and 1999.

Overview

  The Company is engaged in the development and commercialization of on-line
transaction systems for participants in the U.S. and international financial
markets. The Company was founded in 1994 to take advantage of commercial
opportunities through the application of advanced telecommunication and
computing technologies to the area of financial and electronic commerce ("e-
commerce"). The Company is currently organized as a parent company, which has
four subsidiaries:

  .  Universal Trading Technologies Corporation ("UTTC(TM)") and its
     subsidiaries

  .  Gomez Advisors, Inc. ("Gomez")

  .  Electronic Market Center, Inc. ("EMC")

  .  ATG(TM) International, Inc. ("International")

  The Company's limited operating history and dependence upon the operation of
its VTS(TM) makes the prediction of future operating results difficult.
Although the Company has undertaken several initiatives to activate its
VTS(TM) and develop additional sources of revenue, there can be no assurance
that the Company's products will become operational or the Company will become
profitable. For the years ended March 31, 1998 and 1999, Gomez generated all
of the Company's revenues. Gomez provides information and research to
individuals and businesses that want to effectively and efficiently transact
e-commerce online.

  The Company intends to continue to increase its investments in research and
development, sales and marketing and related infrastructure. Such increases
will be dependent upon factors including, but not limited to, operation of the
VTS(TM), success in hiring the appropriate personnel, market acceptance of the
Company's products, and development of a revenue stream from the Company's
products. Due to the anticipated increases in the Company's operating
expenses, the Company's operating results are materially and adversely
affected while revenue is not generated from the Company's transaction
products.

  At March 31, 1999, the Company's consolidated total assets were $5,653,737
compared to $2,998,020 at March 31, 1998. Current assets at March 31, 1999
totaled $3,088,095 and current liabilities were $1,208,759. Stockholders'
equity at March 31, 1999 increased to $4,444,978 from $1,236,573 at March 31,
1998 due to the issuance of $1,275,000 of the Series B Preferred and the
issuance of 4,810,788 shares of Common Stock for $7,250,000. In addition, the
Company issued 3.15 shares for $3,150,000 of the Series D Preferred and 2.1
shares for $2,100,000 of the Series E Preferred during the year, which were
subsequently converted into 4,430,579 shares of Common Stock. The increase in
stockholders' equity resulting from the issuance of preferred stock and common
stock was partially offset by the net loss of $14,276,485 and net issuance
costs of $1,587,999. Preferred stock dividends of $882,477 for the year March
31, 1999 represent cash dividends of $640,040 and stock dividends comprised of
1,968.75 shares of Series A Preferred, .02395 shares of Series D Preferred,
and 182,392 shares of Common Stock issued to the Series D and Series E
Preferred stockholders upon conversion of shares of the Series D Preferred and
Series E Preferred.

Results of Operations

  The net loss applicable to Common Stock totaled $19,693,644, or $1.80 per
share, for the year ended March 31, 1999 compared to $10,989,131, or $1.46 per
share, last year.

  During the year ended March 31, 1999, the Company incurred a net loss of
$14,276,485, or $1.30 per share, as compared to a net loss of $8,674,902, or
$1.15 per share, during the prior year. The net loss for the year

                                      13
<PAGE>

ended March 31, 1998 includes the discontinued operations of Computer Science
Innovations, Inc. ("CSI(R)"). Excluding discounted operations, the net loss
for the year ended March 31, 1998 totaled $8,345,442, or $1.11 per share. In
addition, the results for the years ended March 31, 1998 and 1999 are not
directly comparable since Gomez was incorporated in May 1997 and operated for
approximately ten months of the year ended March 31, 1998.

  On a consolidated basis, the Company's revenue for the year ended March 31,
1999 totaled $1,434,438 compared to $313,659 for the year ended March 31,
1998. Gomez generated all of the Company's revenue for both years.
Substantially all of Gomez's revenue for the period from Inception (May 22,
1997) to March 31, 1998 was generated from advisory engagements with clients
seeking to improve the quality of their Internet service offerings. For the
year ended March 31, 1999, Gomez's consulting revenue increased 203% to
$941,250 due to an increase in the number of consulting engagements. For the
year ended March 31, 1999, advertising revenue totaled $249,156, or 17% of
total revenue, and site revenue generated from lead generation and affiliate
programs totaled $198,952, or 14% of total revenue. In March 1999, Gomez began
selling its GomezPro research services and products to e-commerce businesses.
Accordingly, the Company expects Gomez's consulting revenue to decrease
substantially as a percentage of total revenue.

  Costs of revenues for the years ended March 31, 1998 and 1999 represent the
costs associated with the delivery of Gomez's advisory services, and include
the costs of salaries for personnel providing the advisory services.

  On April 8, 1997, the Company announced that UTTC(TM) had completed
development of the VTS(TM). Although the VTS(TM) has been operationally ready
since April 1997, trading on the system as a facility of the PHLX could not
begin until the SEC approved Rule 237 as proposed by the PHLX. Such approval
was obtained on March 24, 1999. Company personnel and PHLX staff have
completed preparatory system launch sessions and joint, full-scale production
testing of the VTS(TM) and PHLX systems. REB will operate as the facilities
manager for the VTS(TM). On a forward-looking basis, the VTS(TM) is expected
to commence live customer operation during the year ended March 31, 2000.

  During the years ended March 31, 1998 and 1999, the Company capitalized
system development costs related to the VTS(TM) totaling $224,686 and $61,375,
respectively. The Company has ceased capitalization of computer software costs
related to the VTS(TM). During the years ended March 31, 1998 and 1999, the
Company amortized software development costs in the amount of $196,974 and
$190,707, respectively.

  Depreciation consists primarily of depreciation of property and equipment,
mainly computer equipment. Depreciation for the year ended March 31, 1999
increased to approximately $477,000 from $327,000 the prior year due to an
increase in the computer equipment purchased. Capital expenditures increased
to $644,403 for the year ended March 31, 1999 compared to $348,392 for the
prior year. The level of capital expenditures is expected to increase as the
Company moves to implement operation of the VTS(TM) and to develop additional
trading systems.

  Pursuant to Statement of Financial Accounting Standards No. 123, Accounting
for Stock-Based Compensation, the Company recognized a noncash compensation
charge of $4,864,860 to reflect the difference between the estimated fair
market value of the vested Gomez stock options at the date of grant and the
exercise price of the related options issued to the Gomez Founders during the
year ended March 31, 1999. Gomez issued 3,003,000 options at an average price
of $.01 per share, all of which were granted at less than the deemed fair
value at the date of grant. Gomez expects to recognize noncash compensation
charges of $2,432,430 and $6,744,870 for the years ended March 31, 2000 and
2001, respectively, as the stock options vest. However, the full amount of
such charges would be recognized upon the closing of an initial public
offering or upon a change in control as a result of an automatic acceleration
clause contained in the Exchange Agreement.

  The Company also incurred a noncash charge of $497,876 related to the
issuance of non-employee stock options to consultants providing marketing
services to the Company during the year ended March 31, 1999.

                                      14
<PAGE>

During the year ended March 31, 1998, the Company recognized a noncash
compensation charge of $1,804,917 related to the issuance of non-employee
stock options to consultants and professional advisors. The Company has
utilized both common stock and stock options in payment of services as a means
to conserve cash.

  These noncash charges do not materially affect the Company's balance sheet
as the reduction in stockholders' equity is offset by an increase in
additional paid-in capital.

  In February 1998, the Company entered into a consulting agreement with
Continental Capital & Equity Corporation ("Continental") whereby the Company
issued 300,000 shares of Common Stock, with a fair value of $475,125, in
exchange for promotional services through February 1999. During August 1998,
the Company amended the consulting agreement with Continental whereby the
Company issued 250,000 additional shares of Common Stock, with a fair market
value of $416,657, in exchange for additional promotional services and a
reduction in cash payments required pursuant to a previous consulting
agreement. During the year ended March 31, 1999, the Company recorded a
deferred consulting expense of $416,657 as a reduction to stockholders' equity
as a result of amending the consulting agreement. During the year ended March
31, 1999, $569,730 was reflected as a noncash charge for the amortization of
deferred consulting expenses compared to $39,844 during the year ended March
31, 1998.

  Selling, general and administrative expenses ("SG&A"), excluding the noncash
compensatory charge, totaled $5,108,899 and $9,225,551 for the years ended
March 31, 1998 and 1999, respectively. For the year ended March 31, 1999,
Gomez's SG&A totaled $2,329,370, or 25% of the Company's total SG&A, compared
to $503,637 from the period from Inception (May 22, 1997) to March 31, 1998.
The increase in Gomez's SG&A was due primarily to a full year of operation,
growth in staff, leasing of office facilities and other expenses incurred in
building Gomez's infrastructure. As of March 31, 1999, Gomez had 25 employees
compared to six employees as of March 31, 1998. Gomez's expenses are expected
to continue to increase due to growth of the business.

  Excluding Gomez, the Company's SG&A for the year ended March 31, 1999
totaled $6,896,181 compared to $4,605,262 during the year ended March 31,
1998. The increase in SG&A is primarily a result of growth in staff and
increases in marketing, consulting and professional fees. As of March 31,
1999, ATG(TM) and UTTC(TM) employed a total of 27 employees compared to 17
employees at March 31, 1998.

  Other income for the year ended March 31, 1999 includes $290,080 from a
settlement with Alliant Techsystems, Inc. payable as a result of judgements
rendered in favor of the Company, offset by the payment of $47,500 to David
Rosensaft ("Rosensaft") (see Item 7. "Notes to Consolidated Financial
Statements"), and the $105,000 reduction in the carrying value of the
Company's investment in E.Com International. During the year ended March 31,
1998, the Company incurred total other expenses of $1,102,731 consisting of
$760,000 for the settlement of the Rosensaft litigation (See Item 7. "Notes to
Consolidated Financial Statements"), and $342,731 for interest paid on the
UTTC notes(TM). The notes were exchanged for the Series B Preferred which
eliminated the interest payments, but resulted in the payment of dividends
which are not included in net loss (see Item 1. "Description of the Business--
Capitalization and Ownership of Subsidiaries").

  The Company believes, on a forward-looking basis, that SG&A will increase
for the fiscal year ended March 31, 2000, when compared to the current fiscal
year. The Company believes that significant spending related to the
enhancement, development and marketing of its products is required to remain
competitive and establish the necessary trading volumes once the Company's
systems are implemented.

Liquidity and Capital Resources

  At March 31, 1999, the Company's principal source of liquidity consisted of
cash and cash equivalents of $2,667,347. On April 3, 1998, the Company entered
into the Private Equity Agreement with the Private Equity Investors, which
provided for an aggregate commitment of $18,000,000 to the Company, subject to
the satisfaction of certain conditions (see "Notes to Consolidated Financial
Statements--Stockholders' Equity"). As of March 31, 1999, the Company has
drawn down $12,250,000 of the total $18,000,000.

                                      15
<PAGE>

  The Company believes, on a forward-looking basis, it will begin to generate
revenue, in addition to those generated by Gomez, during its fiscal year
ending March 31, 2000. The level and timing of such revenue is dependent,
among other factors, upon the Company's assumptions regarding (i) the date the
VTS(TM) commences live operation; (ii) the trading volume experienced by the
VTS(TM); and (iii) the pricing the Company is able to obtain for VTS(TM) trade
execution. Until adequate revenue is derived from the VTS(TM), the Company's
cash, cash equivalents and cash flow from operations will not be sufficient to
meet the presently anticipated cash requirements. Therefore, the Company
anticipates exercising additional Puts to the Private Equity Investors until
the Private Equity Line is completely utilized. Based upon the Company's
current plan of operations, it is anticipated that the remaining amount
available under the Private Equity Agreement will provide sufficient working
capital for at least the next 12 months.

  The Company's future capital requirements will depend on many factors,
including the timing for launch of the VTS(TM), market acceptance of the
Company's products, the timing and extent of spending to support new product
development efforts and the timing of introductions of new products and
enhancements to existing products. The Company may need additional financing
in the future if (i) the Company experiences unexpected costs, (ii) there are
further delays in the introduction of the VTS(TM), or (iii) the Company fails
to successfully develop markets for its products. The Company will also
require additional financing to fund development of its products, such as
eMC(TM) and NextExchange. Such financing may be raised through spin-offs,
additional equity offerings, borrowings, or other collaborative relationships,
which may require the Company to share ownership of its subsidiaries and/or
revenue from products. There can be no assurance that additional equity or
debt financing, if required, will be available on acceptable terms or at all.
In addition, in order to exercise Puts pursuant to the Private Equity
Agreement, the Company must satisfy certain conditions as required in the
Private Equity Agreement.

Year 2000 Computer Compliance

  The Company has assessed the potential impact of what is commonly referred
to as the "Year 2000" or "Y2K" issue, concerning the inability of certain
information systems and automated equipment to properly recognize and process
dates containing the Year 2000 and beyond. If not corrected, these systems and
equipment could fail or create erroneous results. The Company is subject to
the potential impact of the Y2K issue due to the nature of financial
information and the potential impacts which may arise from software, hardware,
and equipment both within the Company's direct control and outside of the
Company's control.

  The Company views its Y2K risks as arising from three primary sources: (i)
internal software, hardware and equipment utilized in the operations of the
Company; (ii) applications the Company has developed or is developing for use
by its customers; and (iii) third parties with which the Company has material
relationships.

  State of Readiness. The Company has determined that none of its critical
internal systems and equipment presents Y2K issues. The Company is
continuously acquiring and replacing both hardware and software and is
obtaining Y2K compliance certifications with such purchases. The Company's
systems interface electronically and operationally with software, hardware and
equipment outside of the Company's control. The Company also contracts with
third parties for such services as telecommunications. These third party
vendors with whom the Company has material agreements are large publicly
traded organizations. The Company is reviewing the publicly available Y2K
disclosures of these vendors; however there can be no assurance that the
Company will not be adversely affected by the failure of these third parties
to become Y2K compliant. The Company is not independently verifying the Y2K
compliance of these vendors.

  The Company has also determined that none of the applications it has
developed for use by its customers present Y2K issues. The Company is in the
process of obtaining an independent certification of its VTS(TM)'s Y2K
readiness. In addition, the Company's customers cannot enter or export non-Y2K
compliant dates into the VTS(TM) and all VTS(TM) business partners interact
with the VTS(TM) via Y2K compliant interfaces.

                                      16
<PAGE>

  Risks. Since the Company's VTS(TM) has not been activated, the potential
liabilities and costs associated with the Y2K compliance issue cannot be
estimated with certainty at this time. The potential costs, including any
potential loss of revenue, would be dependent upon several factors including,
but not limited to, the volume transacted through the Company's products, the
Y2K readiness of customers utilizing the Company's products and the
concentration of volume among the Company's customers. Because of these
uncertainties regarding others, there can be no assurance that the Y2K issue
will not have a material financial impact in any future period.

  Costs. To date, the Company has not incurred any material costs in
identifying, evaluating or resolving Year 2000 compliance issues and expects
any additional costs incurred to complete its review will be immaterial.
However, the costs incurred to address this issue could increase materially if
the Company identifies non-compliant systems and third-party technology, which
must be replaced or modified or if the Company identifies any other problems
related to the Year 2000 issue, which must be addressed.

  Contingency Plan. Because of the factors described above, the Company has no
Y2K contingency plan and does not intend develop such a plan at this time.
Should the Company become aware that certain products or services provided by
third parties are not Y2K compliant, then the Company will develop contingency
plans for those affected services and vendors.

Subsequent Events

  In April 1999, Gomez completed a private placement of 6% Series B
Convertible Preferred Stock, par value $.01 per share, to accredited investors
at a price of $5 per share. Gross proceeds received by Gomez from the sale
amounted to $5,500,000. Gomez intends to use the net proceeds from the
issuance for staffing increases, capital expenditures related to the upgrading
and marketing of its existing products and services, the development and
marketing of new products and services, and for general corporate purposes,
including working capital.

  In June 1999, UTTC(TM) completed a private placement of Series TK
Convertible Preferred Stock, par value $.01 per share. Gross proceeds received
by UTTC(TM) from the sale amounted to $2,000,000. The proceeds will be used
for general corporate purposes, including working capital.

  On June 4, 1999 the Company, filed a post effective amendment on Form S-3
with the S.E.C. to update its registration statement on Form S-2B, originally
filed by the Company on February 8, 1996 in connection with its initial public
offering, which was declared effective on May 2, 1996. The post effective
amendment was declared effective on June 23, 1999.

                                      17
<PAGE>

ITEM 7. FINANCIAL STATEMENTS

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<S>                                                                          <C>
Financial Statements:
  Report of Independent Auditors............................................  19
  Consolidated Balance Sheets at
   March 31, 1998 and 1999..................................................  20
  Consolidated Statements of Operations
   for the years ended March 31, 1998 and 1999..............................  21
  Consolidated Statement of Stockholders'
   Equity for the years ended March 31, 1998 and 1999.......................  22
  Consolidated Statements of Cash Flows
   for the years ended March 31, 1998 and 1999..............................  24
  Notes to Consolidated Financial Statements................................  25
</TABLE>

                                       18
<PAGE>

                         INDEPENDENT AUDITOR'S REPORT

To the Board of Directors and Stockholders
The Ashton Technology Group, Inc.

  We have audited the accompanying consolidated balance sheet of The Ashton
Technology Group, Inc. and Subsidiaries as of March 31, 1998 and 1999 and the
related consolidated statements of operations, stockholders' equity, and cash
flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

  We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

  In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of The Ashton
Technology Group, Inc. and Subsidiaries as of March 31, 1998 and 1999 and the
results of their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.

/s/ Goldstein Golub Kessler LLP

GOLDSTEIN GOLUB KESSLER LLP
New York, New York

May 7, 1999, except for
paragraph one of Note 14, as
to which the date is April 23,
1999 and paragraph two of Note
15 as to which the date is
June 4, 1999.

                                      19
<PAGE>

               THE ASHTON TECHNOLOGY GROUP, INC. AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                            March 31,
                                                    --------------------------
                                                        1998          1999
                                                    ------------  ------------
<S>                                                 <C>           <C>
                      ASSETS
Cash and cash equivalents.......................... $    815,680  $  2,667,347
Accounts receivable and prepayments................      130,843       308,249
Current portion of notes receivable................      103,619       112,499
Stock subscriptions receivable.....................      245,000           --
                                                    ------------  ------------
    Total current assets...........................    1,295,142     3,088,095
Notes receivable, net of current portion...........      458,040       717,284
Property and equipment, net of accumulated
 depreciation......................................      849,799     1,017,179
Investments and Exchange Membership................      105,000       196,900
Capitalized software development costs.............      224,686        95,354
Intangible assets..................................          --         58,563
Other assets.......................................       65,353       480,362
                                                    ------------  ------------
    Total Assets................................... $  2,998,020  $  5,653,737
                                                    ============  ============
       LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses.............. $  1,736,447  $    675,841
Notes payable......................................       25,000           --
Other liabilities..................................          --        532,918
                                                    ------------  ------------
    Total current liabilities......................    1,761,447     1,208,759
Commitments and Contingencies
Stockholders' equity:
  Preferred stock authorized 3,000,000 shares,
   250,000 shares designated as Series A--
   (liquidation preference $10 per share); shares
   issued and outstanding; 250,000 and 125,219.....    2,500,000     1,252,188
  590,000 shares designated as Series B--
   (liquidation preference $10 per share); shares
   issued and outstanding; 460,000 and 417,500.....    3,188,875     4,175,000
  105,000 shares designated as Series C $.01 par
   value--(liquidation preference equals stated
   value); shares issued and outstanding; 55,000
   and none........................................      550,000           --
  10 shares designated as Series D $.01 par value--
   (liquidation preference equals stated value);
   shares issued and outstanding; none.............          --            --
  10 shares designated as Series E $.01 par value--
   $1,000,000 per share liquidation preference;
   shares issued and outstanding; none.............          --            --
Common stock--par value: $.01; shares authorized:
 60,000,000; Shares issued and outstanding;
 8,143,571 and 20,569,172..........................       81,436       205,692
Additional paid-in capital.........................   15,730,870    39,133,830
Deferred consulting expense........................     (438,281)     (285,208)
Accumulated deficit................................  (20,376,327)  (40,036,524)
                                                    ------------  ------------
Total stockholders' equity.........................    1,236,573     4,444,978
                                                    ------------  ------------
    Total Liabilities and Stockholders' Equity..... $  2,998,020  $  5,653,737
                                                    ============  ============
</TABLE>

                See Notes to Consolidated Financial Statements.

                                       20
<PAGE>

               THE ASHTON TECHNOLOGY GROUP, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                      Year Ended March 31,
                                                    --------------------------
                                                        1998          1999
                                                    ------------  ------------
<S>                                                 <C>           <C>
Revenues........................................... $    313,659  $  1,434,438
                                                    ------------  ------------
Costs and expenses:
  Cost of revenues.................................       79,000       168,000
  Development costs................................      196,974       190,707
  Depreciation and amortization....................      326,736       515,240
  Noncash compensatory charges.....................    1,844,761     5,932,466
  Selling, general and administrative..............    5,108,899     9,225,551
                                                    ------------  ------------
    Total costs and expenses.......................    7,556,370   (16,031,964)
                                                    ------------  ------------
Loss from operations...............................   (7,242,711)  (14,597,526)
Other (expenses)/income:
  Net interest (expense)/income....................     (342,731)      146,816
  Other (expense) income...........................     (760,000)      133,222
                                                    ------------  ------------
    Total other (expenses) income..................   (1,102,731)      280,038
                                                    ------------  ------------
Loss from continuing operations....................   (8,345,442)  (14,317,488)
                                                    ------------  ------------
Minority interest in earnings of subsidiaries......          --         41,003
Minority interest in earnings of discontinued
 operations........................................      (11,465)          --
Income from operations of discontinued operations
 of Computer Science Innovations (less applicable
 income taxes of $42,000)..........................       67,935           --
Loss on disposal of Computer Science Innovations...     (385,930)          --
                                                    ------------  ------------
Net loss........................................... $ (8,674,902) $(14,276,485)
                                                    ============  ============
Dividends attributed to preferred stock............          --     (1,113,277)
Beneficial conversion feature of preferred stock...   (2,206,480)   (4,270,435)
Dividends in arrears on preferred stock............     (107,749)      (33,447)
                                                    ------------  ------------
Net loss applicable to common stock................ $(10,989,131) $(19,693,644)
                                                    ============  ============
Net loss per share from continuing operations...... $      (1.42) $      (1.80)
Net loss per share from discontinued operations.... $      (0.04)          --
                                                    ------------  ------------
Net loss per share................................. $      (1.46) $      (1.80)
                                                    ============  ============
Weighted average number of common shares
 outstanding.......................................    7,519,555    10,953,818
                                                    ============  ============
</TABLE>

                See Notes to Consolidated Financial Statements.

                                       21
<PAGE>

                  THE ASHTON TECHNOLOGY GROUP AND SUBSIDIARIES

                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

                      Years ended March 31, 1998 and 1999

<TABLE>
<CAPTION>
                             Common Stock           Series A                Series B                Series C
                          ------------------- ----------------------  ----------------------  --------------------
                          Number of           Number of               Number of               Number of
                            Shares    Amount   Shares      Amount      Shares      Amount      Shares     Amount
                          ---------- -------- ---------  -----------  ---------  -----------  --------- ----------
<S>                       <C>        <C>      <C>        <C>          <C>        <C>          <C>       <C>
Balance at March 31,
 1997...................   7,562,500 $ 75,625      --            --        --            --        --          --
Issuance of Series A
 Convertible Preferred
 Stock..................         --       --   250,000   $ 2,500,000       --            --        --          --
Issuance of Series B
 Convertible Preferred
 Stock..................         --       --       --            --    162,500   $ 1,625,000       --          --
Issuance of Series B
 Convertible Preferred
 Stock in connection
 with exchange of UTTC
 notes payable..........         --       --       --            --    297,500     2,975,000       --          --
Recognition of
 beneficial conversion
 feature of preferred
 stock..................         --       --       --            --        --     (1,411,125)      --          --
Issuance of Series C
 Convertible Preferred
 Stock..................         --       --       --            --        --            --    105,000  $1,050,000
Series C Convertible
 Preferred Stock
 converted to common
 stock..................     281,071    2,811      --            --        --            --    (50,000)   (500,000)
Issuance cost in
 connection with
 preferred stock........         --       --       --            --        --            --        --          --
Issuance of options to
 purchase common stock..         --       --       --            --        --            --        --          --
Issuance of common stock
 for consulting
 services...............     300,000    3,000      --            --        --            --        --          --
Net loss................         --       --       --            --        --            --        --          --
                          ---------- -------- --------   -----------  --------   -----------   -------  ----------
Balance at March 31,
 1998...................   8,143,571   81,436  250,000     2,500,000   460,000     3,188,875    55,000     550,000
Conversion of preferred
 stock to common stock..   7,062,421   70,624 (126,750)   (1,267,500) (175,000)   (1,750,000)  (55,000)   (550,000)
Preferred stock
 dividends..............     182,392    1,824    1,969        19,688       --            --        --          --
Issuance of Series
 Preferred Stock........         --       --       --            --    127,500     1,275,000       --          --
Issuance costs in
 connection with
 preferred stock........      20,000      200      --            --      5,000        50,000       --          --
Recognition of
 beneficial conversion
 feature of preferred
 stock..................         --       --       --            --        --      1,411,125       --          --
Issuance costs in
 connection with common
 stock..................         --       --       --            --        --            --        --          --
Issuance of options to
 purchase common stock..         --       --       --            --        --            --        --          --
Issuance of options to
 purchase Gomez common
 stock..................         --       --       --            --        --            --        --          --
Issuance of common
 stock..................   4,810,788   48,108      --            --        --            --        --          --
Issuance of common stock
 for consulting
 services...............     250,000    2,500      --            --        --            --        --          --
Issuance of common stock
 and stock options for
 asset acquisitions.....     100,000    1,000      --            --        --            --        --          --
Amortization of deferred
 consulting expense.....         --       --       --            --        --            --        --          --
Net loss................         --       --       --            --        --            --        --          --
                          ---------- -------- --------   -----------  --------   -----------   -------  ----------
Balance at March 31,
 1999...................  20,569,172 $205,692  125,219   $ 1,252,188   417,500   $ 4,175,000       --          --
                          ========== ======== ========   ===========  ========   ===========   =======  ==========
</TABLE>

                See Notes to Consolidated Financial Statements.

                                       22
<PAGE>

                          THE ASHTON TECHNOLOGY GROUP

          CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY--(Continued)

                      Years ended March 31, 1998 and 1999

<TABLE>
<CAPTION>
                               Series D               Series E
                         ---------------------  ---------------------  Additional                  Deferred
                         Number of              Number of                Paid-in    Accumulated   Consulting  Stockholders'
                          Shares     Amount      Shares     Amount       Capital      Deficit      Expense       Equity
                         --------- -----------  --------- -----------  -----------  ------------  ----------  -------------
<S>                      <C>       <C>          <C>       <C>          <C>          <C>           <C>         <C>
Balance at March 31,
 1997..................      --            --       --            --   $10,482,197  $ (9,494,945)       --    $  1,062,877
Issuance of Series A
 Convertible Preferred
 Stock.................      --            --       --            --           --            --         --       2,500,000
Issuance of Series B
 Convertible Preferred
 Stock.................      --            --       --            --           --            --         --       1,625,000
Issuance of Series B
 Convertible Preferred
 Stock in connection
 with exchange of UTTC
 notes payable.........      --            --       --            --      (309,005)          --         --       2,665,995
Recognition of
 beneficial conversion
 feature of preferred
 stock.................      --            --       --            --     3,617,605    (2,206,480)       --             --
Issuance of Series C
 Convertible Preferred
 Stock.................      --            --       --            --           --            --         --       1,050,000
Series C Convertible
 Preferred Stock
 converted to common
 stock.................      --            --       --            --       497,189           --         --             --
Issuance cost in
 connection with
 preferred stock.......      --            --       --            --    (1,594,466)          --         --      (1,594,466)
Issuance of options to
 purchase common
 stock.................      --            --       --            --     2,562,225           --         --       2,562,225
Issuance of common
 stock for consulting
 services..............      --            --       --            --       475,125           --   $(438,281)        39,844
Net loss...............      --            --       --            --           --     (8,674,902)       --      (8,674,902)
                          ------   -----------    -----   -----------  -----------  ------------  ---------   ------------
Balance at March 31,
 1998..................      --            --       --            --    15,730,870   (20,376,327)  (438,281)     1,236,573
Conversion of preferred
 stock to common
 stock.................   (3.174)  $(3,173,950)    (2.1)  $(2,100,000)   8,770,826           --         --             --
Preferred stock
 dividends.............    0.024        23,950      --            --       426,975    (1,113,277)       --        (640,040)
Issuance of Series
 Preferred Stock.......     3.00     3,000,000     2.00     2,000,000          --            --         --       6,725,000
Issuance costs in
 connection with
 preferred stock.......     0.15       150,000     0.10       100,000   (1,163,199)          --         --        (862,999)
Recognition of
 beneficial conversion
 feature of preferred
 stock.................      --            --       --            --     2,859,310    (4,270,435)       --             --
Issuance costs in
 connection with common
 stock.................      --            --       --            --      (725,000)          --         --        (725,000)
Issuance of options to
 purchase common
 stock.................      --            --       --            --       497,876           --         --         497,876
Issuance of options to
 purchase Gomez common
 stock.................      --            --       --            --     4,864,860           --         --       4,864,860
Issuance of common
 stock.................      --            --       --            --     7,201,892           --         --       7,250,000
Issuance of common
 stock for consulting
 services..............      --            --       --            --       414,157           --    (416,657)           --
Issuance of common
 stock and stock
 options for asset
 acquisitions..........      --            --       --            --       254,463           --         --         255,463
Amortization of
 deferred consulting
 expense...............      --            --       --            --           --            --     569,730        569,730
Net loss...............      --            --       --            --           --    (14,276,485)       --     (14,276,485)
                          ------   -----------    -----   -----------  -----------  ------------  ---------   ------------
Balance at March 31,
 1999..................      --            --       --            --   $39,133,830  $(40,036,524) $(285,208)  $  4,444,978
                          ======   ===========    =====   ===========  ===========  ============  =========   ============
</TABLE>

                See Notes to Consolidated Financial Statements.

                                       23
<PAGE>

               THE ASHTON TECHNOLOGY GROUP, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                       Year Ended March 31,
                                                     -------------------------
                                                        1998          1999
                                                     -----------  ------------
<S>                                                  <C>          <C>
Cash Flows From Operating Activities:
Net loss...........................................  $(8,674,902) $(14,276,485)
 Income from discontinued operations...............      (67,935)          --
 Minority interest in earnings of discontinued
  operations.......................................       11,465           --
 Loss on sale of discontinued operations...........      385,930           --
                                                     -----------  ------------
Loss from continuing operations....................   (8,345,442)  (14,276,485)
Adjustments to reconcile net loss to net cash (used
 in) provided by continuing operations:
Depreciation and amortization......................      326,736       705,947
 Noncash compensatory charge for common stock
  options..........................................    1,804,917     5,362,736
 Minority interest in earnings of subsidiaries.....          --        (41,003)
 Common stock issued for consulting services.......       39,844       569,730
 Writedown E.Com investment........................          --        105,000
Changes in operating assets and liabilities
 Decrease/(increase) in receivables and
  prepayments......................................      261,537      (177,406)
 Decrease in stock subscription receivable.........          --        245,000
 (Increase) in other assets........................       (6,863)     (415,009)
 Increase/(decrease) in accounts payable and
  accrued expenses.................................      344,732    (1,440,637)
 Increase in other liabilities.....................          --        532,918
                                                     -----------  ------------
   Net cash used in continuing operations..........   (5,574,539)   (8,829,209)
   Net cash provided by discontinued operations....       50,045           --
                                                     -----------  ------------
Net cash used in operating activities..............   (5,524,494)   (8,829,209)
Cash Flows From Investing Activities:
Purchase of fixed assets...........................     (348,392)     (644,403)
Investment in E.Com................................     (105,000)          --
(Increase) in notes receivable.....................          --       (380,000)
Cash received from notes receivable................       32,466       111,876
Proceeds from sale of subsidiary, net of cash
 disposed..........................................      154,108           --
Capitalized software development costs.............     (224,686)      (61,375)
                                                     -----------  ------------
   Net cash used in investing activities...........     (491,504)     (973,902)
                                                     -----------  ------------
Cash Flows From Financing Activities:
Preferred stock dividends paid in cash.............          --       (319,062)
Issuance costs for preferred stock and notes
 payable...........................................   (1,159,163)     (863,000)
Issuance costs for common stock....................          --       (725,000)
Proceeds from issuance of notes payable............    3,000,000           --
Proceeds from issuance of Gomez common stock.......          --         36,840
Proceeds from issuance of preferred stock..........    4,930,000     6,275,000
Proceeds from issuance of common stock.............          --      7,250,000
                                                     -----------  ------------
   Net cash provided by financing activities.......    6,770,837    11,654,778
                                                     -----------  ------------
Net Increase/(Decrease) in Cash and Cash
 Equivalents.......................................      754,839     1,851,667
Cash and cash equivalents, beginning of year.......       60,841       815,680
                                                     -----------  ------------
Cash and cash equivalents, end of year.............  $   815,680  $  2,667,347
                                                     ===========  ============
Supplemental disclosures of cash flow information:
 Cash paid during the year for interest............  $   364,938  $    147,388
 Cash paid during the year for taxes...............  $    20,198  $      6,619
Supplemental schedule of noncash investing and
 financing activities:
Purchase of PHLX seat and VWAP.com.................          --   $    255,463
 Exchange of UTTC(TM) notes for Ashton preferred
  stock............................................  $ 2,975,000           --
 Forgiveness of note payable in connection with
  the sale of CSI(R)...............................  $   500,000           --
 Receipt of note receivable in connection with
  sale of CSI(R)...................................  $   594,125           --
</TABLE>

                See Notes to Consolidated Financial Statements.

                                       24
<PAGE>

              THE ASHTON TECHNOLOGY GROUP, INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Description of Business and Significant Accounting Policies

  The accompanying consolidated financial statements for the years ended March
31, 1998 and 1999 include the accounts of The Ashton Technology Group, Inc.
("ATG(TM)") and its subsidiaries, Universal Trading Technologies Corporation
("UTTC(TM)"), Gomez Advisors, Inc. ("Gomez"), ATG(TM) International
("International"), Electronic Market Center, Inc. ("EMC"), and UTTC(TM)'s
subsidiaries, collectively the "Company".

  Gomez was formed in May 1997, REB was formed in April 1998, EMC was formed
in June 1998, and International was formed in July 1998. ATG(TM) owns 94% of
the voting equity of UTTC(TM) and 70% of the voting equity of Gomez.
UTTC(TM)'s subsidiaries, Croix Securities, Inc. and Next Exchange, Inc. were
formed in February 1999 and are wholly owned subsidiaries of UTTC(TM). The
results of operations for each of these subsidiaries are included from the
date of formation. All significant intercompany accounts and transactions have
been eliminated.

  The Company is engaged in the development and commercialization of on-line
transaction systems for participants in the U.S. and international financial
markets. The Company was founded in 1994 to take advantage of commercial
opportunities through the application of advanced telecommunication and
computing technologies to the area of financial and electronic commerce ("e-
commerce"). The Company is currently organized as a parent company with four
subsidiaries.

 Revenue Recognition

  Consulting revenues are recognized when the services are completed and the
client has been billed for the services rendered. Advertising and sponsorship
revenues are recognized in the period in which the advertisement or
sponsorship is displayed, provided that no significant obligations remain and
either the Company has already been paid or collection of the receivable is
probable.

 Cash and Cash Equivalents

  The Company considers all cash and highly liquid investments with a maturity
of three months or less to be cash equivalents. Cash equivalents, which
consist primary of money market accounts, are carried at cost, which
approximates market value.

 Accounts Receivable and Concentration of Credit Risk

  Accounts receivable and prepayments are primarily attributable to Gomez and
consist of billed receivables arising from recognized revenues. One customer
contributed approximately $185,000, or 13% of total revenues, for the year
ended March 31, 1999. Three customers contributed approximately $86,250 (28%),
$37,500 (17%), and $37,500 (12%) of total revenue, for the year ended March
31, 1998. Three customers account for approximately 30%, 18%, and 16% of
Gomez's total accounts receivable at March 31, 1999. As of March 31, 1998,
three customers accounted for approximately 41%, 29%, and 23% of Gomez's
accounts receivable. Accounts receivable includes accrued interest of $34,083
on the note receivable from The Dover Group, Inc. ("Dover") (see "Note 3.
Certain Transactions").

 Capitalized Software Development Costs

  The costs of software developed for internal use incurred during the
preliminary project stage are expensed as incurred. Direct costs incurred
during the application development stage are capitalized. Costs incurred
during the post implementation/operation stage are expensed as incurred. No
internal-use software costs have been capitalized at March 31, 1998 and 1999.

                                      25
<PAGE>

  The Company accounts for the costs of software to be marketed in compliance
with SFAS No. 86, Accounting for the Costs of Computer Software to be Sold,
Leased or Otherwise Marketed. The Company capitalizes software development
costs where technological feasibility of the product has been established. The
technological feasibility of a computer software product is established when
the enterprise has completed all planning, designing, coding, and testing
activities that are necessary to establish that the product can be produced to
meet its design specifications including functions, features, and technical
performance requirements. The establishment of technological feasibility and
the ongoing assessment of recoverability of capitalized software development
costs require considerable judgement by management.

  At each balance sheet date, the capitalized computer software costs are
compared to the net realizable value of the related product. The net realized
value is the estimated future gross revenue from the related product reduced
by the estimated future costs of completing and disposing of such product. In
the event that the unamortized capitalized computer software costs exceed the
net exceed the net realizable value of the related product, such excess amount
is to be written off.

  Capitalized software development costs related to the volume weighted
average price ("VWAP(R)") trading system ("VTS(TM)") amounted to $224,686 and
$61,375 for the years ended December 31, 1998 and 1999, respectively, of
which, $224,686 and $95,354 are included on the consolidated balance sheets at
March 31, 1998 and 1999, respectively.

 Advertising Expenses

  All advertising costs are expensed as incurred. Advertising expenses for the
years ended March 31, 1998 and 1999 amounted to approximately $245,000 and
$385,992, respectively.

 Property and Equipment

  Property and equipment are depreciated using the straight-line method over
the estimated useful lives of the assets (generally three to seven years).
Leasehold improvements are amortized over the term of the lease, which is
shorter than the estimated useful life of the leasehold improvements.

 Fair Value of Notes Receivable

  Based on rates of return currently available to the Company for investments
with similar terms and maturities, the fair value of the notes receivable
approximates the carrying amount.

 Deferred Stock Issuance Costs

  Stock issuance costs of $282,117, representing costs incurred in connection
with the Gomez Series B Preferred Stock Offering (see "Note 14 "Subsequent
Events") completed in April 1999, have been deferred and will be netted
against the proceeds received from the offering. This amount is included in
other assets at March 31, 1999.

 Restatement of Financial Statements

  The presentation of the operations and sale of Computer Science Innovations,
Inc. ("CSI(R)") has been reclassified and presented as discounted operations
in accordance with APB Opinion No. 30, Reporting the Results of Operations--
Reporting the Effects of Disposal of a Segment, and Extraordinary, Unusual and
Infrequently Occuring Events and Transactions. This accounting treatment does
not change the reported loss for the year ended March 31, 1998. The Company
believes such presentation simplifies the comparison of the financial
statements.

 Intangible Assets

  Intangible assets consist entirely of the purchase of the rights to
www.VWAP.com in March 1999 and represents the fair market value of stock
options paid in consideration for such rights. The fair market value of the
stock options was calculated using a Black-Scholes option-pricing model.
Amortization of intangible assets is provided on a straight-line basis over
the estimated useful life of the asset, which is estimated at 18 months. No
amortization expense was recognized during the year ended March 31, 1999. The
Company identifies and records impairment losses on intangible assets when
events and circumstances indicate that such assets might be impaired. To date,
no such impairment has occurred.

                                      26
<PAGE>

 Accounts Payable and Accrued Expenses

  Accounts payable and accrued expenses at March 31, 1999 consist entirely of
accrued professional fees and other expenses. At March 31, 1998, accounts
payable and accrued expenses included accrued litigation settlement of
$760,000, accrued compensation expenses of $115,500, trade accounts payable of
$47,786, and accrued professional fees and other expenses of $813,161.

  Other non-current liabilities are comprised of accrued dividends of
approximately $320,000 and deferred revenue of approximately $197,525.

 Earnings Per Share

  Net loss per share is computed using the weighted average number of shares
outstanding. Incremental shares to be issued upon the exercising of options
and warrants and upon the conversion of convertible preferred stock have not
been included, because the effect would be anti-dilutive.

 Reclassifications

  Certain reclassifications have been made to prior year's amounts to conform
to the current year's presentation.

 Use of Estimates

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

2. Recently Adopted Accounting Standards

  In March 1998, the AICPA issued SOP No. 98-1, Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use. The Company will
adopt SOP No. 98-1 beginning April 1, 1999. Adoption of this Statement is not
expected to have a material impact on the Company's consolidated financial
position or results of operations.

  In April 1998, the AICPA issued SOP No. 98-5, Reporting on the Costs of
Start-Up Activities. SOP No. 98-5 requires all costs associated with pre-
opening and pre-operating organization activities to be expensed as incurred.
The Company will adopt SOP No. 98-5 beginning April 1, 1999. Adoption of this
Statement is not expected to have a material impact on the Company's
consolidated financial position or results of operations.

3. Certain Transactions

  The Company and Raymond T. Tate ("Tate"), formerly Chairman of the Board of
Directors, entered into a consulting agreement, dated October 22, 1996 (the
"Consulting Agreement"). Under the terms of the Consulting Agreement, the
Company retained Tate to act as a consultant to the CSI(R) for the period from
October 22, 1996 to December 31, 1998. As compensation for such services, the
Company agreed to pay Raymond Tate Associates and Tate $120,000 per annum and
certain other expenses. Tate also agreed not to compete with the Company in
the Financial Services Industry (as such term is defined in the Consulting
Agreement) during the term of the Consulting Agreement.

  For the years ended March 31, 1998 and 1999, the Company paid Raymond Tate
Associates and Tate $101,423 and $91,692, respectively. As of December 31,
1998, all payments to Raymond Tate Associates and Tate pursuant to the
Consulting Agreement were completed. The total cost of the Consulting
Agreement was accrued during the year ended March 31, 1997 when the Company
determined no value would be derived from the Consulting Agreement.

  On May 1, 1997, David N. Rosensaft ("Rosensaft") commenced an action in the
U.S. District Court for the Southern District of New York captioned Rosensaft
v. The Ashton Technology Group, Inc., et al, No. 97 Civ.

                                      27
<PAGE>

3138 ("the Rosensaft lawsuit"). On January 14, 1998, the Company entered into
an agreement with Dover and Fredric W. Rittereiser (the Company's President,
Chief Executive Officer and a director of the Company), whereby Dover and Mr.
Rittereiser agreed to reimburse $413,980 in legal costs associated with the
Rosensaft lawsuit to the Company to the extent such costs were not covered by
the Company's directors' and officers' liability insurance carrier. Dover and
Mr. Rittereiser pledged 333,334 shares of UTTC(TM) stock as collateral in
support of their agreement to pay the legal costs. The Company has submitted a
claim to its insurance carrier in the full amount of such legal costs. To
date, the Company and its insurance carrier have not reached agreement as to
whether the legal costs are covered by the Company's directors' and officers'
liability insurance policy. On March 4, 1998, the U.S. District Court entered
an order awarding damages against Dover and Mr. Rittereiser in the amount of
approximately $1,200,000. Mr. Rittereiser is the sole shareholder, director
and officer of Dover. On April 7, 1998, the Company's Board of Directors,
after due deliberation, concluded that the Company and its UTTC(TM) subsidiary
derived mutual benefit from the Rosensaft settlement by Dover and Mr.
Rittereiser. The Board resolved to fund one-third of the $1.2 million
settlement amount. Separately, UTTC(TM) agreed to fund one-third of the
Rosensaft settlement amount. On April 8, 1998, the Company loaned $380,000 to
Dover and Mr. Rittereiser at an annual rate of 9%, for thirty months. The loan
is included in notes receivable on the consolidated sheets at March 31, 1999.
In exchange for the loan to satisfy the Rosensaft settlement, Dover pledged
300,000 shares of the Company's common stock ("Common Stock") under its
control and entered into a Promissory Note in favor of the Company.

  Since 1996, the Company has utilized Dover for various services including
advising the Company on its acquisitions of UTTC(TM) and CSI(R) and consulting
services related to the Company's financings and product development efforts.
Mr. Rittereiser, is the Chairman of Dover. For the years ended March 31, 1998
and 1999, the Company paid consulting fees to Dover amounting to $125,000
compared to $235,000, respectively.

  During 1998, the Company retained Richard Butler, a member of the Company's
Board of Directors, to provide strategic marketing services. For the years
ended March 31, 1998 and 1999, the Company paid consulting fees to Richard
Butler amounting to $7,500 and $90,000, respectively.

  During 1997, the Company retained Adirondack Capital, L.L.C. ("Adirondack")
to provide investment banking and financial advisory services. K. Ivan F.
Gothner, a member of the Company's Board of Directors, is the Managing
Director of Adirondack. For the year ended March 31, 1999, the Company paid
consulting fees to Adirondack amounting to $120,000 compared to $115,000 for
the same period of 1998. The Company has received an independent opinion
stating that the fees paid to Adirondack are comparable to fees that it would
have been required to pay, if it had obtained such services from an
unaffiliated third party.

  Additionally, the Company has paid Adirondack $300,000 (an amount equal to
5% of the proceeds from the sale of the Series C Preferred, the Series D
Preferred and the Series E Preferred) and an option to purchase 600,000 shares
of Common Stock at $1.875 per share. Pursuant to the Private Equity Line of
Credit Agreement (the "Private Equity Agreement" or "Agreement"), the Company
has also agreed to pay Adirondack an amount equal to 5% of the proceeds from
the sale of Common Stock (each such sale a "Put"). As of March 31, 1999,
Adirondack has been paid $362,500 pursuant to the Private Equity Agreement.

4. Property and Equipment

  Property and equipment, at cost, consist of the following as of March 31,
1998 and 1999:

                                      28
<PAGE>

<TABLE>
<CAPTION>
                                                 March 31,
                                           ----------------------    Estimated
                                              1998        1999      Useful Life
                                           ----------  ----------  -------------
   <S>                                     <C>         <C>         <C>
   Office equipment....................... $  165,250  $  196,999      3-5 years
   Computer equipment.....................    923,907   1,466,306        3 years
   Furniture and fixtures.................    134,835     216,757        7 years
   Leasehold improvements.................    112,332     100,665  Term of lease
                                           ----------  ----------
                                            1,336,324   1,980,727
   Less accumulated depreciation..........   (486,525)   (963,548)
                                           ----------  ----------
     Property and equipment, net.......... $  849,799  $1,017,179
                                           ==========  ==========
</TABLE>

  Depreciation and amortization expense for the years ended March 31, 1998 and
1999 was approximately $327,000 and $477,000, respectively.

5. Investments and Exchange Membership

  In November 1997, the Company entered into a strategic relationship with
E.Com International, Inc. ("E.Com") to support its goal of providing remote
wireless access to its family of online transaction systems. Under this
relationship, the Company is the exclusive distributor of E.Com's products for
the professional financial services market. E.Com develops and markets
integrated wireless mobile computing devices, which provide user access to the
Internet, corporate networks, and remote databases. The Company purchased
35,000 shares of E.Com common stock and warrants to purchase E.Com common
stock at $3.00 per share in a private placement.

  On October 2, 1998, E.Com filed a Current Report on Form 8-K stating E.Com
is exploring various alternative financing strategies, including private and
public financing, selling assets and bank borrowings. Absent successful
completion of such a financing, E.Com has indicated it will not have
sufficient liquid assets to continue operations as currently conducted. Since
E.Com has made no subsequent filings to update its situation, the Company has
elected to write off the carrying value of its investment in E.Com in the
amount of $105,000.

  On March 19, 1999, the Company purchased PHLX membership seat privileges for
REB. The Company issued 100,000 restricted shares of Common Stock in
consideration of the PHLX seat. Based upon the market value of the Common
Stock on March 19, 1999, the Company recorded the total $196,900 acquisition
price of the PHLX as an asset. The acquisition cost approximates the bid/offer
price range of a PHLX membership seat at the time of purchase.

6. Stockholders' Equity

  On September 18, 1997, the Company commenced a private offering and exchange
offer pursuant to which it offered to certain investors (i) shares of its
Series A Convertible PIK Preferred Stock (with a liquidation preference of
$10.00 per share) (the "Series A Preferred"); (ii) shares of its Series B
Convertible Preferred Stock (with a liquidation preference of $10.00 per
share) (the "Series B Preferred"); and (iii) the opportunity to exchange (the
"Exchange Offer") up to 300,000 shares of its Series B Preferred for up to
$3,000,000 of convertible and non-convertible notes issued by UTTC(TM) (the
"UTTC(TM) Notes"). The Series A Preferred pays cumulative dividends semi-
annually at an annual rate of $0.50 per share and is payable in cash or
additional shares of Series A Preferred until February 15, 2000. Each holder
of shares of Series A Preferred has the right to convert each share of Series
A Preferred into: (i) ten shares of Common Stock; and (ii) one two-year
warrant to purchase three shares of the common stock, par value $0.01 per
share, of UTTC(TM) (the "UTTC(TM) Common Stock"), with an exercise price of
$0.75 per share, subject to adjustment. The Series B Preferred pays cumulative
dividends semi-annually at an annual rate of $0.90 per share. Each holder of
shares of Series B Preferred has the right to convert each share of Series B
Preferred into: (i) six shares of Common Stock; and (ii) one two-year warrant
to purchase two shares of UTTC(TM) Common Stock, with an exercise price of
$0.75 per share, subject to adjustment.

  The Company sold 250,000 shares of its Series A Preferred at $10.00 per
share, and realized gross proceeds of $2,500,000. The Series A Preferred
offering closed on January 15, 1998. The Company closed the Exchange Offer
transaction after receiving the tender of $2,975,000 of the UTTC(TM) Notes for
which the Company issued 297,500 shares of Series B Preferred Stock. The
Company sold 290,000 shares of its Series B Preferred Stock at

                                      29
<PAGE>

$10 per share. The sale of Series B Preferred Stock closed on May 6, 1998. The
Company realized gross proceeds of $2,900,000.

  Over the past two fiscal years the Company realized gross proceeds of
$9,425,000 from the sale of the Series A Preferred, the Series B Preferred,
and the Series C Preferred. After deducting issue costs of approximately
$1,445,000, the Company received net proceeds of $7,980,000.

  As of March 31, 1999, dividends in arrears amounted to $7,252 for the Series
A Preferred and $26,235 for the Series B Preferred. As of March 31, 1999, the
Company had 125,219 shares of Series A and 417,500 shares of Series B
Preferred outstanding. Upon conversion of these shares of Series A Preferred
and Series B Preferred, the Company would be obligated to issue 3,757,190
shares of Common Stock.

  On January 27, 1998, the Company completed the sale of 100,000 shares of the
Series C Convertible Preferred Stock to a group of foreign investors (the
"Series C Investors"), with a liquidation preference of $10.00 per share (the
"Series C Preferred"), for an aggregate purchase price of $1,000,000. Holders
of shares of Series C Preferred had the right to convert each share of Series
C Preferred into one share of Common Stock at the defined floating conversion
price which amounted to $1.51 per share. In addition, the Series C Investors
received warrants exercisable into an aggregate of 100,000 shares of Common
Stock at an exercise price of $1.70 for a period of five years. As of March
31, 1998, 50,000 shares of the Series C Shares were converted into 281,071
shares of Common Stock. Between March 31 and April 21, 1998, the remainder of
the shares Series C Preferred were converted into 314,342 shares of Common
Stock. The fees paid for the Series C Shares were as follows: 5,000 Series C
Shares, $50,000, and a warrant to purchase 100,000 shares of Common Stock at
105% of Market Price to Settondown Capital International Ltd. (the "Placement
Agent"). In addition, the Company paid $50,000 and granted an option to
purchase 150,000 shares of Common Stock at $1.875 per share to Adirondack, for
services in structuring the offering.

  On April 3, 1998 (the "Subscription Date"), the Company entered into the
Private Equity Agreement with a group of accredited investors (the "Private
Equity Investors") which provided for an aggregate commitment of $18,000,000
to the Company of which $12,250,000 has been drawn down as described below. On
the Subscription Date, the Private Equity Investors purchased three shares of
Series D Convertible Preferred Stock (the "Series D Preferred"), with a
liquidation preference of $1,000,000 per share, for an aggregate purchase
price of $3,000,000. The Company also agreed to promptly file a registration
statement with the Securities and Exchange Commission ("SEC") under the
Securities Act, registering shares of Common Stock issuable in connection with
the transactions contemplated by the Private Equity Agreement (the
"Registration Statement"). The Company filed this Registration Statement with
the Commission on June 29, 1998 and it became effective on August 13, 1998.
The Agreement provided that the Private Equity Investors would be obligated to
purchase Series E Convertible Preferred Stock (the "Series E Preferred") with
a liquidation preference of $1,000,000 per share for an aggregate purchase
price of $2,000,000. The Private Equity Investors purchased such shares of
Series E Preferred on July 15, 1998.

  In addition, on the Subscription Date, the Private Equity Investors received
warrants (each, a "Warrant") to purchase up to an aggregate of 250,000 shares
of Common Stock and received additional Warrants to purchase up to an
aggregate of 100,000 of such shares on July 15, 1998. The Warrants are
exercisable for five years at an exercise price of $4.58 per share. The fair
value of the Warrants amounting to $230,800 has been recorded as a dividend to
the holders of the Series D and Series E Preferred.

  On the Subscription Date, the Company paid the Placement Agent, a fee of (i)
$150,000, (ii) 0.15 shares of Series D Preferred, (iii) a Warrant, on the same
terms as the Warrants issued to the Private Equity Investors, to purchase up
to 190,000 shares of Common Stock, (iv) 20,000 shares of Common Stock, and (v)
attorneys fees of $30,000. On July 15, 1998, the Company paid the Placement
Agent, $100,000 and 0.1 share of Series E Preferred and a Warrant to purchase
up to 60,000 shares of Common Stock, on the same terms as the Warrant issued
on the Subscription Date. In addition, on the completion of each Put by the
Company pursuant to the Private Equity Agreement, the Company has agreed to
pay the Placement Agent an amount equal to 5% of the proceeds of each such
Put.

                                      30
<PAGE>

  The conversion price of the Series D Preferred is an amount equal to 75% of
the average closing bid price per share over the five days preceding the
conversion date (the "Market Price"). The conversion price of the Series E
Preferred is 80% of the Market Price. Each share of the Series D Preferred and
Series E Preferred (i) ranks pari passu with the other authorized preferred
stock of the Company and (ii) is entitled to a cumulative dividend of 8% per
annum on its respective liquidation preference. Between August 20, 1998 and
March 31, 1999, 3.174 shares of the Series D Preferred were converted into
2,863,521 shares of Common Stock. Between December 1, 1998 and March 31, 1999,
2.1 shares of the Series E Preferred were converted into 1,567,058 shares of
Common Stock.

  At the time of issuance, the Series A, Series B, Series C, Series D, and
Series E Preferred Stock was convertible at prices below the market value of
the underlying Common Stock. The beneficial conversion feature represented by
the intrinsic value is calculated as the difference between the conversion
price and the market price of the underlying Common Stock multiplied by the
number of shares to be issued upon conversion. The beneficial conversion
feature is recognized as a return to the preferred stockholders over the
minimum period in which the preferred stockholders can realize that return. At
March 31, 1999, the beneficial conversion feature amounted to $1,643,900,
$2,695,436, $349,943, $1,180,549, and $607,087 for the Series A Preferred,
Series B Preferred, Series C Preferred, Series D Preferred, and Series E
Preferred, respectively. At March 31, 1998, the beneficial conversion feature
amounted to $1,643,900, $212,637, and $343,943 for the Series A Preferred,
Series B Preferred, and Series C Preferred, respectively.

  Following the purchase of the Series E Preferred and subject to the
satisfaction of certain other conditions, the Company may from time to time
Put to the Private Equity Investors shares of the Common Stock for an
aggregate Put price of $13,000,000. The Put price per share is an amount equal
to 85% of the average of the lowest bid prices of such Common Stock over the
seven day period beginning three days before and ending three days after the
Company gives notice of a Put. The Private Equity Investors are not obligated
to purchase any Put shares unless, among other things, (i) the Registration
Statement is effective, (ii) the Company is listed and its Common Stock is
trading on a national exchange or quotation system, (iii) the closing bid
price of the Common Stock on the day immediately preceding such purchase is at
least $1.50 per share, and (iv) the Common Stock has traded at an average
volume of at least 25,000 shares a day for the thirty trading days preceding
such purchase.

  Between August 20, 1998 and March 31, 1999, the Company exercised six Puts
to the Private Equity Investors in the aggregate amount of $7,250,000. The
Company has issued 4,810,788 shares of Common Stock to the Private Equity
Investors in connection with the Puts.

  On September 1, 1998, the Company entered into an agreement with the Private
Equity Investors to amend the Private Equity Agreement. The amendment
clarifies that each of the Private Equity Investors may not beneficially own
more than 4.99 percent of the Company's Common Stock at one time, including
Common Stock underlying convertible securities that would be deemed to be
beneficially owned pursuant to section 13(d) of the Securities Exchange Act of
1934 and Rule 13d-3 promulgated thereunder.

  In February 1998, the Company entered into a consulting agreement with
Continental Capital & Equity Corporation ("Continental") whereby the Company
issued 300,000 shares of Common Stock, with a fair value of $475,125, in
exchange for promotional services through February 1999. In August 1998, the
Company amended the consulting agreement with Continental whereby the Company
issued 250,000 additional shares of Common Stock, with a fair market value of
$416,657, in exchange for additional promotional services and a reduction in
cash payments required pursuant to a previous consulting agreement. During the
year ended March 31, 1999, the Company recorded a deferred consulting expense
of $416,657 as a reduction to stockholders' equity as a result of amending the
consulting agreement. The consulting cost will be amortized over the revised
term of the agreement, which is one year. For the year ended March 31, 1999,
the Company charged $569,730 to operations for the amortization of deferred
consulting expenses related to the consulting agreement and the amended
consulting agreement. The Company recognized deferred consulting expenses of
$39,844 during the year ended March 31, 1998.

                                      31
<PAGE>

7. Employee Stock Option Plan

  Stock options are granted to officers, directors, employees and others who
provide services to the Company at the discretion of the Board of Directors.
During the quarter ended September 30, 1998, the Company issued non-qualified
options to purchase 4,760,000 shares of the Company's Common Stock to
officers, directors and employees of the Company pursuant to the Company's
plan to grant 6,000,000 shares of Common Stock at $1.875 to employees,
officers, directors, and third parties. Stock options granted to officers and
directors pursuant to this plan vest on July 15, 1999 and expire on July 15,
2003.

  On November 11, 1998, the Board of Directors authorized the adoption of a
non-qualified stock plan for one million shares of Common Stock to officers,
directors, employees, and third parties. During the year ended March 31, 1999,
options to purchase 970,000 shares of the Company's common stock were issued
to officers and employees pursuant to this plan. These options have an
exercise price equal to the fair market value of Common Stock at the date of
grant. The options vest over a period of three years and expire five years
after the date of grant.

  All stock options granted by the Company include provisions for: (i)
forfeiture in the event the employee dies or ceases to be in the employment of
ATG(TM), or one of its subsidiaries, during the first year of employment; and
(ii) immediate vesting upon a merger, consolidation or change of control of
the Company. The Company has not registered the Common Stock underlying the
stock options.

  A summary of the status of the Company's employee stock options outstanding
as of March 31, 1998 and 1999 is as follows:

<TABLE>
<CAPTION>
                                         March 31, 1998     March 31, 1999
                                        ----------------- --------------------
                                                Weighted-            Weighted-
                                                 Average              Average
                                                Exercise             Exercise
                                        Options   Price    Options     Price
                                        ------- --------- ---------  ---------
   <S>                                  <C>     <C>       <C>        <C>
   Outstanding at beginning of year.... 450,000   $6.28     450,000    $6.28
   Forfeited during the year...........     --      --       (2,500)    1.88
   Granted during the year.............     --      --    5,730,000     1.94
                                        -------   -----   ---------    -----
   Outstanding at end of year.......... 450,000   $6.28   6,177,500    $2.25
                                        =======   =====   =========    =====
</TABLE>

  The following table summarizes information about employee stock options
outstanding and exercisable at March 31, 1999:

<TABLE>
<CAPTION>
                              Number        Weighted-Average
            Range of      Outstanding and Remaining Contractual
         Exercise Price     Exercisable           Life          Exercise Price
         --------------   --------------- --------------------- --------------
         <S>              <C>             <C>                   <C>
           $1.50-2.00        5,337,500          4.4 years           $ 1.88
           $3.00-4.00          740,000          5.7 years           $ 3.39
             14.25             100,000          7.0 years           $14.25
</TABLE>

  Of the total 6,177,500 stock options outstanding at March 31, 1999, 219,000
stock options were exercisable at an average price of $5.50 per share.

  The Company also grants stock options to third parties in consideration for
services rendered to the Company. During the year ended March 31, 1999,
525,000 options to purchase Common Stock were issued to consultants providing
marketing services to the Company and in consideration for the rights to
www.VWAP.com. A summary of the status of the stock options issued to third
parties as of March 31, 1999 is as follows:

<TABLE>
<CAPTION>
                                         March 31, 1998      March 31, 1999
                                       ------------------- -------------------
                                                 Weighted-           Weighted-
                                                  Average             Average
                                                 Exercise            Exercise
                                        Options    Price    Options    Price
                                       --------- --------- --------- ---------
   <S>                                 <C>       <C>       <C>       <C>
   Outstanding at beginning of year...       --    $ --    1,090,000   $1.88
   Granted during the year............ 1,090,000    1.88     525,000    2.06
                                       ---------   -----   ---------   -----
   Outstanding at end of year......... 1,090,000   $1.88   1,615,000   $1.93
                                       =========   =====   =========   =====
</TABLE>


                                      32
<PAGE>

  The following table summarizes information about third party stock options
outstanding and exercisable at March 31, 1999:

<TABLE>
<CAPTION>
                              Number        Weighted-Average
            Range of      Outstanding and Remaining Contractual
         Exercise Price     Exercisable           Life          Exercise Price
         --------------   --------------- --------------------- --------------
         <S>              <C>             <C>                   <C>
          $1.50-$2.50        1,615,000          4.2 years           $1.93
</TABLE>

  Of the total 1,615,000 stock options outstanding at March 31, 1999,
1,515,000 stock options were exercisable at an average price of $1.93 per
share.

  Stock options granted to third parties generally vest immediately and have a
maximum exercise term of five years. The Company has not registered the Common
Stock underlying the stock options. The Company recognizes a non-cash
compensation charge for options granted to third parties in compliance with
SFAS No. 123, Accounting for Stock-Based Compensation. The Company's
assumptions used to calculate the fair values of options issued to third
parties include: (i) a risk-free interest rate of 6%, (ii) an expected life of
five years, (iii) expected stock volatility of 20%, and (iv) expected stock
dividends of zero. During the years ended March 31, 1998 and 1999, the Company
recognized a noncash compensatory expense of $1,804,917 and $497,876,
respectively, for options granted to third parties, including non-employee
directors.

  Gomez established a 1998 Employee Stock Option Plan to grant incentive and
non-qualified stock options to employees. As of of March 31, 1999, 445,000
options to purchase shares of Gomez common stock have been granted to
employees. Gomez also established a 1999 Long-Term Incentive Plan, which was
approved by the Gomez Board of Directors in January 1999. Under this plan,
Gomez may grant stock, stock options, stock grants, stock appreciation rights,
restricted shares, performance-based awards or other stock-based awards
(collectively, "stock awards"). As of March 31, 1999, a total of 4,189,000
shares of Gomez common stock have been reserved for issuance under this plan,
and no shares had been issued pursuant to stock awards granted under this
stock plan, 3,437,500 shares were subject to outstanding options and 751,500
shares were available for future grant.

  A summary of the status of the Gomez stock options outstanding as of March
31, 1999 is as follows:

<TABLE>
<CAPTION>
                                      March 31, 1998       March 31, 1999
                                    ------------------- ---------------------
                                              Weighted-             Weighted-
                                               Average               Average
                                              Exercise              Exercise
                                     Options    Price    Options      Price
                                    --------- --------- ----------  ---------
   <S>                              <C>       <C>       <C>         <C>
   Outstanding at beginning of
    year...........................       --    $ --     5,000,000    $0.41
   Forfeited during the year.......       --      --    (6,500,000)    0.31
   Granted during the year......... 5,000,000    0.41    5,382,500     0.52
                                    ---------   -----   ----------    -----
   Outstanding at end of year...... 5,000,000   $0.41    3,882,500    $0.71
                                    =========   =====   ==========    =====
</TABLE>

  The following table summarizes information about Gomez stock options
outstanding and exercisable at March 31, 1999:

<TABLE>
<CAPTION>
                              Number        Weighted-Average
            Range of      Outstanding and Remaining Contractual
         Exercise Price     Exercisable           Life          Exercise Price
         --------------   --------------- --------------------- --------------
         <S>              <C>             <C>                   <C>
              $.01           3,003,000          4.8 years           $ .01
           $1.00-5.00          879,500          4.8 years           $3.10
</TABLE>

  Of the total 3,882,500 stock options outstanding at March 31, 1999,
1,501,500 stock options were exercisable at an average price of $.01 per
share.


                                      33
<PAGE>

  On January 22, 1999, an Exchange Agreement was entered into by and between
Gomez, ATG(TM), certain persons affiliated with Gomez, and certain persons
affiliated with ATG(TM). Pursuant to the Exchange Agreement:

  .  ATG(TM) exchanged all of its rights and interest in the $1,475,000 of
     loans made by ATG(TM) to Gomez for an additional 59,000 shares of Gomez
     common stock and subsequently exchanged all 60,000 shares of Gomez
     common stock that it held for 4,905 shares of Gomez Series A Preferred
     Stock;

  .  Julio Gomez, John Robb, and Dr. Alexander Stein (collectively "The Gomez
     Founders") exchanged options to purchase 3,000,000 shares of Gomez
     common stock and paid $.01 per share for 2,103,000 shares of Gomez
     common stock;

  .  The Gomez Founders exchanged options to purchase 2,000,000 shares of
     Gomez common stock for options to purchase 3,003,000 shares of Gomez
     common stock at $.011 per share pursuant to the Gomez 1999 Long-Term
     Incentive Plan; and

  .  Certain officers and directors of ATG(TM) exchanged options to purchase
     1,500,000 shares of Gomez's common stock and paid $.01 per share for
     1,631,000 shares of restricted Gomez common stock.

  During the year ended March 31, 1999, Gomez and the Company recognized a
noncash compensation charge of $4,864,860 to reflect the difference between
the estimated fair market value of the vested Gomez stock options at the date
of grant and the exercise price of the related options issued to the Gomez
Founders. Gomez issued 3,003,000 options at an average price of $.01 per
share, all of which were granted at less than the deemed fair value at the
date of grant. Gomez expects to recognize noncash compensation charges of
$2,432,430 and $6,744,870 for the years ended March 31, 2000 and 2001,
respectively, as the stock options vest. However, the full amount of such
charges would be recognized upon the closing of an initial public offering or
upon a change in control as a result of an automatic acceleration clause
contained in the Exchange Agreement.

  In addition, UTTC(TM) issued stock options to employees and third parties. A
summary of the status of the employee UTTC(TM) stock options outstanding as of
March 31, 1999 is as follows:

<TABLE>
<CAPTION>
                                          March 31, 1998     March 31, 1999
                                         ----------------- -------------------
                                                 Weighted-           Weighted-
                                                  Average             Average
                                                 Exercise            Exercise
                                         Options   Price    Options    Price
                                         ------- --------- --------- ---------
   <S>                                   <C>     <C>       <C>       <C>
   Outstanding at beginning of year.....     --    $ --      400,000   $1.50
   Forfeited during the year............     --      --          --      --
   Granted during the year.............. 400,000    1.50   1,000,000    1.00
                                         -------   -----   ---------   -----
   Outstanding at end of year........... 400,000   $1.50   1,400,000   $1.14
                                         =======   =====   =========   =====
</TABLE>

  The following table summarizes information about UTTC(TM) employee stock
options outstanding and exercisable at March 31, 1999:

<TABLE>
<CAPTION>
                              Number        Weighted-Average
            Range of      Outstanding and Remaining Contractual
         Exercise Price     Exercisable           Life          Exercise Price
         --------------   --------------- --------------------- --------------
         <S>              <C>             <C>                   <C>
           $1.00-1.50        1,400,000          3.8 years           $1.14
</TABLE>

  Of the total 1,400,000 employee stock options outstanding at March 31, 1999,
100,000 stock options were exercisable at an average price of $1.50 per share.

                                      34
<PAGE>

  A summary of the status of the third party UTTC(TM) stock options
outstanding as of March 31, 1999 is as follows:

<TABLE>
<CAPTION>
                                            March 31, 1998    March 31, 1999
                                           ----------------- -----------------
                                                   Weighted-         Weighted-
                                                    Average           Average
                                                   Exercise          Exercise
                                           Options   Price   Options   Price
                                           ------- --------- ------- ---------
   <S>                                     <C>     <C>       <C>     <C>
   Outstanding at beginning of year.......   --      $ --        --    $ --
   Forfeited during the year..............   --        --        --      --
   Granted during the year................   --        --    835,000    1.00
                                             ---     -----   -------   -----
   Outstanding at end of year.............   --      $ --    835,000   $1.00
                                             ===     =====   =======   =====
</TABLE>

  The following table summarizes information about UTTC(TM) third-party stock
options outstanding and exercisable at March 31, 1999:

<TABLE>
<CAPTION>
                              Number        Weighted-Average
            Range of      Outstanding and Remaining Contractual
         Exercise Price     Exercisable           Life          Exercise Price
         --------------   --------------- --------------------- --------------
         <S>              <C>             <C>                   <C>
             $1.00            835,000           4.0 years           $1.00
</TABLE>

  All 835,000 third-party stock options outstanding at March 31, 1999 were
exercisable at an average price of $1.00 per share.

  Net loss and loss per share for the year ended March 31, 1998 would not have
materially changed because the UTTC(TM) options issued had no value at the
grant date based on an independent valuation of the Company.

  In 1997, the Company adopted SFAS No. 123, Accounting for Stock-Based
Compensation. The Company has elected to apply APB Opinion No. 25 and related
interpretations in accounting for stock options issued to employees and has
adopted the disclosure-only provisions of SFAS No. 123.

  If the Company had elected to recognize compensation cost based on the fair
value of the options granted to directors and employees at the grant date as
prescribed by SFAS No. 123, net loss per share would have been adjusted to the
pro forma amounts indicated in the table below. The Company's assumptions used
to calculate the fair values of options issued to employees include: (i) a
risk-free interest rate of 6%, (ii) an expected life of five years, (iii)
expected stock volatility of 20%, and (iv) expected stock dividends of zero.

<TABLE>
<CAPTION>
                                As Reported                 Pro Forma
                          -------------------------  -------------------------
                          For the year ended March   For the year ended March
                                    31,                        31,
                          -------------------------  -------------------------
                             1998          1999         1998          1999
                          -----------  ------------  -----------  ------------
   <S>                    <C>          <C>           <C>          <C>
   Net loss.............. $(8,674,902) $(14,276,485) $(8,674,902) $(21,755,046)
   Loss per share........ $     (1.46) $      (1.80) $     (1.46) $      (2.48)
</TABLE>

8. Benefit Plans

  The Company maintains a defined contribution plan under Section 401(k) of
the Internal Revenue Code covering all qualified employees. The Company may
make nonmandatory contributions. Certain officers of the Company serve as
trustees of the plan. No contributions were made during the years ended March
31, 1998 and 1999.

                                      35
<PAGE>

  The Company maintains life insurance policies on its key officers and
employees in the aggregate amount of $4,600,000.

9. Segment Information

  The Company's continuing operations are classified in two primary business
segments: (i) trading systems and (ii) Gomez.

  Gomez Advisors, Inc. ("Gomez") was formed in May 1997 as a subsidiary of the
Company together with Julio Gomez, John Robb, and Dr. Alex Stein to provide
independent advice with respect to online investing and provide clients in the
financial services industry with consulting advice concerning the use of the
Internet as a tool for establishing electronic client relationships,
marketing, and the interactive distribution of securities. Gomez is a provider
of Internet-based products and services to consumers and businesses in select
e-commerce industries. Gomez delivers interactive content that provides
decision support for consumers and businesses to more efficiently engage in e-
commerce.

  Summarized financial information, excluding intercompany transactions, by
business segment is as follows:

<TABLE>
<CAPTION>
                                                       For the year March 31,
                                                       ------------------------
                                                          1998         1999
                                                       -----------  -----------
     <S>                                               <C>          <C>
     Revenues:
       Gomez.......................................... $   313,659  $ 1,434,438
       Trading systems................................         --           --
                                                       -----------  -----------
                                                           313,659    1,434,438
     Loss from operations:
       Gomez..........................................    (189,978)  (5,842,921)
       Trading systems................................  (8,155,464)  (8,474,567)
                                                       -----------  -----------
                                                        (8,345,442) (14,317,488)
     Net interest (expense) income:
       Gomez..........................................         --           --
       Trading Systems................................    (342,731)     146,816
                                                       -----------  -----------
                                                          (342,731)     146,818
     Depreciation and amortization:
       Gomez..........................................      10,282       89,676
       Trading Systems................................     316,454      425,561
                                                       -----------  -----------
                                                           326,736      515,240
     Noncash compensation charges:
       Gomez..........................................         --     4,864,860
       Trading Systems................................   1,844,761    1,067,606
                                                       -----------  -----------
                                                         1,844,761    5,932,466

</TABLE>

                                      36
<PAGE>

<TABLE>
<CAPTION>
                                                                March 31,
                                                           --------------------
                                                             1998       1999
                                                           ---------  ---------
     <S>                                                   <C>        <C>
     Balance Sheet:
      Current assets
       Gomez..............................................   265,306    290,849
       Trading systems.................................... 1,029,836  2,797,246
                                                           ---------  ---------
                                                           1,295,142  3,088,095
      Total assets
       Gomez..............................................   355,725  1,090,761
       Trading systems.................................... 2,642,295  4,562,976
                                                           ---------  ---------
                                                           2,998,020  5,653,737
      Preferred stock
       Gomez..............................................       --         --
       Trading systems.................................... 6,238,875  5,427,188
                                                           ---------  ---------
                                                           6,238,875  5,427,188
      Total stockholders equity
       Gomez..............................................  (164,978)   388,801
       Trading systems.................................... 1,401,551  4,056,177
                                                           ---------  ---------
                                                           1,236,573  4,444,978
</TABLE>

10. Discontinued Operations

  On November 4, 1997, ATG(TM) sold CSI(R) to a trust created by the CSI(R)
leveraged ESOP for $1,723,000. The Company received $600,000 in cash, a
$594,125 five-year 8 1/4% note and the forgiveness of $528,875 due to CSI(R),
which included $28,875 of accrued interest. As of March 31, 1998 and 1999 the
outstanding balance of the note is $561,659 and $449,783, respectively.

  Prior period amounts in the consolidated financial statements have been
reclassified to reflect CSI(R)'s operations as discontinued operations in
accordance with APB Opinion No. 30. The $385,930 loss from the sale CSI(R) has
been reflected as a loss from the disposal of discontinued operations.

11. Income Taxes

  The Company has net operating loss carryforwards at March 31, 1999 of
approximately $18,100,000, which will expire between 2011 and 2019, available
to reduce future federal taxable income. Additionally, the income tax basis of
intangibles exceeds the basis for financial reporting purposes by
approximately $1,400,000 and $8,532,000, respectively. Additionally, the
timing of expense recognition for certain options and warrants granted to non-
employees differs for income tax and financial reporting purposes by
approximately $8,532,000. The carryforwards and the temporary differences
result in a deferred tax asset of approximately $6,260,000 and $11,114,000 at
March 31, 1998 and 1999, respectively, for which the Company has provided a
full valuation allowance due to the uncertainty about the future realization
of this tax benefit.

<TABLE>
<S>                                               <C>            <C>
The components of the deferred tax assets are as
 follows:
<CAPTION>
                                                  March 31, 1998 March 31, 1999
                                                  -------------- --------------
<S>                                               <C>            <C>
Net operating loss carryforward.................   $ 4,695,000    $  7,247,000
Basis of intangible asset.......................       540,000         540,000
Grant of non-qualified options..................     1,025,000       3,327,000
Valuation allowance.............................    (6,260,000)    (11,114,000)
                                                   -----------    ------------
Deferred tax asset..............................   $       --     $        --
                                                   ===========    ============
</TABLE>


                                      37
<PAGE>

  The difference between the income tax benefit computed at the federal
statutory rate and the actual provision for income taxes is accounted for as
follows:

<TABLE>
<CAPTION>
                                                     Year ended March 31,
                                                    ------------------------
                                                       1998         1999
                                                    -----------  -----------
   <S>                                              <C>          <C>
   Tax benefit computed at the federal statutory
    rate of 34%.................................... $(2,885,000) $(4,854,000)
   Change in valuation allowance...................   2,885,000    4,854,000
                                                    -----------  -----------
                                                    $       --   $       --
                                                    ===========  ===========
</TABLE>

  ATG(TM), UTTC(TM), International, EMC and REB file a consolidated federal
income tax return. Gomez files a federal tax return on its own. In 1997,
Ashton entered into an agreement with UTTC(TM). The agreement provides that
any member of the group which has taxable income must compensate any other
member for the use of net operating losses and tax credits.

12. Commitments, Contingencies and Settlements

  The Company leases office facilities under noncancelable operating leases
expiring through May 2005. Future minimum operating lease payments are as
follows:

<TABLE>
   <S>                            <C>
   Year ending March 31,
       2000...................... $  215,345
       2001......................    215,345
       2002......................    153,400
       2003......................    153,400
       2004......................    153,400
       Thereafter................    197,925
                                  ----------
      Total...................... $1,088,815
</TABLE>

  The leases are subject to escalation for the Company's share of increases in
real estate taxes and other operating expenses. In addition, the company
leases office facilities on a month-to-month basis. Rent expense for the years
ended March 31, 1998 and 1999 totaled approximately $253,000 and $265,000,
respectively.

  The Company has employment agreements, which require the Company to pay
approximately $392,500 through July 2001.

  In September 1995, UTTC entered into an agreement with the Philadelphia
Stock Exchange ("PHLX") whereby the PHLX has agreed to employ UTTC(TM)'s
VTS(TM) on its equity-trading floor. In connection with this agreement,
UTTC(TM) is required to reimburse the PHLX up to $100,000 for the first year
of the agreement for marketing costs incurred by the PHLX. UTTC(TM) is also
required to assume up to $200,000 of the PHLX's initial technology development
costs in implementing the VTS(TM). UTTC(TM) is required to contribute to a
PHLX administered "claim fund" for potential claims relating to the VTS(TM)
operations. UTTC(TM) is required to contribute $100,000 after commencement of
the VTS(TM) trading and, if necessary, to make additional contributions of up
to $100,000 per year to such claim fund. The PHLX is also entitled to receive
an annual royalty from UTTC(TM) of 3% of annual gross revenue based on
UTTC(TM)'s average revenue in the first three years of operations for each
year the PHLX agreement is in effect. These payments are required to begin at
the end of the second full year of operation and continue for the life of the
PHLX agreement.

  Alliant with whom the Company had a contract for the production of certain
ATED Encryption Devices ("ATEDs") had demanded payment of approximately
$292,000, under the contract between Alliant and the Company, which the
Company was contesting. On October 22, 1997, the Company filed a Compliant
against Alliant in the Courts of Common Pleas, County of Philadelphia,
Pennsylvania ("PA") for damages and failure of Alliant to perform its
obligations under its contract with the Company. On December 15, 1997, Alliant
filed its Answer and Counterclaims totaling $292,000. Since the filing of this
original lawsuit on October 22, 1997,

                                      38
<PAGE>

the Company encountered warranty-related problems while testing the ATEDs.
Alliant had failed to address the reported problems. As a result, the Company
filed a second Compliant against Alliant for breach of warranty. The second
was commenced on July 20, 1998 and sought damages in excess of $50,000.

  On November 16, 1998, a non-jury civil trial commenced related to the
Company's first Complaint as well as Alliant's Counterclaim. On November 23,
1998, judgements were rendered in favor of the Company in the amount of
$316,000 (plus interest of approximately $28,000) that resolved both pending
Complaints by the Company against Alliant. Additionally, a judgement for
Company was rendered which dismissed Alliant's Counterclaims against the
Company.

  On May 29, 1998, Rosensaft served ATG(TM) with a complaint in the U.S.
District Court for the Southern District of New York, entitled Rosensaft vs.
ATG and UTTC, No. 98 Civ 3681, alleging claims against ATG(TM) and its
subsidiary, UTTC(TM), for breach of fiduciary duty to Rosensaft as a minority
shareholder of UTTC(TM), for invalid amendments to the certificates of
incorporation of UTTC(TM) and ATG(TM) and invalid issuance of UTTC(TM) common
stock to ATG(TM) and improper issuance of additional shares of UTTC(TM) common
stock to ATG(TM). The relief sought by Rosensaft was: (i) 450,000 shares of
UTTC(TM) common stock or damages to be determined at trial, but not less than
$2,000,000; (ii) an order revoking or canceling the issuance of additional
shares of UTTC(TM) common stock in excess of the 10 million shares authorized
by UTTC(TM)'s original Certificate of Incorporation; and (iii) an order
revoking or canceling the issuance of approximately 19,000,000 additional
shares of UTTC(TM) common stock to the Company; and (iv) other damages to be
determined at trial.

  On March 22, 1999, the Company and Rosensaft entered into a settlement
agreement whereby the Company agreed to, among other considerations, issue
416,667 additional shares of UTTC(TM) common stock to Rosensaft and to
reimburse Rosensaft $47,500 for legal expenses. The parties also executed
comprehensive mutual releases as between each other. While the Company
believes Rosensaft's claims are without merit and that the Company would have
prevailed at trial, the Board of Directors of ATG(TM) and UTTC(TM) believe the
cost of litigation would have significantly exceeded the costs associated with
the settlement. Therefore, the Board of Directors of ATG(TM) and UTTC(TM)
agreed to the settlement to avoid significant additional legal costs and the
management distraction associated with such litigation.

13. Net Capital Requirements

  REB, as a registered broker-dealer and NASD member firm, is subject to the
SEC's Uniform Net Capital Rule (the "Rule") which requires the maintenance of
minimum net capital. REB has elected the basic method, permitted by the Rule,
which requires that it maintain net capital equal to $5,000.

  At March 31, 1999, REB had net capital of $84,688, which was $79,688 in
excess of its required net capital of $5,000.

14. Subsequent Events

  In April 1999, Gomez completed a private placement of 6% Series B
Convertible Preferred Stock, par value $.01 per share, to accredited investors
at a price of $5 per share. Gross proceeds received by Gomez from the sale
amounted to $5,500,000. Gomez intends to use the net proceeds from the
issuance for staffing increases, capital expenditures related to the upgrading
and marketing of its existing products and services, the development and
marketing of new products and services, and for general corporate purposes,
including working capital.

  In June 1999, UTTC(TM) completed a private placement of Series TK
Convertible Preferred Stock, par value $.01 per share. Gross proceeds received
by UTTC(TM) from the sale amounted to $2,000,000. The proceeds will be used
for general corporate purposes, including working capital.

                                      39
<PAGE>

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

  None.
                                    PART III

ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

  Information with respect to this item will be contained in the Proxy
Statement for the 1999 Annual Meeting of Stockholders, which is incorporated
herein by reference.

ITEM 10. EXECUTIVE COMPENSATION

  Information with respect to this item will be contained in the Proxy
Statement for the 1999 Annual Meeting of Stockholders, which is incorporated
herein by reference.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

  Information with respect to this item will be contained in the Proxy
Statement for the 1999 Annual Meeting of Stockholders, which is incorporated
herein by reference.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

  Information with respect to this item will be contained in the Proxy
Statement for the 1999 Annual Meeting of Stockholders, which is incorporated
herein by reference.

                                       40
<PAGE>

                                    PART IV

ITEM 13. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND AND REPORTS ON FORM 8-K

  (a) Exhibits

<TABLE>
<CAPTION>
 Exhibit
   No.                                 Description
 -------                               -----------
 <C>     <S>
   2     Agreement and Plan of Reorganization, dated as of October 25, 1995,
         among Ashton, Universal Trading Technologies Corp. ("UTTC(TM)"),
         Robert A. Eprile ("Eprile"), David N. Rosensaft ("Rosensaft"), The
         Dover Group, Inc. ("Dover") and Medford Financial Inc.(1)

   3     Certificate of Incorporation of Ashton filed February 16, 1994.(1)

   3.1   Certificate of Amendment of Ashton filed October 27, 1995.(1)

   3.1A  Certificate of Amendment of Ashton filed December 7, 1995.(1)

   3.2   Certificate of Amendment of Ashton filed in February 1996.(1)

   3.3   Bylaws of Ashton.(1)

   3.4   Amendment to Bylaws of Ashton, dated October 22, 1996.

   3.5   Amendment to Bylaws of Ashton, dated November 11, 1998.(11)

   3.6   Certificate of Designation for Series A Convertible PIK Preferred
         Stock.(1)

   3.7   Certificate of Designation for Series B Convertible Preferred
         Stock.(1)

   3.8   Certificate of Designation for Series C Convertible Preferred
         Stock.(9)

   3.9   Certificate of Designation for Series D Convertible Preferred
         Stock.(9)

   3.10  Certificate of Designation for Series E Convertible Preferred
         Stock.(9)

   4.    Specimen of Common Stock.(1)

   4.1   Form of Representative's Warrant Agreement (including Specimen of
         Redeemable Common Stock Purchase Warrant).(1)

   4.2   Form of Warrant Agreement (including Specimen of Redeemable Common
         Stock Purchase Warrant).(1)

  10     Agreement, dated as of September 18, 1995, between UTTC(TM) and the
         Philadelphia Stock Exchange.(1)

  10.1   Employment Agreement, dated as of January 22, 1996, between UTTC and
         Eprile.(1)

  10.2   Agreement, dated as of January 19, 1996, among Ashton, UTTC(TM) and
         Rosensaft.(1)

  10.3   Escrow Agreement, dated as of January 19, 1996, among Ashton,
         Rosensaft and First United Equities Corporation.(1)

  10.4   Stock Purchase Agreement, dated as of January 19, 1996, between Ashton
         and Rosensaft.(1)

  10.5   Assignment and Termination Agreement, dated as of January 19, 1996,
         among Dover, Ashton, Eprile and Rosensaft.(1)

  10.6   Common Stock Purchase Warrant of Ashton, dated June 27, 1995, held by
         Dover.(1)

  10.7   Common Stock Purchase Option of Ashton, dated January 30, 1996, held
         by John A. Blohm.(1)

  10.8   Option to Purchase Common Stock, dated as of March 15, 1996, between
         Rosensaft and Dover.(1)

  10.9   Option to Purchase Common Stock, dated as of March 15, 1996, between
         Eprile and Dover.(1)

  10.10  Employment Agreement between Fred S. Weingard and UTTC(TM), dated June
         21, 1996.(3)

</TABLE>

                                       41
<PAGE>

<TABLE>
<CAPTION>
 Exhibit
   No.                                 Description
 -------                               -----------
 <C>     <S>
  10.11  Settlement Agreement, dated October 22, 1996, by and among the
         Company, Raymond T. Tate, Helen J. Tate, as trustee for the Andrew
         Patrick Tate Trust, Helen J. Tate, as trustee for the Susan Katherine
         Tate Burrowbridge Trust, Helen J. Tate, as trustee for the Elizabeth
         Tate Winters Trust and Robert A. Eprile, John A. Blohm, Fredric W.
         Rittereiser, The Dover Group, Inc., F.E. Weimmer, Jr., F.E. Weimmer,
         Sr., F.E. Rittereiser, Sr. and, Thomas Rittereiser, as trustee for
         Alexis J. Rittereiser, Amanda Weimmer and John Weimmer.(2)

  10.12  License Agreement dated October 22, 1996, between the Company and
         Tate.(2)

  10.13  Consulting Agreement dated October 22, 1996, between the Company and
         Tate.(2)

  10.14  Settlement Agreement by and among Ashton, UTTC(TM), Rittereiser, Dover
         and Rosensaft, dated January 30, 1997.(4)(6)

  10.15  Stock Purchase Agreement by and among Ashton, Dover, Rittereiser, and
         Rosensaft, dated January 30, 1997.(4)

  10.16  Memorandum of Understanding between Ashton and E.Com International,
         Inc., dated October 31, 1997.

  10.17  Network Services Agreement between Ashton CompuServe Incorporated, as
         amended, dated January 13, 1998. Material omitted pursuant to a
         request for confidential treatment and filed separately with the
         Securities and Exchange Commission.

  10.18  Form of Nonqualified Employee Stock Option Agreement.(8)

  10.19  Form of Nonqualified Deferred Stock Option Agreement.(8)

  10.20  Form of Nonqualified Stock Option Agreement.(8)

  10.21  Private Equity Line of Credit Agreement dated April 3, 1998.

  10.22  Client Service Agreement with Continental Capital and Equity
         Corporation dated February 24, 1998.

  10.23  Letter of Understanding--Amendment of Client Service Agreement with
         Continental Capital and Equity Corporation dated August 13, 1998.

  10.24  Settlement Agreement by and Among Ashton, UTTC(TM) and Rosensaft,
         dated March 19, 1999.

  10.25  Employment Agreement, dated as of July 13, 1998, between Arthur J.
         Bacci and Ashton.(9)

  10.26  Employment Agreement, dated as of July 27, 1998, between Dr. Mark
         Turner and Ashton.(10)

  10.27  Employment Agreement, dated as of August 4, 1998, between Julio Gomez
         and Gomez Advisors.(10)

  10.28  Employment Agreement, dated as of August 4, 1998, John Robb and Gomez
         Advisors.(10)

  10.29  Employment Agreement, dated as of August 4, 1998 Dr. Alexander Stein
         and Gomez Advisors.(10)

  10.30  Employment Agreement, dated as of September 23, 1998, between Scott
         vonKleeck and Ashton.(10)

  21     Subsidiaries of Ashton.

  27     Financial Data Schedule.
</TABLE>
--------
  * Incorporated by reference as indicated in the applicable footnote.
 (1) Incorporated by reference to the Company's Form SB-2 Registration
     Statement No. 33-1182.
 (2) Incorporated by reference to Form 8-K, dated October 22, 1996.
 (3) Incorporated by reference to Form 10-QSB, for the period ended September
     30, 1996.
 (4) Incorporated by reference to Form 10-QSB, for the period ended December
     31, 1996.
 (5) Incorporated by reference to Form 8-K, dated April 15, 1997.
 (6) Incorporated by reference to Amendment No. 1 to Form 10-QSB for the
     period ended December 31, 1996, filed April 18, 1997.
 (7) Incorporated by reference to Registration Statement on Form S-3 filed
     June 29, 1998.
 (8) Incorporated by reference to Form 10-KSB, for the period ended March 31,
     1998.

                                      42
<PAGE>

 (9) Incorporated by reference to Form 10-QSB, for the period ended June 30,
     1998.
(10) Incorporated by reference to Form 10-QSB, for the period ended September
     30, 1998.
(11) Incorporated by reference to Form 10-QSB, for the period ended December
     31, 1998.

  (b) Reports on Form 8-K

(1) Form 8-K, dated March 31, 1999 was filed pursuant to Item 5.

(2) Form 8-K, dated December 10, 1998 was filed pursuant to Item 5.

(3) Form 8-K, dated September 1, 1998 was filed pursuant to Item 5.

(4) Form 8-K, dated April 9, 1998 was filed pursuant to Item 5.

(5) Form 8-K, dated January 27, 1998 was filed pursuant to Item 5.

                                       43
<PAGE>

                                  SIGNATURES

  In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized as of June 29, 1999.

                                          The Ashton Technology Group, Inc.

                                                /s/ Fredric W. Rittereiser
                                          By: _________________________________
                                                  Fredric W. Rittereiser
                                                  Chief Executive Officer

                                                    /s/ Arthur J. Bacci
                                          By: _________________________________
                                                      Arthur J. Bacci
                                               President and Chief Financial
                                                          Officer

  In accordance with the Exchange Act, this report has been signed below by
the following persons in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
              Signature                          Title                   Date
              ---------                          -----                   ----

<S>                                    <C>                        <C>
    /s/ Fredric W. Rittereiser         Director and Chief            June 29, 1999
______________________________________  Executive Officer
        Fredric W. Rittereiser          (Principal Executive
                                        Officer)

       /s/ Arthur J. Bacci             President and Chief           June 29, 1999
______________________________________  Financial Officer
           Arthur J. Bacci              (Principal Financial
                                        Officer)

        /s/ Fred Weingard              Director and Executive        June 29, 1999
______________________________________  Vice President
            Fred Weingard

       /s/ William Uchimoto            Director and Executive        June 29, 1999
______________________________________  Vice President
           William Uchimoto

      /s/ K. Ivan F. Gothner           Director                      June 29, 1999
______________________________________
          K. Ivan F. Gothner

        /s/ Richard Butler             Director                      June 29, 1999
______________________________________
            Richard Butler

        /s/ John A, Blohm              Director                      June 29, 1999
______________________________________
            John A. Blohm

                                       Director                      June   , 1999
______________________________________
           Robert A. Eprile
</TABLE>

                                      44