<PAGE>
 
                                AMENDMENT NO. 2

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D. C. 20549

                                    FORM 10-QSB

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

For the Fiscal Quarter Ended                              Commission File Number
      December 31, 1997                                            1-11747

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


      Delaware                                          22-6650372
(State of Incorporation)                 (I.R.S. Employer Identification Number)


              1900 Market Street, Suite 701, Philadelphia, PA 19103
                    (Address of principal executive offices)

          Issuer's telephone number, including area code: 215-751-1900

                 (Former name, former address and former fiscal
                       year if changed since last report)

Number of shares of common stock outstanding on December 31, 1997:     7,562,500

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 
                                       -----     ----- 
<PAGE>
 
                       THE ASHTON TECHNOLOGY GROUP, INC.

                    INDEX - AMENDMENT NO. 2 TO FORM 10-QSB

                               December 31, 1997

<TABLE>
<CAPTION>
Part I - Financial Information                                                                  Page
------------------------------                                                                  ----
<S>                                                                                            <C>
Item 1.  Financial Statements
 
         Consolidated Balance Sheets as of December 31, 1997 and March 31, 1997...............     3
 
         Consolidated Statements of Operations -
         For the Three and Nine Months Ended December 31, 1997 and 1996.......................     4
 
         Consolidated Statements of Cash Flows -
         For the Nine Months Ended December 31, 1997 and 1996.................................     5

         Notes to Unaudited Consolidated Financial Statements.................................     6

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

Signatures....................................................................................     11
</TABLE> 
 

                                      -2-
<PAGE>
 
                        PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

              The Ashton Technology Group, Inc. and Subsidiaries

                          Consolidated Balance Sheets

                  As of December 31, 1997 and March 31, 1997
<TABLE>
<CAPTION>
 
                                               December 31,    March 31,
                                                   1997           1997
                                               ------------   -----------
                                                (UNAUDITED)    (AUDITED)
<S>                                            <C>            <C>
     ASSETS
Current Assets:
 Cash and cash equivalents                     $    853,383   $    60,841
 Contracts receivable, net of allowance for
  doubtful accounts                                  36,843     1,483,163
 Notes receivable                                   100,009            --
 Prepayments and other current assets               424,025        98,903
------------                                   ------------   -----------   
 Total Current Assets                             1,414,260     1,642,907
Property and equipment, net                         711,305     1,041,449
Note receivable - long term                         486,090            --
Private placement costs                             700,818            --
Development costs                                   365,640            --
Investment in ECOM, Inc.                            105,000            --
Goodwill, net                                            --       575,581
Other assets                                         67,605       106,693
------------                                   ------------   -----------
 Total Assets                                  $  3,850,718   $ 3,366,630
                                               ============   ===========
 
    LIABILITIES AND STOCKHOLDERS' EQUITY
 
Current Liabilities:
 Accounts payable and accrued expenses         $    994,663   $ 1,937,752
 Billings in excess of costs                             --        52,722
------------                                   ------------   ----------- 
Total current liabilities                           994,663     1,990,474
Long-term debt                                       38,000        13,000
------------                                   ------------   ----------- 
Total liabilities                                 1,032,663     2,003,474
------------                                   ------------   ----------- 
Minority Interest                                        --       300,279
------------                                   ------------   -----------
Commitments and contingencies
Stockholders' Equity:
 Preferred stock - $.01 par value                     5,485            --
 Common stock - $.01 par value                       75,625        75,625
Additional paid-in capital                       16,670,129    10,482,197
Accumulated deficit                             (13,933,184)   (9,494,945)
------------                                   -----------    -----------
Total stockholders' equity                        2,818,055     1,062,877
------------                                   ------------   ----------- 
Total Liabilities and
   Stockholders' Equity                        $  3,850,718   $ 3,366,630
                                               ============   ===========
</TABLE>

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

                                      -3-
<PAGE>
 
               The Ashton Technology Group, Inc. and Subsidiaries

                      Consolidated Statements of Operations
 
        For the Three and Nine Months Ended December 31, 1997 and 1996
                                  (Unaudited)
 
<TABLE>
<CAPTION>
                                                                         Three Months Ended          Nine Months Ended
                                                                             December 31,               December 31,
                                                                      ------------------------    -------------------------
                                                                         1997          1996          1997          1996
                                                                      ----------    ----------    ----------    -----------
<S>                                                                   <C>           <C>           <C>           <C>
Revenues                                                              $   505,310   $ 1,144,977   $ 3,340,367   $ 3,426,992
                                                                      -----------   -----------   -----------   -----------
Costs and expenses:
  Cost of revenues                                                        431,233       827,121     2,620,896    2,355,816
  Development costs                                                       103,018       668,518       306,693    2,643,462
  Selling, general and administrative expenses                            892,930       695,432     2,813,757    2,331,783
  Depreciation and amortization                                           120,880       120,384       364,834      361,152
                                                                      -----------   -----------   -----------   -----------
Total costs and expenses                                                1,548,061     2,311,455     6,106,180     7,692,213
                                                                      -----------   -----------   -----------   -----------
Loss from operations                                                   (1,042,751)   (1,166,478)   (2,765,813)   (4,265,221)
 
Other costs and revenues:
  Cost of corporate restructuring                                              --      (702,678)           --      (702,678)
  Interest income (expense), net                                          (55,043)       15,105      (142,070)      113,865

  Loss on sale of subsidiary                                             (385,930)          --       (385,930)          -- 
  Private placement costs                                                 (55,003)          --       (165,005)          -- 
  Minority interest in earnings of subsidiary                              10,223       (37,085)      (11,464)     (118,153)
                                                                      -----------   -----------   -----------   -----------
Loss before provision for
 income taxes                                                          (1,528,504)   (1,891,136)   (3,470,282)   (4,972,187)
Provision for income taxes                                                 27,749       155,800        41,775       227,300
                                                                      -----------   -----------   -----------   -----------
Net loss                                                              ($1,556,253)   $(2,046,936)  $(3,512,057) $(5,199,487)
                                                                     ============   ===========   ===========   ===========

Net loss per common share                                            $       (.33)* $      (.27)  $      (.59)* $      (.73)
                                                                     ============   ===========   ===========   ===========
 
Weighted average number of
 common shares outstanding                                              7,562,500     7,562,500     7,562,500     7,150,416 
                                                                     ============   ===========   ===========   ===========

 
* See Description of Business and Basis of Presentation paragraphs 5, 6 and 7.
Also See Exhibit 11, Computation of Earnings per Share.

</TABLE>

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

                                      -4-
<PAGE>
 
              The Ashton Technology Group, Inc. and Subsidiaries

                     Consolidated Statements of Cash Flows
 
             For the Nine Months Ended December 31, 1997 and 1996
                                  (Unaudited)
 
<TABLE>
<CAPTION>
                                                                      Nine Months Ended
                                                                         December 31,
                                                                ----------------------------
                                                                    1997            1996
                                                                ------------    ------------
<S>                                                            <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss                                                        ($ 3,512,057)   ($ 5,199,487)
Adjustments to reconcile net loss to net cash used
 by operating activities, net of acquired business in 1996:
   Depreciation and amortization                                     554,081         253,827
    Increase in minority interest of subsidiary                       11,464              --
    Loss on sale of subsidiary                                       385,930              --
Changes in operating asset and liabilities
    Increase in contracts receivable, net                            (36,843)       (229,469)
    Increase in prepayments and other assets                        (273,568)       (236,094)
    Decrease in accounts payable and accrued expenses               (464,036)       (250,440)
    Increase in billings in excess of costs                               --         194,043
                                                                ------------    ------------
Net cash used by operating activities                             (3,335,029)     (5,467,620)
                                                                ------------    ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
 Note receivable - sale of subsidiary                               (586,099)             --
 Purchase of fixed assets                                           (121,797)     (1,012,917)
 Cash received from sale of subsidiary                               600,000              --
 Cash paid for acquisition of CSI(R), net of cash acquired                --        (512,012)
 Investment in ECOM, Inc.                                           (105,000)             --
 Increase in minority interest                                            --         118,153
 Development costs                                                  (365,640)             --
 Adjustment of net cash for subsidiary sold                          (45,448)             --
                                                                ------------    ------------
  Net cash used in investing activities                             (623,984)     (1,406,776)
                                                                ------------    ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
 Issuance costs for private placement                               (702,997)         (1,960)
 Issuance costs for initial public offering                               --        (282,001)
 Proceeds from initial public offering                                    --      10,394,709
 Proceeds from notes payable                                              --         250,000
 Proceeds from private placement                                   5,500,000              --
 Payment of notes payable                                                 --      (2,101,341)
                                                                ------------    ------------
Net cash provided by financing activities                          4,797,003       8,259,407
                                                                ------------    ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS                            837,990       1,385,011
Cash and cash equivalents, beginning of period                        15,393          31,021
                                                                ------------    ------------
Cash and cash equivalents, end of period                       $     853,383   $   1,416,032
                                                               =============   =============
</TABLE>

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

                                      -5-
<PAGE>
 
THE ASHTON TECHNOLOGY GROUP, INC. AND SUBSIDIARIES NOTES TO
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1.   DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
 
     The accompanying unaudited consolidated financial statements for the nine
     months ended December 31, 1997 include the accounts of The Ashton
     Technology Group, Inc. ("Ashton") and its subsidiaries, Universal Trading
     Technologies Corporation ("UTTC(TM)"), and Gomez Advisors, Inc. ("Gomez").
     Ashton, together with UTTC(TM) and Gomez, is the "Company".
 
     The Company's subsidiary, Computer Science Innovations, Inc. ("CSI(R)"),
     was sold on November 6, 1997 (see "Sale of Subsidiary" below). The
     financial statements for the nine months ended December 31, 1997 include
     CSI(R) until it was sold. The financial statements for the year ended March
     31, 1997 include CSI(R), but did not include Gomez, which was formed by
     Ashton as a wholly owned subsidiary on May 22, 1997.
 
     As originally filed in the Company's Form 10-QSB for the quarter ended
     December 31, 1997, the Company reflected a gain on the sale of CSI(R) of
     $102,000. The reason for reporting the gain on sale in this manner results
     from the Company's accounting for its portion of CSI(R)'s prior years
     earnings as an adjustment to additional paid-in capital instead of as an
     increase in its investment in CSI(R). Had the Company accounted for this
     increase in investment, the sale of CSI(R) would have resulted in a loss of
     approximately $386,000 instead of a gain of $102,000. The adjustment of
     $488,000 had the effect of increasing the Company's net loss from
     $1,068,331 to $1,556,253 for the three-month period ended December 31, 1997
     and increasing the Company's net loss from $3,024,135 to $3,512,057 for the
     nine-month period ended December 31, 1997.
 
     A corresponding error was also made. As mentioned above, the loss was
     charged to additional paid-in capital when it should have been charged to
     operations. The revised reporting of this transaction had no effect on cash
     or working capital and did not produce a change in stockholders' equity.
 
     In addition, the Company is amending its financial statements to reflect
     the accounting of the "beneficial conversion feature" of its Series A
     Convertible PIK Preferred Stock ("Series A Preferred"), in accordance with
     Topic D-60 described below. Financial Accounting Standard Board Emerging
     Issues Task Force Topic No. D-60 ("Topic D-60") addresses the position of
     the accounting staff of the Securities and Exchange Commission ("SEC")
     regarding conversion features of convertible preferred stock and
     convertible debt securities that are "in the money" upon issuance, i.e. the
     conversion price is below the market price for the common stock. At the
     time of issuance, the conversion rate for the Series A Preferred of $1.00
     per share was below the market price. Thus, the Series A Preferred contains
     a "beneficial conversion feature" within the meaning of Topic D-60.

     According to Topic D-60, an issuer of an equity security containing such a
     "beneficial conversion feature" must allocate to additional paid-in capital
     an amount equal to the intrinsic value of such conversion feature. The
     discount resulting from the allocation of proceeds to the "beneficial
     conversion feature" is analogous to a dividend and should be recognized as
     a return to the preferred stockholders over the minimum period in which the
     preferred stockholders can realize that return.
 
     The net effect of the adjustment made to conform to topic D-60 is an
     increase to previously reported additional paid-in capital and accumulated
     deficit as of December 31, 1997 of approximately $926,000. In addition, the
     effect on loss per common share as previously reported was an increase of
     $0.12 and $0.13 for the three months ended December 31, 1997, respectively.
     The adjustment had no effect on total stockholders' equity.

                                      -6-
<PAGE>
 
     The accompanying unaudited consolidated financial statements have been
     prepared by the Company in accordance with generally accepted accounting
     principles for interim financial statements and in accordance with the
     instructions for Form 10-QSB. Accordingly, they do not contain all of the
     information and footnotes required by generally accepted accounting
     principles for complete financial statements. In the opinion of management,
     the accompanying unaudited consolidated financial statements have been
     prepared on the same basis as the audited statements and include all
     adjustments, consisting only of normal recurring adjustments, which are
     necessary for a fair statement of the results of the interim periods
     presented. These financial statements should be read in conjunction with
     the footnotes contained in the Company's 10-KSB for the fiscal year ended
     March 31, 1997.
 
     The preparation of interim 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 interim statements; and the reported amounts of revenues and
     expenses during the reporting period. Actual results could differ from
     those estimates.
 
2.   SALE OF SUBSIDIARY
 
     On November 6, 1997, Ashton 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 $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. The Company recognized an
     accounting loss of $385,930; however, on a cash basis, the Company actually
     realized a gain on the sale of $101,992. (See the third paragraph above.)
     In addition, the Company received cash in the amount of approximately
     $340,000 due to a Tax Allocation Agreement.
 
3.   PREPAYMENTS AND OTHER CURRENT ASSETS
 
     Included in prepayments are $413,980 of legal costs incurred by the Company
     in connection with a lawsuit with one stockholder. The Company has
     submitted a claim in the amount of $413,980 to its insurance carrier. To
     the extent such costs are not recoverable from the Company's insurance
     carrier, Fredric W. Rittereiser, Chief Executive Officer of Ashton and The
     Dover Group, Inc., a stockholder of Ashton, has agreed to pay such costs.


FORWARD-LOOKING STATEMENTS
 
     Certain statements in this Form 10-QSB constitute "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, Section 21E of the Securities Exchange Act of 1934, as amended, 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: general
economic and business conditions; industry trends; competition; material costs;
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 and other factors referenced in this
Form 10-QSB. Such forward-looking statements speak only as of the date of this
Form 10-QSB. 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.

                                      -7-
<PAGE>
 
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF
      FINANCIAL CONDITION AND RESULTS OF OPERATIONS

      NINE MONTHS OF FISCAL 1998 COMPARED TO NINE MONTHS OF FISCAL 1997.
 
For fiscal 1997, all of the Company's revenues, and the related "cost of
revenues," were generated by CSI(R) which was sold on November 6, 1997 (see Note
2 to the Financial Statements), and for fiscal 1998, all but $159,750 of
revenues were generated by CSI(R). The sale of CSI(R) has resulted in
substantially lower revenues from continuing operations. Until the SEC approves
the Philadelphia Stock Exchange's ("PHLX") proposed Rule 237 (see "Rule Change"
below) and the Company's Universal Trading System ("UTS(TM)"), and its module,
the volume weighted average price ("VWAP(TM)") trading system ("VTS(TM)") become
operational, the Company will not be able to generate significant revenues.
 
On a consolidated basis, the Company had revenues of $3,340,367 for the nine
months ended December 31, 1997 compared to revenues of $3,426,992 for the nine
months ended December 31, 1996.
 
During the nine months ended December 31, 1997, the Company incurred a net loss
of $3,512,057 as compared to the nine months ended December 31, 1996, in which
the Company incurred a net loss of $5,199,487.
 
Development Costs
 
During the nine months ended December 31, 1997, the Company incurred $672,333 of
development costs of which $306,693 was expensed and $365,640 was capitalized.
For the nine months ended December 31, 1996, the Company incurred development
costs of $2,643,462 which was expensed. The December 31, 1996 development costs
included $1,618,592 for the Ashton Technology Encryption Device ("ATED") and its
associated cryptoserver. The December 31, 1997 development costs were for
enhancements to the VTS(TM) trading system and the design of future
transactional products.

Rule Change
 
On April 8, 1997, the Company announced that UTTC(TM) had completed development
of its VTS(TM). Under generally accepted accounting principles, the Company
expenses development costs until the system is ready for commercial use and
thereafter capitalizes any additional development costs. Although the VTS(TM)
trading system has been operationally ready since April of 1997, trading on the
system cannot begin until the SEC approves Rule 237 proposed by the PHLX. An
amendment to the proposed rule, reflecting enhancements made to the system since
the SEC first published the proposed rule in the Federal Register on September
4, 1996, was submitted by the PHLX to the SEC on October 28, 1997. The SEC
approved re-publishing the proposed rule and amendments in the Federal Register
on December 22, 1997, and the proposed rule and amendments were published in the
Federal Register on December 31, 1997. The notification period will be a minimum
of 35 days and a maximum of 90 days after publication. There can be no assurance
that Rule 237 will be approved or that, if the SEC approves Rule 237, the
Company will be able to generate positive net revenues.
 
Capital Equipment
 
During the nine months ended December 31, 1997, the Company spent $121,797 for
the acquisition of equipment, as compared to $1,012,917 for the nine months
ended December 31, 1996. The reason capital equipment expenditures during the
nine months ended December 31, 1996 were substantially greater than in the
period ended December 31, 1997 was because the primary computers required for
the VTS(TM) trading system were purchased  during the nine months ended December
31, 1996. Given the rapid  advancements in computer  technology,  the Company is
continually upgrading its systems.

                                      -8-
<PAGE>
 
Selling, General and Administrative Expenses

During the nine months ended December 31, 1997, the Company incurred $2,813,757
of Selling, General, and Administrative ("SG&A") expenses, as compared to
$2,331,783 for the nine months ended December 31, 1996. On a per company basis,
SG&A costs were $1,591,230 for Ashton, $494,808 for UTTC(TM), $433,083 for
CSI(R), and $294,636 for Gomez. The increase in SG&A expenses is due to the
formation and operation of the new wholly owned subsidiary Gomez (which was
formed in May 1997) and to higher legal costs incurred in connection  with the
Rosensaft lawsuit, regulatory and listing issues. See "Legal Proceedings."

Liquidity
 
On December 31, 1997, the Company had cash and cash equivalents of $853,383. For
a description of an improvement in the Company's liquidity since that date, see
"Subsequent Events" below.
 
On September 18, 1997 the Company commenced a private offer and exchange offer
pursuant to which it offered to certain investors (i) up to 250,000 shares of
its Series A Preferred (with a liquidation preference of $10.00 per share); (ii)
up to 250,000 shares of its Series B Convertible Preferred Stock (with a
liquidation preference of $10.00 per share) ("Series B Preferred"); and (iii) 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 (the "UTTC(TM)
Notes") issued by UTTC(TM). The Series A Preferred pays cumulative dividends
semi-annually at an annual rate of $0.50 per share and is payable in additional
shares of Series A Preferred until February 15, 2000. At any time after February
15, 1998, each holder of shares of Series A Preferred will have the right to
convert each share of Series A Preferred into: (i) ten shares of the Common
Stock, par value $0.01 per share, of Ashton (the "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. At any time after
June 30, 1998, each holder of shares of Series B Preferred will have 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.
 
As of December 31, 1997, the Company had received signed Subscription Agreements
for all of the shares of the Series A Preferred offered (250,000 shares) and
5,000 of the shares of Series B Preferred offered. This Series A transaction was
closed on January 15, 1998.
 
As of December 31, 1997, the Company had received signed Subscription Agreements
for the tender of $2,975,000 of UTTC(TM) Notes for which the Company issued
297,500 shares of Series B Preferred. This Exchange transaction was closed
on January 15, 1998.
 
The Company extended its private offer to institutional and accredited investors
of Series B Preferred until May 15, 1998. Such offering of Series B Preferred
will not be registered under the Securities Act of 1933, as amended, and may not
be offered or sold in the United States absent registration thereunder or an
applicable exemption from the registration requirements thereunder.

                                      -9-
<PAGE>
 
If and when the SEC approves the PHLX's proposed Rule 237 (see "Rule Change",
above), the Company expects to be able to commence the operation of its VTS(TM)
system with the PHLX within a month thereafter.
 
In addition to the $1,000,000 which the Company raised on January 27, 1998 (see
"Subsequent Events" below), the Company expects to raise additional capital from
future private placements and/or other sources by the end of March 1998. There
can be no assurances, however, that the Company will be able to raise capital on
a timely basis or on terms acceptable to the Company, if at all.
 
There can be no assurance that the Company's actual cash requirements will not
exceed its anticipated cash requirements or that additional cash requirements or
additional financing will not be required. The Company may require additional
funds to provide working capital and to sustain its operations until it
generates positive cash flow from its operations.
 
Subsequent Events
 
On January 27, 1998, the Company completed the sale of 100,000 shares of the
Series C Convertible Preferred Stock (the "Series C Preferred"), to a group of
foreign investors (the "Investors"), with a liquidation preference of $10.00 per
share for an aggregate purchase price of $1,000,000. Holders of each share of
the Series C Preferred will have the right to convert each share of Series C
Preferred into one share of Common Stock at the conversion price which shall be
equal to the following: (i) if the Market Price (as hereinafter defined) on the
Conversion Date (as hereinafter defined) is less than $1.8774, the conversion
price is equal to the lesser of 75% of the Market Price at the Conversion Date
or $1.2516; or (ii) if the Market Price at the Conversion Date is equal to or
greater than $1.8774, the conversion price is equal to $1.2516 plus 50% of the
difference between the Market Price at the Conversion Date and $1.8774. The
"Market Price" shall mean the average of the closing bid prices per share of the
Common Stock over the five consecutive trading days ending on the trading day
immediately preceding the date the holder elects to have the shares of Series C
Preferred converted (the "Conversion Date"). In addition, the Investors will
receive warrants exercisable into an aggregate of 100,000 shares of Common Stock
at an exercise price of 105% of the Market Price for a period of 5 years. In
connection with the sale, the Company has agreed to pay a placement fee to the
placement agent of $50,000 and to transfer to it 5,000 shares of the Series C
Preferred and a warrant to purchase 100,000 shares of Common Stock at an
exercise price of 105% of the Market Price for a period of 5 years. The Company
has used a substantial portion of the $1,000,000 to reduce its accounts payable
and accrued expenses.

                                      -10-
<PAGE>
 
                                  SIGNATURES

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


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


Date: August 6, 1998                       By: /s/ Robert A. Eprile
                                               --------------------------------
                                                    Chairman     
                                                    
                                      -11-