<PAGE>

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

                                   FORM 10-Q

    (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                             EXCHANGE ACT OF 1934
                    For the quarter ended December 31, 1999

                                      OR

   (  ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                             EXCHANGE ACT OF 1934
                For the transition period from ______ to ______

                           Commission File #1-11747
                                            -------


                       THE ASHTON TECHNOLOGY GROUP, INC.
            (Exact name of registrant as specified in its charter)


     (State or other jurisdiction of              (IRS Employer
     incorporation or organization)             Identification No.)

                         1900 Market Street, Suite 701
                       Philadelphia, Pennsylvania 19103
              (Address of Principal Executive Offices) (Zip Code)

                                (215) 751-1900
             (Registrant's telephone number, including area code)


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

                       Yes    X                  No  ____
                            -----

                     APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer's classes of
Common stock, as of the last practical date.

           Common stock $.01 par value                  27,800,760
                (Title of Class)               (No. of Shares Outstanding
                                                 as of January 31, 2000)
<PAGE>

                       THE ASHTON TECHNOLOGY GROUP, INC.

                                     INDEX


<TABLE>
<CAPTION>
                                                                                   Page
<S>                                                                                <C>
Part I - Financial Information

Item 1. Financial Statements (Unaudited)

          Consolidated Balance Sheets - March 31, 1999 and December 31, 1999....    4

          Consolidated Statements of Operations -
          For the Three and Nine Months Ended December 31, 1998 and 1999........    5

          Consolidated Statements of Cash Flows -
          For the Nine Months Ended December 31, 1998 and 1999..................    6

          Notes to Unaudited Consolidated Financial Statements..................    7

Item 2. Management's Discussion and Analysis of Financial Condition and
        Results of Operations...................................................   13

Item 3. Quantitative and Qualitative Disclosure of Market Risk..................   20


Part II - Other Information

Item 1. Legal Proceedings.......................................................   20

Item 2. Changes in Securities and Use of Proceeds...............................   20

Item 3. Default Upon Senior Securities..........................................   20

Item 4. Submission of Matters to a Vote of Security Holders.....................   20

Item 5. Other Information.......................................................   20

Item 6. Exhibits and Reports on Form 8-K........................................   20

Signatures......................................................................   21
</TABLE>
<PAGE>

                         PART I - FINANCIAL INFORMATION

FORWARD-LOOKING STATEMENTS

Certain statements in this Form 10-Q constitute "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act"), 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; ability to successfully
deploy the Company's volume-weighted average price trading system ("eVWAP");
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-Q.  Such forward-
looking statements speak only as of the date of this Form 10-Q.  For discussion
of the factors that might cause performance of the Company to differ with actual
results, see Item 2: Management's Discussion and Analysis of Financial Condition
and Results of Operations and the Company's other periodic reports and
registration statements filed with the Securities Exchange Commission (the "SEC"
or "Commission").  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.
<PAGE>

ITEM 1.                         FINANCIAL STATEMENTS



                 The Ashton Technology Group, Inc. and Subsidiaries
                            Consolidated Balance Sheets

<TABLE>
<CAPTION>
                                                                                       March 31,            December 31,
                                                                                         1999                  1999
                                                                                      (Audited)             (Unaudited)
                                                                                    --------------        ----------------
<S>                                                                                 <C>                   <C>
ASSETS
 Cash and cash equivalents........................................................  $     2,667,347       $    14,904,873
 Investments available for sale...................................................              ---             9,912,120
 Accounts receivable and prepayments..............................................          308,249               372,740
 Current portion of notes receivable..............................................          112,499               119,654
                                                                                    ---------------       ---------------
      Total current assets........................................................        3,088,095            25,309,387
 Notes receivable, net of current portion.........................................          717,284               626,628
 Property and equipment, net of accumulated depreciation..........................        1,017,179               551,139
 Exchange memberships.............................................................          196,900               196,900
 Capitalized software development costs...........................................           95,354                   ---
 Intangible assets, net of accumulated amortization...............................           58,563                29,282
 Other assets.....................................................................          480,362               301,023
                                                                                    ---------------       ---------------
           Total Assets...........................................................  $     5,653,737       $    27,014,359
                                                                                    ===============       ===============

LIABILITIES AND STOCKHOLDERS' EQUITY

 Accounts payable and accrued expenses............................................  $       675,841       $       294,365
 Other liabilities................................................................          532,918                   ---
                                                                                    ---------------       ---------------
     Total current liabilities....................................................        1,208,759               294,365

 Minority interest................................................................              ---             2,000,000
 Stockholders' equity:
 Preferred stock - shares authorized: 3,000,000
  250,000 shares designated as Series A - (liquidation preference $10 per share);
  shares issued and outstanding; 125,219 and none.................................        1,252,188                   ---
  590,000 shares designated as Series B - (liquidation preference $10 per share);
  shares issued and outstanding; 417,500 and 129,200..............................        4,175,000             1,292,000
  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 - (liquidation preference
  $1,000,000 per share); shares issued and outstanding; none......................              ---                   ---
  20,000 shares designated as Series F $.01 par value - (liquidation preference
  equals stated value of $1,000 per share); shares issued and outstanding; none
  and 14,000......................................................................              ---            14,000,000
Common stock - par value: $.01; shares authorized: 60,000,000;
  Shares issued and outstanding;  20,569,172 and 26,397,069.......................          205,692               263,970
Additional paid-in capital........................................................       39,133,830            57,083,075
Deferred consulting expense.......................................................         (285,208)                  ---
Accumulated deficit...............................................................      (40,036,524)          (47,856,504)
Accumulated other comprehensive loss..............................................              ---               (62,547)
                                                                                     --------------       ---------------
     Total stockholders' equity...................................................        4,444,978            24,719,994
                                                                                     --------------       ---------------
         Total Liabilities and Stockholders' Equity                                  $    5,653,737       $    27,014,359
                                                                                     ==============       ===============
</TABLE>

            See Notes to Unaudited Consolidated Financial Statements

                                       4
<PAGE>

              The Ashton Technology Group, Inc. and Subsidiaries
                     Consolidated Statements of Operations
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                                     Three Months Ended                  Nine Months Ended
                                                                        December 31,                        December 31,
                                                                 -----------------------------      ----------------------------
                                                                    1998               1999             1998             1999
                                                                 ----------         ----------       ----------       ----------
<S>                                                              <C>                <C>             <C>              <C>
Revenues.....................................................     $   427,884       $ 2,012,693     $  1,079,836     $  3,868,566
                                                                  -----------       -----------     ------------     ------------

Costs and expenses:
 Costs of revenues...........................................          56,250           513,880          146,250          644,510
 Development costs...........................................          47,677               ---          143,031           95,354
 Depreciation and amortization...............................          92,499           218,327          279,128          631,411
 Non-cash compensation charges...............................         220,313               ---        5,135,511          285,208
 Selling, general and administrative.........................       2,314,868         6,154,085        6,797,989       14,492,494
                                                                  -----------       -----------     ------------     ------------
     Total costs and expenses                                       2,731,607         6,886,292       12,501,909       16,148,977
                                                                  -----------       -----------     ------------     ------------
Loss from operations.........................................      (2,303,723)       (4,873,599)     (11,422,073)     (12,280,411)

 Interest income.............................................          35,640           420,416          111,081          773,312
 Gain on deconsolidation of Gomez............................             ---         5,568,475              ---        5,568,475
 Other income (expense)......................................         290,080               ---          290,080         (416,632)
                                                                  -----------       -----------     ------------     ------------
Net (loss) income............................................     $(1,978,003)      $ 1,115,292     $(11,020,912)    $ (6,355,256)
                                                                  ===========       ===========     ============     ============

Dividends attributed to preferred stock......................        (129,471)         (122,794)        (489,170)        (987,041)
Beneficial conversion feature of preferred stock.............             ---               ---       (5,083,484)             ---
Dividends in arrears on preferred stock......................         (98,507)         (347,795)        (312,467)        (515,738)
                                                                  -----------       -----------     ------------     ------------
Net (loss) income applicable to common stock.................     $(2,205,981)      $   644,703     $(16,906,033)    $ (7,858,035)
                                                                  ===========       ===========     ============     ============
Basic net (loss) income per common share.....................           $(.20)             $.03           $(1.63)           $(.33)
                                                                  ===========       ===========     ============     ============
Diluted net (loss) income per common share...................           $(.20)             $.02           $(1.63)           $(.33)
                                                                  ===========       ===========     ============     ============

Weighted average number of common shares outstanding:
Basic........................................................      10,907,910        25,305,923       10,350,524       23,969,241
                                                                  ===========       ===========     ============     ============
Diluted......................................................      10,907,910        30,852,564       10,350,524       23,969,241
                                                                  ===========       ===========     ============     ============
</TABLE>

           See Notes to Unaudited Consolidated Financial Statements

                                       5
<PAGE>

              The Ashton Technology Group, Inc. and Subsidiaries
                     Consolidated Statements of Cash Flows
                                  (Unaudited)

<TABLE>
<CAPTION>

                                                                                                     Nine Months Ended December 31,
                                                                                                     ------------------------------
                                                                                                         1998             1999
                                                                                                     -------------    -------------
<S>                                                                                                  <C>              <C>
Net loss...........................................................................................  $(11,020,912)    $ (6,355,256)
Adjustments to reconcile net loss to net cash used in operating activities:
 Depreciation and amortization.....................................................................       422,159          726,765
 Non-cash compensation charges.....................................................................     4,626,136              ---
 Common stock issued for consulting services.......................................................       509,375          285,208
 Common stock issued in connection with termination agreement......................................           ---          416,632
 Gain on deconsolidation of Gomez..................................................................           ---       (5,568,475)
Changes in operating assets and liabilities (excluding effect of deconsolidation of Gomez)
 Increase in accounts receivable and prepayments...................................................      (585,066)      (2,097,509)
 Increase in notes receivable......................................................................      (380,000)             ---
 Decrease in stock subscriptions receivable........................................................       245,000              ---
 (Increase)/ decrease in other assets..............................................................       (34,809)         111,349
 (Decrease)/ increase in accounts payable and accrued expenses.....................................    (1,558,826)       1,094,874
 Increase/ (decrease) in other liabilities.........................................................       141,049         (432,532)
                                                                                                     ------------     ------------
  Net cash used in operating activities............................................................    (7,635,894)     (11,818,944)
                                                                                                     ------------     ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
 Purchase of investments available for sale........................................................           ---       (9,968,771)
 Purchase of fixed assets..........................................................................      (481,237)      (2,113,570)
 Cash received from notes receivable...............................................................        85,266           83,501
 Capitalized software development costs............................................................       (61,375)             ---
 Effect of deconsolidation of Gomez................................................................           ---        2,554,511
                                                                                                     ------------     ------------
  Net cash used in investing activities............................................................      (457,346)      (9,444,329)
                                                                                                     ------------     ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
 Preferred stock dividends paid in cash............................................................      (319,062)        (156,655)
 Issuance costs for common stock...................................................................      (300,000)        (575,000)
 Proceeds from issuance of common stock............................................................     3,000,000        5,750,000
 Proceeds from exercise of stock options and warrants to purchase common stock.....................           ---        2,288,088
 Issuance costs for preferred stock................................................................      (864,628)        (682,563)
 Proceeds from issuance of preferred stock.........................................................     6,275,000       20,000,000
 Issuance costs for Gomez preferred stock..........................................................           ---         (611,898)
 Proceeds from issuance of Gomez preferred stock...................................................           ---        5,500,000
 Proceeds from issuance of Gomez common stock......................................................           ---              500
 Issuance costs for UTTC preferred stock...........................................................           ---          (11,673)
 Proceeds from issuance of UTTC preferred stock....................................................           ---        2,000,000
                                                                                                     ------------     ------------
  Net cash provided by financing activities........................................................     7,791,310       33,500,799
                                                                                                     ------------     ------------

NET (DECREASE)/ INCREASE IN CASH AND CASH EQUIVALENTS..............................................  $   (301,930)    $ 12,237,526
Cash and cash equivalents, beginning of period.....................................................       815,680        2,667,347
                                                                                                     ------------     ------------
Cash and cash equivalents, end of period...........................................................  $    513,750     $ 14,904,873
                                                                                                     ============     ============
</TABLE>

           See Notes to Unaudited Consolidated Financial Statements

                                       6
<PAGE>

THE ASHTON TECHNOLOGY GROUP, INC. AND SUBSIDIARIES NOTES TO
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation

The consolidated financial statements included herein have been prepared without
audit pursuant to the rules and regulations of the Securities and Exchange
Commission ("SEC" or "Commission"). Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations. The accompanying consolidated financial statements
reflect all adjustments that are, in the opinion of management, necessary to a
fair statement of the results for the interim periods presented. Such
adjustments are of a normal recurring nature. Certain amounts in prior periods
have been reclassified for comparative purposes.

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

These consolidated financial statements should be read in conjunction with the
audited financial statements and the notes thereto included in the registrant's
Annual Report on Form 10-KSB for the year ended March 31, 1999. The results for
the three months ended December 31, 1999 and the nine months ended December 31,
1999 are not necessarily indicative of the results that may be expected for the
year ended March 31, 2000.

The consolidated financial statements include the accounts of The Ashton
Technology Group, Inc. ("ATG(TM)", "Ashton", or the "Company") and its wholly-
owned and majority-owned subsidiaries which, at December 31, 1999, include
Universal Trading Technologies Corporation ("UTTC(TM)"), ATG(TM) International
("International"), and Electronic Market Center, Inc. ("EMC"). ATG(TM) owns 100%
of the voting equity of International and EMC, and approximately 93% of the
voting equity of UTTC(TM). Also included in the consolidated financial
statements are the accounts of UTTC(TM)'s wholly-owned subsidiaries, REB
Securities, Inc. ("REB"), Croix Securities, Inc. ("Croix"), and NextExchange,
Inc. ("NextExchange"). Croix Securities and NextExchange were formed in February
1999. The results of operations for these subsidiaries are included from the
dates of formation. All significant intercompany accounts and transactions have
been eliminated.

In December 1999, ATG(TM) entered into agreements to create two joint venture
companies, Kingsway ATG Asia, Ltd. ("Asia") and Ashton Technology Canada, Inc.
("Canada"). The Company accounts for investments in businesses which it owns
between 20% and 50% using the equity method, and those which are majority-owned
using the consolidation method. As of December 31, 1999, ATG(TM) had not yet
funded its investment in Asia.

On December 20, 1999, ATG(TM) funded Canada with $333,400 in cash for equity in
the Class A common shares of Canada, and has agreed to provide an additional
$666,600 as and when required, by way of either equity or debt. ATG(TM) owns 51%
of the voting equity of Canada, and accordingly, the accounts of Canada are
consolidated with those of ATG(TM) in the December 31, 1999 unaudited
consolidated balance sheet. Also in connection with the agreement with Canada,
the Company issued warrants to purchase 500,000 shares of ATG(TM) common stock
at $2.50 per share to holders of the UTTC(TM) Series TK Convertible Preferred
Stock. The warrants are exercisable for a period of two years beginning on June
4, 2000. The fair value of the warrants will be recorded as a dividend to the
holders of the Series TK Preferred as of the vesting dates of the warrants. Such
vesting will begin during the fiscal year ended March 31, 2001.

2. Deconsolidation of Gomez

In September 1999, Gomez commenced the private placement of its Series C
Convertible Preferred Stock ("Gomez Series C Preferred Stock"). Two closings of
the Gomez Series C Preferred Stock sale were completed in November and December
1999, resulting in total gross proceeds of approximately $18,946,000. The
private placement is expected to be completed during the Company's fourth
quarter. During the first two quarters of the fiscal year, the Company owned in
excess of 50% of the voting equity of Gomez and accounted for its investment
under the consolidation method. As a result of Gomez's sale of a portion of its
Series C Convertible Preferred Stock on

                                       7
<PAGE>

December 30, 1999, the Company's ownership percentage in Gomez was reduced to
below 50%. At December 31, 1999, ATG(TM) owned 39.9% of the voting equity and
36.6% of the total equity of Gomez in the form of 4,905 shares of the Gomez
Series A Preferred Stock (which is convertible into 4.9 million shares of Gomez
common stock). As such, the Company began accounting for its remaining
investment in Gomez under the equity method of accounting rather than the
consolidation method. In prior periods, the operating results of Gomez were
consolidated within the operating results of the Company and the assets and
liabilities of Gomez were consolidated with those of ATG(TM)'s other majority-
owned subsidiaries in the consolidated balance sheets. As a result of the
deconsolidation, the Company consolidated Gomez's operating results only through
the date of deconsolidation. Pursuant to the equity method of accounting, the
Company has increased the carrying amount of its remaining investment in Gomez
to zero, and recorded a gain of $5,568,475 equal to the amount of the increase.
The Company will not provide for any future losses of Gomez which would reduce
the carrying amount to below zero, and in the event Gomez has future earnings,
the Company will recognize its share of those earnings only after it exceeds its
share of net losses not recognized.

3.  Certain Transactions

Series F Convertible Preferred Stock

On August 18, 1999 (the "Issue Date"), the Company completed a private placement
for the sale of 20,000 shares of Series F Convertible Preferred Stock (the
"Series F Preferred") with a par value of $.01 and a stated value of $1,000 per
share, and warrants to purchase an aggregate of 200,000 shares of the Company's
common stock (the "Warrants") for gross proceeds of $20,000,000. Each share of
the Series F Preferred is convertible into a number of shares of the Company's
common stock equal to the stated value plus a premium of up to 9% per annum,
divided by a conversion price. The conversion price of the Series F Preferred is
the lesser of $10.79 or the average of the five lowest closing bid prices during
the 22 trading days preceding conversion. Prior to February 17, 2000, if any
conversions take place on days where the common stock trades below $7.85 (the
"Floor Price"), then the conversion price will equal the Floor Price. Beginning
on February 18, 2000, the Series F Preferred is subject to redemption, at the
Company's option, if the market price of the common stock is below $7.35 on the
conversion date. During the three months ended December 31, 1999, 6,000 shares
of the Series F Preferred were converted into 1,093,721 shares of ATG(TM) common
stock, including 32,957 shares deemed as dividends. The Company also accrued
dividends in arrears of $468,089 to reflect the premium on the remaining Series
F Preferred from the Issue Date through December 31, 1999.

The Warrants are immediately exercisable for a period of five years, ending
August 18, 2004, at an exercise price of $12.26 per share. The fair value of the
Warrants, or $645,000, was recorded as a dividend to the holders of the Series F
Preferred on the Issue Date.

UTTC(TM) Series TK Convertible Preferred Stock

On June 4, 1999, UTTC(TM) completed a private placement of 145,700 shares of
Series TK Convertible Preferred Stock ("UTTC(TM) Series TK Preferred Stock") and
warrants to purchase 200,000 shares of ATG(TM) common stock at $10.00 per share.
The fair value of the warrants will be recorded as a dividend to the holders of
the Series TK Preferred as of the vesting dates of the warrants. Such vesting
will begin during the fiscal year ended March 31, 2001. Gross proceeds received
by UTTC(TM) from the sale of the Series TK Preferred Stock and the warrants
amounted to $2,000,000. Between May 2001 and April 2004, each share of UTTC(TM)
Series TK Preferred Stock is convertible into ten shares of UTTC(TM) common
stock. Additionally, between May 1, 2001 and June 1, 2001, holders of the
UTTC(TM) Series TK Preferred Stock may exchange each share of Series TK
Preferred for 1.83 shares of ATG(TM) common stock. The UTTC(TM) Series TK
Preferred Stock is presented as a minority interest on the December 31, 1999
unaudited consolidated balance sheet at its liquidation preference of
$2,000,000. As a result of the UTTC(TM) Series TK Preferred stockholders'
liquidation preference, the balance has not been reduced by any portion of the
losses of UTTC(TM).

                                       8
<PAGE>

4.  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 paid cumulative dividends semi-annually at an annual rate of $0.50
per share and was payable in cash or additional shares of Series A Preferred
until February 15, 2000. Each holder of shares of Series A Preferred had the
right to convert each share of Series A Preferred into: (i) ten shares of
ATG(TM) common stock; and (ii) one warrant to purchase three shares of the
common stock of UTTC(TM), par value $0.01 per share (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 ATG(TM) common
stock; and (ii) one warrant to purchase two shares of UTTC(TM) common stock,
with an exercise price of $0.75 per share, subject to adjustment. During the
nine months ended December 31, 1999, 125,219 shares of Series A Preferred and
288,300 shares of Series B Preferred were converted into 2,980,736 shares of
ATG(TM) common stock. As of December 31, 1999, all shares of Series A Preferred
Stock have been converted into common stock.

On April 3, 1998 (the "Subscription Date"), the Company entered into the Private
Equity Line of Credit Agreement (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. 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. On July 15,
1998, the Private Equity Investors also 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. The conversion price of the Series D Preferred was 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 was equal to 80% of the Market Price. Each share of the Series D
Preferred and Series E Preferred (i) ranked pari passu with the other authorized
preferred stock of the Company and (ii) was entitled to a cumulative dividend of
8% per annum on its respective liquidation preference. During the fiscal year
ended March 31, 1999 all of the outstanding 3.174 shares of the Series D
Preferred were converted into 2,863,521 shares of common stock, and the
outstanding 2.1 shares of the Series E Preferred were converted into 1,567,058
shares of common stock.

Also on the Subscription Date, the Private Equity Investors received warrants to
purchase up to an aggregate of 250,000 shares of common stock and on July 15,
1998, received additional warrants to purchase up to an aggregate of 100,000
shares of common stock. The warrants, which were exercisable for a period of
five years, were exercised in May 1999. As a result of the exercise, the Company
received gross proceeds of $1,601,450 and issued 350,000 shares of common stock.

Following the purchase of the Series E Preferred and subject to the satisfaction
of certain other conditions, the Company was entitled to 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 was 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 gave notice of a Put. During
the fiscal year ended March 31, 1999, the Company exercised six Puts in the
aggregate amount of $7,250,000, and issued 4,810,788 shares of common stock in
connection with the Puts. During the six months ended September 30, 1999, the
Private Equity Investors fulfilled their remaining commitment to the Company
under the Private Equity Agreement when the Company exercised four Puts in the
aggregate amount of $5,750,000, and issued 696,570 shares of common stock.

In April 1999, 100,000 warrants that were issued in January 1998 to investors in
the Series C Convertible Preferred Stock ("Series C Preferred") were exercised.
As a result of this exercise, the Company received gross proceeds of $171,282
and issued 100,000 shares of common stock. Warrants that were issued to the
underwriters of the Company's initial public offering in May 1996 were exercised
on a cashless basis during June 1999, and 100,555 shares of common stock were
issued. Of the 350,000 warrants issued to the placement agent for the Series C,
Series D, and

                                       9
<PAGE>

Series E Preferred Stock offerings, a total of 130,000 warrants were exercised
during July and August, 1999, resulting in gross proceeds of $308,687 and the
issuance of 130,000 shares of common stock.

At the time of issuance, the Series A, Series B, Series C, Series D, and Series
E Preferred Stocks were 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 was fully
recognized as a return to the preferred stockholders when the shares became
convertible, or at the time of issuance. The accumulated beneficial conversion
feature amounted to $1,643,900, $2,695,436, $349,943, $1,180,549, and $607,087
for the Series A, Series B, Series C, Series D, and Series E Preferred,
respectively, and is included as a component of the accumulated deficit on the
consolidated balance sheets at March 31, 1999 and December 31, 1999.

5.  Related Party Transactions

The Company utilizes the Dover Group, Inc. ("Dover") for consulting services
related to the Company's financings and product development efforts. Fredric W.
Rittereiser, the Company's Chairman and Chief Executive Officer, is the sole
shareholder, director and officer of Dover. The Company paid consulting fees to
Dover amounting to $135,000 in each of the nine-month periods ended December 31,
1999 and 1998.

In 1997, the Company retained Adirondack Capital, LLC ("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. The
Company paid consulting fees to Adirondack amounting to $90,000 in each of the
nine-month periods ended December 31, 1999 and 1998. In April 1999, Gomez paid a
fee of $50,000 to Adirondack for its assistance in structuring the private
placement of the Gomez Series B Preferred Stock. Additionally, the Company paid
Adirondack $287,500 in the nine months ended December 31, 1999 pursuant to the
Private Equity Line of Credit Agreement, and $450,000 in the nine months ended
December 31, 1998 pursuant to the Private Equity Line of Credit Agreement and in
connection with the sale of the Series C Preferred, the Series D Preferred and
the Series E Preferred. Effective April 1, 1999, Mr. Gothner began receiving a
monthly board retainer.

During 1998, the Company retained Richard Butler, a member of the Company's
Board of Directors, to provide strategic marketing services. For the nine months
ended December 31, 1998 the Company paid $67,500 in consulting fees to Richard
Butler under that arrangement. Effective April 1, 1999, the arrangement was
terminated, and Mr. Butler began receiving a monthly board retainer.

In 1997, the Company retained Wyndham Capital Corporation ("Wyndham") to provide
investment banking and financial advisory services. Thomas G. Brown, a member of
the Company's Board of Directors, is the President and Managing Director of
Wyndham. The Company paid $25,000 in consulting fees to Wyndham during the nine
months ended December 31, 1999, and $45,000 in consulting fees and $140,000
pursuant to the sale of equity in the nine months ended December 31, 1998 under
this agreement. Effective September 1, 1999, Wyndham's consulting fees were
terminated and Mr. Brown began receiving a monthly board retainer upon his
election to the Board.

6.  Investments Available for Sale and Accumulated Other Comprehensive Income

The Company classifies its marketable securities as available for sale.
Investments available for sale are recorded at fair value with unrealized gains
and losses reported as a component of accumulated other comprehensive loss. As
of December 31, 1999, the Company's investments available for sale consist of
government agency and corporate debt securities with remaining maturities not
exceeding 18 months.

                                       10
<PAGE>

7.    Segment Information

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

<TABLE>
<CAPTION>
                                          Three Months Ended December 31,                Nine Months Ended December 31,
                                      ------------------------------------------------------------------------------------------
                                              1998                     1999                   1998                    1999
                                      -----------------         ---------------      -------------------     -------------------
<S>                                   <C>                       <C>                  <C>                      <C>
Revenues:
    Gomez.........................           $  427,884              $1,993,793              $ 1,079,836             $ 3,836,949
    Trading systems...............                  ---                  18,900                      ---                  31,617
                                        ---------------         ---------------      -------------------           -------------
                                                427,884               2,012,693                1,079,836               3,868,566
Loss from operations:
    Gomez.........................              263,927               2,534,406                4,946,600               5,372,315
    Trading systems...............            1,714,076               1,918,777                6,074,312               6,551,416
                                        ---------------         ---------------      -------------------           -------------
                                              1,978,003               4,453,183               11,020,912              11,923,731
Interest income:
    Gomez.........................                  ---                  32,707                      ---                  94,816
    Trading systems...............               35,640                 387,709                  111,081                 678,496
                                        ---------------         ---------------      -------------------           -------------
                                                 35,640                 420,416                  111,081                 773,312
Depreciation and amortization:
    Gomez.........................               27,330                 151,690                   61,492                 334,171
    Trading systems...............              112,846                  66,637                  360,667                 392,594
                                        ---------------         ---------------      -------------------           -------------
                                                140,176                 218,327                  422,159                 726,765
Non-cash compensation charges
    Gomez.........................                  ---                     ---                4,626,136                     ---
    Trading systems...............              220,313                     ---                  509,375                 285,208
                                        ---------------         ---------------      -------------------           -------------
                                                220,313                     ---                5,135,511                 285,208
</TABLE>

8.  Recently Adopted Accounting Standards

In March 1998, the American Institute of Certified Public Accountants (AICPA)
issued Statement of Position (SOP) No.98-1, Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use. The Company has adopted SOP No.
98-1 effective April 1, 1999. Adoption of this Statement has not had 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, which requires all costs associated with pre-opening, pre-operating,
organization activities to be expensed as incurred. The Company has adopted SOP
No. 98-5 beginning April 1, 1999. Adoption of this Statement has not had a
material impact on the Company's consolidated financial position or results of
operations.


9.  Net (Loss) Income per Share

Net (loss) income per share is computed in accordance with SFAS No 128, Earnings
per Share. SFAS 128 requires companies to present basic and diluted earnings per
share. Basic earnings per share excludes the dilutive effect of outstanding
stock options, warrants and convertible securities, whereas diluted earnings per
share includes the effect of such items. For the nine months ended December 31,
1999, and the three and nine months ended December 31, 1998, the Company is in a
net loss position. For those periods, the effect of the Company's common share
equivalents would be anti-dilutive, and therefore, there is no difference
between basic and diluted net loss per share. For the three months ended
December 31, 1999, the Company is in a net income position, and has included in
its diluted earnings per share an additional 5,546,642 shares related to the
Company's outstanding options and warrants. No shares were included in the
calculation of diluted earnings per share for the Company's convertible
preferred stock for the three months ended December 31, 1999, as their effect
would be anti-dilutive.

                                       11
<PAGE>

10.  Subsequent Events

On January 12, 2000, UTTC(TM) completed a private placement of 123,240 shares of
its Series KW Convertible Preferred Stock ("Series KW Preferred"), resulting in
gross proceeds of $3,000,000. The Series KW Preferred has a liquidation value of
$24.34275 per share, or $3,000,000. Upon the completion of an initial public
offering of the common stock of UTTC(TM) or upon a change in control, and until
December 2004, each share of Series KW Preferred is convertible into ten shares
of UTTC(TM) common stock. If UTTC(TM) has not completed an initial public
offering by December 31, 2001, holders of the Series KW Preferred may exchange
up to 41,080 shares of Series KW Preferred, each for 3.477 shares of ATG(TM)
common stock, and up to 41,080 shares of Series KW Preferred at an exchange
ratio equal to the liquidation value per share divided by the average closing
price of the ATG(TM) common stock for the twenty trading days preceding such
conversion. Additionally, ATG(TM), UTTC(TM), and the holders of the Series KW
Preferred agreed that if, within thirty days of Asia completing an initial
public offering of its securities, UTTC(TM) has not filed to register UTTC(TM)'s
common stock to engage in an underwritten initial public offering, the holders
of the Series KW Preferred may then, and at any time thereafter for so long as
UTTC(TM) has not filed to register UTTC(TM)'s common stock to engage in an
underwritten initial public offering of its securities, exchange up to 41,080
shares of Series KW Preferred for shares of ATG(TM) common stock at an exchange
ratio equal to the liquidation value per share of the Series KW Preferred
divided by the average closing price of the ATG(TM) common stock for the twenty
trading days preceding such conversion.

On January 13, 2000, ATG(TM) contributed $1 million to Asia in exchange for 47
million shares of Asia voting common stock. ATG(TM) owns 47% of the voting
equity of Asia. Such investment will be accounted for using the equity method,
and will be presented as an investment in affiliates.

                                       12
<PAGE>

ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF
          FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

The Company is engaged in the development and commercialization of intelligent
matching systems and 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"). At December 31, 1999, the Company is
organized as a parent company, which has four subsidiaries:


     .    Universal Trading Technologies Corporation ("UTTC(TM)") and its three
          subsidiaries:
               REB Securities, Inc. ("REB")
               Croix Securities, Inc. ("Croix")
               NextExchange, Inc. ("NextExchange")
     .    Ashton Technology Canada, Inc. ("Canada")
     .    Electronic Market Center, Inc. ("EMC")
     .    ATG(TM) International, Inc. ("International")

In December 1999, ATG(TM) entered into agreements to create two joint venture
companies, Kingsway ATG Asia, Ltd. ("Asia") and Ashton Technology Canada, Inc.
("Canada"). The Company accounts for investments in businesses which it owns
between 20% and 50% using the equity method, and those which are majority-owned
using the consolidation method. ATG(TM) has agreed to invest $1,000,000 for 47%
of the voting equity of Asia, however, that investment had not been funded as of
December 31, 1999. Upon its funding, the Company's investment in Asia will be
accounted for using the equity method. On December 20, 1999, ATG(TM) funded
Canada with $333,400 in cash for equity in the Class A common shares of Canada,
and has agreed to provide an additional $666,600 as and when required, by way of
either equity or debt. ATG(TM) owns 51% of the voting equity of Canada, and
accordingly, the accounts of Canada are consolidated with those of ATG(TM) in
the December 31, 1999 unaudited consolidated balance sheet.

During the first two quarters of the fiscal year, ATG(TM) owned in excess of 50%
of the voting equity of Gomez Advisors, Inc. ("Gomez"), and accounted for its
investment under the consolidation method. In September 1999, Gomez commenced
the private placement of its Series C Convertible Preferred Stock. As a result
of Gomez's sale of a portion of its Series C Convertible Preferred Stock on
December 30, 1999, the Company's ownership percentage in Gomez was reduced to
below 50%. As such, the Company began accounting for its remaining investment in
Gomez under the equity method of accounting rather than the consolidation
method. In prior periods, the operating results of Gomez were consolidated
within the operating results of the Company and the assets and liabilities of
Gomez were consolidated with those of ATG(TM)'s other majority owned
subsidiaries in the consolidated balance sheets. In the current period, the
operating results of Gomez were consolidated within the operating results of the
Company only through the date of deconsolidation, or December 30, 1999. The
carrying amount of the Company's remaining investment in Gomez was increased to
zero, and the increase of $5,568,475 was reported on the unaudited consolidated
statements of operations for the three and nine months ended December 31, 1999
as a gain on deconsolidation of Gomez. For the periods ended December 31, 1999
and 1998, Gomez generated substantially all of the Company's revenues. As a
result of the deconsolidation, the Company anticipates its revenues will
decrease materially during the quarter ended March 31, 2000, and the revenues
reported for the nine months ended December 31, 1999 will constitute virtually
all of the Company's revenues for the year ended March 31, 2000.

On March 24, 1999, the SEC approved the Philadelphia Stock Exchange's ("PHLX")
proposed rule change relating to the Company's eVWAP(TM) trading system. On
August 27, 1999, UTTC and the PHLX began a controlled, live trading period of
the eVWAP(TM) with a group of PHLX floor specialists and "upstairs" customers
involving twenty listed equity securities. This initial trading period
successfully met management's expectations for the first phase rollout of the
eVWAP(TM) trading system.

                                       13
<PAGE>

The second phase of the eVWAP(TM) trading system commenced in November 1999 with
the Company working with certain major clearing firms to clear and settle trades
through the eVWAP(TM) trading system. The second phase is intended to solidify
the electronic integration of geographically diverse customers through their
clearing agents, which is a prerequisite for effective electronic straight-
through processing of eVWAP(TM) trades. On January 3, 2000, ATG(TM) announced
that eight national brokerage firms had agreed to clear and settle trades by
institutions, pension funds, and money managers utilizing ATG(TM)'s eVWAP(TM)
trading system directly or through ATG(TM)'s subsidiary, Croix. The Company has
been working with these firms to integrate systems and refine business processes
to effectively perform straight-through processing of eVWAP(TM) trades and to
reduce potential errors and risks associated with improper integration.

Upon completion of clearing firm integration, it is expected that approximately
60 institutions and broker-dealers will be able to execute trades in the
eVWAP(TM) trading system. This event is forecasted to occur in mid-March, 2000
and will be accompanied by an increase in eligible securities. The third stage
of the rollout, which is expected to commence shortly thereafter, is planned to
provide the connectivity to the larger institutions and brokers-dealers, who
aggregate orders from multiple locations, and is projected to demonstrate
eVWAP(TM) volume growth and liquidity.

The Company's limited operating history and dependence upon the operation of its
eVWAP(TM) make the prediction of future operating results difficult.  Although
the Company has activated its eVWAP(TM) and attempted to develop additional
sources of revenue, there can be no assurance that the Company will generate the
anticipated revenues from the operation of the eVWAP(TM) or other sources.

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
eVWAP(TM), success in hiring the appropriate personnel, successful development
of new products and services, regulatory approval of its products and services,
market acceptance of the Company's products and services, and development of a
revenue stream from the Company's products and services. Due to such anticipated
increases in the Company's operating expenses, the Company's operating results
may be materially and adversely affected.

The Company is currently in various stages of developing additional eVWAP(TM)
enhancements, features, and products to be integrated into the existing
eVWAP(TM) trading system. The Company also continues to refine design
requirements, evaluate market acceptance and assess implementation strategies in
the development of other intelligent matching systems, its electronic Market
Center (`eMC(TM)"), electronic Options Exchange System ("eOX(TM)"), electronic
Auction System ("eAS(TM)"), and electronic Public Limit Order Book
("ePLOB(TM)"). The Company has met with potential business partners, including
national stock exchanges, to discuss the concepts and initial designs underlying
these systems.

In addition, the Company is continuing to evaluate and assess alternatives for
the development and implementation of its NextExchange concept, a fully
electronic, national securities exchange offering screen-based trading systems.
It is envisioned that the eOX(TM), eAS(TM) and ePLOB(TM) could form the
technical backbone of the NextExchange concept. The Company does not anticipate
generating revenue from these systems or concepts during its fiscal year ended
March 31, 2000.


Results of Operations

For the Three Months Ended December 31, 1999 and 1998

The net income applicable to common stock totaled $644,703 or $.02 per share on
a diluted basis for the three months ended December 31, 1999, compared to a net
(loss) of $(2,205,981) or $(.20) per share for the three months ended December
31, 1998. The Company recorded net income before preferred dividends of
$1,115,292, or $.04 per share on a diluted basis for the three months ended
December 31, 1999, compared to a net loss of $1,978,003, or $.18 per share for
the three months ended December 31, 1998.

The Company's revenues totaled $2,012,693 for the three months ended December
31, 1999, and $427,884 for the three months ended December 31, 1998. UTTC(TM)
generated $18,900 from the operation of eVWAP(TM) during the

                                       14
<PAGE>

three months ended December 31, 1999 and Gomez generated the balance of the
revenues. The revenues in the three months ended December 31, 1998 were
generated entirely by Gomez.

In the three months ended December 31, 1999, $703,481 or 35% of Gomez's revenues
were from subscriptions and related data and analysis services from its GomezPro
web site, which it began selling in March 1999. For the same period, Gomez
generated $1,033,112 in advertising, sponsorship, and transaction-based
revenues. Advertising revenue for the three months ended December 31, 1998 was
$246,000. Consulting and advisory service revenues for the three months ended
December 31, 1999 declined as a percentage of total revenues from the same
period in 1998 due to the introduction of the GomezPro web site and Research
Station. Total consulting and advisory service revenues were $257,200 or 13% of
Gomez's revenues in the three months ended December 31, 1999, compared to
$90,000 or 21% of revenues in the three months ended December 31, 1998.

The costs of revenues represent salaries associated with the delivery of Gomez's
consulting and advisory services, and amounts paid in connection with
transaction-based revenues. Costs of revenues for the three months ended
December 31, 1999 were $513,880 or 25.5% of total revenues, compared to $56,250
or 13.1% of revenues for the three months ended December 31, 1998. The increase
as a percent of total revenues is primarily due to the increase in advertising
and sponsorship revenues and the related increase in amounts paid for
transaction-based revenues.

During the three-months ended December 31, 1998, the Company amortized system
development costs related to the eVWAP(TM) totaling $47,677. The Company has not
capitalized computer software costs related to the eVWAP(TM) since the second
quarter of fiscal 1999, when the application development stage of the eVWAP(TM)
was completed. The capitalized computer software asset was completely amortized
during the second quarter of fiscal 2000.

Depreciation and amortization expense includes depreciation of property and
equipment, comprised primarily of computer equipment, and amortization of
intangible assets. Depreciation and amortization for the three months ended
December 31, 1999 increased to $218,327 from $92,499 for the three months ended
December 31, 1998, due to an increase in the computer equipment purchased.
Capital expenditures increased to approximately $653,000 for the three months
ended December 31, 1999 compared to approximately $98,000 in the same period
last year. The increase is primarily due to Gomez's purchase of computer
equipment and software to accommodate additional staff and to support the
increased traffic on their web site and network servers. The level of capital
expenditures is expected to increase as the Company moves to replace hardware
originally purchased in 1996, expand the operation of the eVWAP(TM) trading
system, and to develop additional trading systems.

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 the previous consulting agreement. The
Company recorded the deferred consulting expenses in 1998 and 1999 as a
reduction to stockholders' equity. During the three months ended December 31,
1998, $220,313 was reflected as a non-cash compensation charge for the
amortization of deferred consulting expenses. The deferred consulting expense
relating to this agreement was fully amortized during the second quarter of the
current fiscal year.

Selling, general and administrative expenses ("SG&A") totaled $6,154,085 and
$2,314,868 for the three-month periods ended December 31, 1999 and 1998,
respectively. For the period ended December 31, 1999, Gomez's SG&A totaled
$3,895,336, or 63% of the Company's total SG&A, compared to $444,478 or 19% in
the three months ended December 31, 1998. The increase in Gomez's SG&A was due
primarily to the growth in staff and related expenses incurred in building
Gomez's infrastructure, and increased advertising and marketing costs related to
introduction of new products and services.

Excluding Gomez, the Company's SG&A for the three months ended December 31, 1999
totaled $2,258,749 compared to $1,870,390 during the three months ended December
31, 1998. The increase in SG&A is primarily a result of the growth in staff and
is partially offset by decreases in consulting and professional fees. As of
December 31, 1999, ATG(TM) and UTTC(TM) employed a total of 35 employees
compared to 27 employees at December 31, 1998.

                                       15
<PAGE>

Interest income increased to $420,416 for the three months ended December 31,
1999 from $35,640 for the three months ended December 31, 1998, as a result of
the higher cash and cash equivalents and investments available for sale
balances. (see "Liquidity and Capital Resources"). During the three months ended
December 31, 1999, the Company recorded a gain of $5,568,475 as a result of a
change in the accounting for its investment in Gomez from the consolidation
method to the equity method (see "Notes to Unaudited Consolidated Financial
Statements"). Other income for the three months ended December 31, 1998 relates
to judgments rendered in favor of the Company in connection with its claims
against Alliant Techsystems, Inc.

For the Nine Months Ended December 31, 1999 and 1998

The net loss applicable to common stock totaled $7,858,035 or $.33 per share for
the nine months ended December 31, 1999, and $16,906,033 or $1.63 per share for
the nine months ended December 31, 1998. The Company incurred a net loss before
preferred dividends of $6,355,256, or $.27 per share for the nine months ended
December 31, 1999, compared to a net loss of $11,020,912, or $1.06 per share for
the nine months ended December 31, 1998.

The Company's revenues totaled $3,868,566 and $1,079,836 for the nine months
ended December 31, 1999 and 1998, respectively. UTTC(TM) generated $31,617 from
the operation of eVWAP(TM) during the nine months ended December 31, 1999 and
Gomez generated the balance of the revenues. The revenues in the nine months
ended December 31, 1998 were generated entirely by Gomez.

In the nine months ended December 31, 1999, $1,351,400 or 35% of Gomez's
revenues were from subscriptions and related data and analysis services from its
GomezPro web site, which it began selling in March 1999. For the nine-month
periods ended December 31, 1999 and 1998, Gomez generated $1,730,549 and
$223,500, respectively, in advertising, sponsorship, and transaction-based
revenues. Consulting and advisory service revenues declined as a percentage of
total revenues due to Gomez's introduction of its GomezPro web site and Research
Station. Total consulting and advisory service revenues were $755,001 or 20% of
Gomez's revenues in the nine months ended December 31, 1999, compared to
$730,000 or 67% of revenues in the three months ended December 31, 1998.

The costs of revenues represent salaries associated with the delivery of Gomez's
consulting and advisory services, and amounts paid in connection with
transaction-based revenues. Costs of revenues for the nine months ended December
31, 1999 were $644,510 or 16.7% of total revenues, compared to $146,250 or 13.5%
of revenues for the nine months ended December 31, 1998. The increase as a
percent of total revenues is primarily due to the increase in advertising and
sponsorship revenues and the related increase in amounts paid for transaction-
based revenues.

During the nine-month periods ended December 31, 1999 and 1998, the Company
amortized system development costs related to the eVWAP(TM) totaling $95,354 and
$143,031, respectively. The Company has not capitalized computer software costs
related to the eVWAP(TM) since the second quarter of fiscal 1999, when the
application development stage of the eVWAP(TM) was completed. As of December 31,
1999, the capitalized computer software asset has been completely amortized.

Depreciation and amortization expense includes depreciation of property and
equipment, comprised primarily of computer equipment, and amortization of
intangible assets. Depreciation and amortization for the nine months ended
December 31, 1999 increased to $631,411 from $279,128 for the nine months ended
December 31, 1998, due to an increase in the computer equipment purchased.
Capital expenditures increased to approximately $2,114,000 for the nine months
ended December 31, 1999 compared to approximately $481,000 in the same period
last year. The increase is primarily due to Gomez's purchase of computer
equipment and software to accommodate additional staff and to support the
increased traffic on their web site and network servers. The level of capital
expenditures is expected to increase as the Company moves to replace hardware
originally purchased in 1996, expand the operation of the eVWAP(TM) trading
system, and to develop additional trading systems.

During the nine months ended December 31, 1999 and 1998, $285,208 and 509,375,
respectively, was reflected as a non-cash compensation charge for the
amortization of deferred consulting expenses in connection with the common stock
issued to Continental described above. The deferred consulting expense relating
to the agreement with Continental was fully amortized as of December 31, 1999.

                                       16
<PAGE>

In August, 1998, the Company entered into employment agreements with Julio
Gomez, John Robb and Alexander Stein. Pursuant to the employment agreements, an
aggregate of 3,000,000 options were granted at an exercise price of $.01 per
share. In addition, 1,400,000 options with an exercise price of $.01 per share
were granted to certain officers and directors of ATG(TM). During the nine
months ended December 31, 1998, Gomez and the Company recognized a non-cash
compensation charge of $4,367,809 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 those options. Those options were exchanged for
Gomez common stock on January 22, 1999 pursuant to an exchange agreement among
Gomez, ATG(TM), and other persons affiliated with them. Also during the nine
months ended December 31, 1998, the Company incurred a non-cash compensation
charge of $258,327 related to the issuance of non-employee stock options to
consultants and professional advisors.

SG&A totaled $14,492,494 and $6,797,989 for the nine-month periods ended
December 31, 1999 and 1998, respectively. For the nine months ended December 31,
1999, Gomez's SG&A totaled $8,325,399, or 57% of the Company's total SG&A,
compared to $1,466,790 or 22% in the nine months ended December 31, 1998. The
increase in Gomez's SG&A was due primarily to the growth in staff and related
expenses incurred in building Gomez's infrastructure, and increased advertising
and marketing costs related to introduction of new products and services.

Excluding Gomez, the Company's SG&A for the nine months ended December 31, 1999
totaled $6,167,095 compared to $5,331,199 during the nine months ended December
31, 1998. The increase in SG&A is primarily a result of the growth in staff of
ATG(TM) and UTTC(TM), and is partially offset by decreases in consulting and
professional fees.

Interest income increased to $773,312 for the nine months ended December 31,
1999 from $111,081 for the nine months ended December 31, 1998, as a result of
the higher cash and cash equivalents and investments available for sale
balances. (see "Liquidity and Capital Resources"). During the nine months ended
December 31, 1999, the Company recorded a gain of $5,568,475 as a result of a
change in the accounting for its investment in Gomez from the consolidation
method to the equity method (see "Notes to Unaudited Consolidated Financial
Statements"). Other expense for the nine months ended December 31, 1999 is
comprised of a charge of $416,632 for the value of UTTC(TM) stock issued to a
former director in satisfaction of the terms of an agreement executed on June
29, 1999 between the former director and the Company. Other income for the nine
months ended December 31, 1998 relates to judgments rendered in favor of the
Company in connection with its claims against Alliant Techsystems, Inc.

Liquidity and Capital Resources

At December 31, 1999, the Company's consolidated total assets were $27,014,359,
compared to $5,653,737 at March 31, 1999. Current assets at December 31, 1999
totaled $25,309,387 and current liabilities were $294,365. Stockholders' equity
at December 31, 1999 increased to $24,719,994 from $4,444,978 at March 31, 1999
due to the private placement of 20,000 shares of its Series F Preferred Stock
for gross proceeds of $20,000,000, the issuance of 1,582,685 shares of its
common stock for proceeds of $7,908,713 in connection with the Company's Private
Equity Line of Credit Agreement (see "Notes to Unaudited Consolidated Financial
Statements - Stockholders' Equity"), and the exercise of stock options and
warrants. The increase in stockholders' equity resulting from the issuance of
stock was partially offset by the net loss applicable to common stock of
$7,858,035 and net issuance costs of approximately $1,800,000.

At December 31, 1999, the Company's principal sources of liquidity consisted of
cash and cash equivalents of $14,904,873 and investments available for sale of
$9,912,120, compared to cash and cash equivalents of $2,667,347 at March 31,
1999. The increase in cash and cash equivalents and investments available for
sale is primarily a result of (i) the private placement of 20,000 shares of
ATG(TM)'s Series F Convertible Preferred Stock for gross proceeds of $20,000,000
in August 1999, and (ii) the private placement of UTTC(TM)'s Series TK
Convertible Preferred Stock for gross proceeds of $2,000,000 in June 1999. (see
"Notes to Unaudited Consolidated Financial Statements - Certain Transactions").

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 Unaudited Consolidated Financial Statements - Stockholders'
Equity"). During the nine

                                       17
<PAGE>

months ended December 31, 1999, the Company drew down $5,750,000 under the
agreement, reaching the aggregate commitment of $18,000,000.

Gomez has historically generated substantially all of the Company's revenues. As
of December 30, 1999, the Company began accounting for its remaining investment
in Gomez under the equity method of accounting rather than the consolidation
method. As a result, the Company's projected revenues will decrease materially
during the quarter ended March 31, 2000. The revenues reported for the nine
months ended December 31, 1999 will constitute virtually all of the Company's
revenues for the year ended March 31, 2000.

The Company's future revenues will be dependent upon the Company's ability to
deploy its eVWAP(TM) trading system and customer utilization of the eVWAP(TM)
trading system. The Company believes, on a forward-looking basis, it will begin
to generate more significant revenues during its fiscal year ending March 31,
2001. The level and timing of such revenue is dependent upon, among other
factors, the Company's assumptions regarding (i) the rollout of the eVWAP(TM)
trading system implementation; (ii) the trading volume experienced by the
eVWAP(TM) trading system; and (iii) the pricing the Company is able to obtain
for eVWAP(TM) trade execution. Until adequate revenue is derived from the
eVWAP(TM) trading system, the Company's cash and cash equivalents, investments
and cash flow from operations will be sufficient to meet the presently
anticipated cash requirements of the Company for a period of approximately
twenty-four months.

The Company's future capital requirements will depend on many factors, including
the timing for the implementation of the next phases of the eVWAP(TM) trading
system, 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 continued delays in expanding the eVWAP(TM), or
(iii) the Company fails to successfully develop markets for its products. The
Company and its subsidiaries will also require additional financing to fund
development of its products and launch the Canadian and Asian joint ventures.
Such financing may be raised through spin-offs, additional equity offerings,
borrowings, or other collaborative relationships, which may require Ashton to
share ownership of its subsidiaries, joint ventures, and/or revenue from
products and services. There can be no assurance that additional equity or debt
financing, if required, will be available on acceptable terms or at all.


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 problems 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. To date, the Company's products, computing and
communications infrastructure systems have operated without Y2K related
problems, and appear to be Y2K ready. The Company is not aware that any of its
major customers, business partners or third-party vendors have experienced
significant Y2K related problems. Y2K experts have warned, however, that
potential problems may arise after January 1, 2000, therefore, the Company is
continuing to monitor for Y2K related problems. Although the Company believes
all its critical systems are Y2K ready, there is no guarantee that the Company
has discovered all possible failure points. Specific factors contributing to
this uncertainty include failure to identify all systems, non-ready third
parties whose systems and operations impact the Company, and other similar
uncertainties.

Costs. To date, the Company estimates it has spent less than $50,000 related to
Y2K preparation. However, the costs incurred to address this issue could become
material if the Company identifies non-compliant systems and

                                       18
<PAGE>

third-party technology which must be replaced or modified, or if the Company
identifies any other problems throughout 2000 related to the Y2K issue which
must be addressed.

Risks. The Company has encountered delays in deploying its eVWAP(TM) trading
system with potential users and business partners as a result of Y2K. This
situation has, in some instances, been referred to as the "Y2K lockout". The Y2K
lockout involves organizations "locking down" their existing systems and
refusing to introduce new systems, hardware, or technology into operation during
the millennium transition period. During the lockout phase, organizations are
not introducing any new technology enhancements, products or services, and are
deploying technical resources to the remediation and testing phases of their Y2K
plans and the preparation for post-Y2K lockout activities. Many organizations
have reported that their lockout periods extend until March 2000.

As a result of these lockouts the Company has encountered delays in deploying
its eVWAP(TM) with certain potential users and business partners.  Once the
lockout period is completed, the Company will need to work with its business
partners and potential users to accelerate the prioritization of the eVWAP(TM)
deployment by these organizations.

                                       19
<PAGE>

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.


                          PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

None.

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

None.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

Not applicable.

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

None.

ITEM 5.  OTHER INFORMATION

None.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K


     (A)  Exhibits

     3.15      Certificate of Designation for UTTC (TM) Series TK Convertible
               Preferred Stock
     4.4       Form of Stock Purchase K Warrants
     10.35     Stock Purchase Agreement between TK Holdings, Inc. and UTTC(TM)
               dated as of June 4, 1999
     10.36     Joint Venture Agreement by and between The Ashton Technology
               Group, Inc. and Kingsway Electronic Services, Ltd. dated as of
               December 16, 1999
     10.37     Unanimous Shareholder Agreement between The Ashton Technology
               Group, Inc., 3690822 Canada, Inc. and Ashton Technology Canada,
               Inc. dated as of December 20, 1999
     10.38     Amended Stockholders Agreement of Gomez Advisors, Inc. dated as
               of December 30, 1999
     10.39     Tax Allocation Agreement by and among The Ashton Technology
               Group, Inc. and UTTC(TM) dated as of October 27, 1999
     10.40     Management Services Agreement between The Ashton Technology
               Group, Inc. and UTTC(TM) dated as of October 27, 1999
     27        Financial Data Schedule

     (B)  Reports on Form 8-K

     None

                                       20
<PAGE>

                                  SIGNATURES

In accordance with the requirements of the Securities Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.


                                        The Ashton Technology Group, Inc.
                                        ----------------------------------
                                                (Registrant)


Date: February 11, 2000                 By: /s/ Arthur J. Bacci
      -----------------------------     ---------------------------------
      _____________________________          Arthur J. Bacci
                                             President and
                                             Chief Financial Officer

                                       21