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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

For the period ended June 30, 2004

OR

For the transition period from              to             

Commission File Number: 001-11747

VIE FINANCIAL GROUP, INC.

1114 AVENUE OF THE AMERICAS, 22^ND FLOOR

NEW YORK, NEW YORK 10036

(212) 575-8200

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  ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined by Exchange Act Rule 12b-2)    Yes  ¨    No  x

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:

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VIE FINANCIAL GROUP, INC.

INDEX

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PART I - FINANCIAL INFORMATION

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Certain statements included in this document 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 our actual results, performance, or achievements 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:

In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “could,” “would,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “projects,” “predicts,” “potential” or “continue” or other forms of or the negative of those terms or other comparable terms.

Although we believe that the expectations reflected in the forward-looking statements are based on reasonable assumptions, we cannot guarantee future results, levels of activity, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of such statements. We do not have a duty to update any of the forward-looking statements after the date of this filing.

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ITEM 1. FINANCIAL STATEMENTS

VIE FINANCIAL GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

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

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VIE FINANCIAL GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

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

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VIE FINANCIAL GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

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

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VIE FINANCIAL 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 SEC. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America 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 accounting principles generally accepted in the United States of America requires us 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 our Annual Report on Form 10-K for the year ended March 31, 2004. The results for the three months ended June 30, 2004 are not necessarily indicative of the results that may be expected for the year ending March 31, 2005.

Our principal stockholders are SOFTBANK Capital Partners LP, SOFTBANK Capital Advisors Fund LP and SOFTBANK Capital LP, each a Delaware limited partnership (SOFTBANK), Draper Fisher Jurvetson ePlanet Ventures L.P., a Cayman Islands limited partnership, Draper Fisher Jurvetson ePlanet Partners Fund, LLC, a California limited liability company, and Draper Fisher Jurvetson ePlanet Ventures GmbH & Co. KG, a German partnership (DFJ ePlanet), and OptiMark Innovations, Inc. a Delaware corporation (Innovations). SOFTBANK and DFJ ePlanet are entitled to 40% and 21%, respectively, of the aggregate voting rights with respect to all classes of our outstanding common and preferred voting stock. SOFTBANK and DFJ ePlanet are also investors in Innovations, which controls approximately 26% of the aggregate voting rights with respect to all classes of our common and preferred voting stock. Pursuant to an Investors’ Rights Agreement, Innovations has the right to approve certain significant corporate matters such as (i) the issuance of additional shares of common stock; (ii) the repurchase or redemption of our securities; (iii) a merger, consolidation, or sale of substantially all of our assets; or (iv) our involvement in any business other than our current line of business.

Since our inception, we have recognized recurring operating losses and have financed our operations primarily through the issuance of debt and equity securities. As of June 30, 2004, we had an accumulated deficit of $116,924,901 and stockholders’ deficiency of $6,126,908, which raises substantial doubt as to our ability to continue as a going concern. We are actively exploring alternative sources of capital, including additional financing arrangements and strategic relationships with other firms. If we are unable to accomplish either of these objectives or generate sufficient cash flows from operations to fund our business within the next two to three months, we will be unable to continue operating as an independent entity. There is no assurance that we will be successful in accomplishing these objectives, nor can we predict the terms or the impact on existing holders of our common stock of any potential financing or strategic transaction.

The consolidated financial statements have been prepared assuming that we will continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

The accounts of each of our majority-owned subsidiaries, Vie Securities, UTTC, and Ashton Technology Canada, Inc., are consolidated with those of Vie Financial Group in our consolidated financial statements. All significant intercompany accounts and transactions between Vie Financial Group and its subsidiaries are eliminated in consolidation.

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Other Affiliates

Ashton Technology Canada, Inc.

Ashton Technology Canada, Inc. is one of our majority-owned subsidiaries. On December 20, 1999, we entered into an agreement to create Ashton Canada to develop, market and operate intelligent matching, online transaction systems and distribution systems for use by U.S. and Canadian financial intermediaries. On June 8, 2000, Ashton Canada entered into an agreement with the Toronto Stock Exchange to market, deploy, and operate our proprietary eVWAP, as a facility of the Toronto Stock Exchange for Canadian securities. On January 12, 2001, the Ontario Securities Commission approved an amendment to the Rules and Policies of the Toronto Stock Exchange, allowing the implementation of eVWAP as a facility of the Toronto Stock Exchange and allowing participating organizations and eligible institutional clients access to the eVWAP facility. The Toronto Stock Exchange deferred implementing eVWAP in 2002, and Ashton Canada reduced its expenses and staffing to address the reduced prospects for near-term revenues from such a facility.

On June 11, 2003, Ashton Canada filed an arbitration claim against the Toronto Stock Exchange for breach of contract under the June 7, 2000 agreement to introduce the eVWAP trading system. The arbitration claim states that Ashton Canada designed, developed and was prepared to deploy eVWAP as a facility of the primary Canadian exchange when the Toronto Stock Exchange circumvented the deployment of eVWAP without proper excuse. The Ashton Canada arbitration claim was filed in Toronto, Ontario and seeks substantial damages. On August 22, 2003, the Toronto Stock Exchange filed a counterclaim against Ashton Canada seeking specific performance of the integration agreement, or in the alternative, a declaration that it is entitled to terminate the agreement without penalty. The arbitration case began in May 2004, and closing arguments were submitted to the arbitrator in June 2004. Ashton Canada is no longer operational, has no employees, and currently has the sole objective of focusing on the arbitration claim with the Toronto Stock Exchange.

Electronic Market Center, Inc. (Discontinued Operations)

We formed Electronic Market Center, Inc. (eMC) as a wholly-owned subsidiary in June 1998 to develop, operate and market a global electronic distribution channel for financial products and services. In April 2000, Vie’s board of directors agreed to fund eMC’s initial development efforts. After being unable to find other funding sources or consummate a sale of eMC to a third party, eMC’s board of directors voted on March 29, 2001 to begin the orderly winding down of its operations, including terminating all of its employees, selling its assets, and negotiating the settlement of its outstanding liabilities. eMC’s results are reflected as discontinued operations in the consolidated financial statements for all periods presented.

1. SIGNIFICANT ACCOUNTING POLICIES

Stock-Based Compensation

We use the intrinsic value-based method to account for stock options issued to employees and have adopted the disclosure-only alternative of SFAS No. 123 “Accounting for Stock-Based Compensation”, as amended by SFAS No. 148, “Accounting for Stock-Based Compensation”. We are required to disclose the pro forma effects on operating results as if we had elected to use the fair value approach to account for all our stock-based employee compensation plans.

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If compensation had been determined based on the fair value at the grant date for awards in the three month periods ended June 30, 2004 and 2003, respectively, consistent with the provisions of SFAS No. 123, our net loss and net loss per share would have been as follows:

Such pro forma disclosures may not be representative of future compensation costs because options vest over several years and additional grants are made each year.

The fair value of each option grant is estimated on the date of grant using the Black-Scholes valuation model with the following weighted average assumptions:

Recent Accounting Pronouncements

In December 2003, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 46 (Revised December 2003), Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51 (FIN 46R). This standard replaces FIN 46, Consolidation of Variable Interest Entities, which was issued in January 2003. FIN 46R modifies or clarifies various provisions of FIN 46. FIN 46R addresses the consolidation of business enterprises of variable interest entities, as defined by FIN 46R. FIN 46R exempts certain entities from its requirements and provides for special effective dates for entities that have fully or partially applied FIN 46 prior to issuance of FIN 46R. Otherwise, application of FIN 46R is required in financial statements of public entities that have interests in structures commonly referred to as special purpose entities for periods ending after December 15, 2003. FIN 46 had no effect on our financial statements for the period ended June 30, 2004, as we had no interests in special purpose entities. Application by us for all other types of variable interest entities is required in financial statements for periods ending no later than the quarter ended January 31, 2005. We do not expect the adoption of FIN 46R to have a material effect on our financial statements.

3. RECENT DEVELOPMENTS

Common Stock Reverse Split

On April 8, 2004, our stockholders voted to amend our certificate of incorporation to authorize a 1-for-100 reverse split of our common stock. We completed the reverse split on April 20, 2004. The purposes of the reverse stock split were to create a sufficient number of authorized but unissued shares of our common stock to permit the full conversion of the series H convertible preferred stock (series H preferred) and the conversion or exercise of all other existing convertible securities, for future issuances of common stock or convertible securities, and to reduce the number of outstanding shares of common stock to a number that is more comparable with the market capitalization of similar companies in our industry. As a result of rounding up fractional shares held by registered stockholders on the effective date of the reverse split, we issued an additional 96 shares of common stock. All common share and per share numbers in this document have been restated to reflect the reverse split.

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Series H Preferred Conversion

On September 30, 2003, we issued 35,000 shares of our series H preferred, par value $0.01, to SOFTBANK for gross proceeds of $3.5 million, and on October 9, 2003, we issued an additional 15,000 shares of our series H preferred to DFJ ePlanet for gross proceeds of $1.5 million. Further, in October 2003, we issued an additional 25,562 shares of our series H preferred to SOFTBANK and DFJ ePlanet upon their conversion of our subordinated convertible notes in the aggregate amount of $2,556,223 (see Note 5). On April 21, 2004, after the reverse stock split became effective and we had a sufficient number of available shares to issue to the series H preferred holders, we exercised our right to convert all of the shares of series H preferred into shares of common stock. We issued 9,370,115 shares to SOFTBANK and 4,809,324 shares to DFJ ePlanet upon conversion of the series H preferred.

Each share of series H preferred was convertible at our election at any time into such number of shares of common stock that is determined by dividing the series H preferred purchase price per share ($100) by the conversion price, or $0.5329 per share. The conversion price per share of the series H preferred was below the prevailing market prices of the underlying common stock on the dates of issuance. Therefore, we were recording the beneficial conversion feature of the series H preferred as a return to the preferred stockholders in accordance with EITF 98-5, Accounting for Convertible Securities with Beneficial Conversion Features or Contingency Adjustable Conversion Ratios. The beneficial conversion feature of the series H preferred, 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, and was limited to the amount of gross proceeds received in the transaction. The beneficial conversion feature on the series H preferred of $7,556,222 was being recognized as a dividend to the preferred stockholders over the period beginning on the dates of issuance and ending on September 30, 2004, the date the series H preferred holders would have had the right to convert the series H preferred into common stock. Upon the conversion of the series H preferred in April 2004, however, we recorded the entire remaining unrecognized beneficial conversion amount as a dividend. During the three months ended June 30, 2004, we recorded total dividends of $3,880,142 related to the series H beneficial conversion feature.

2002 Stock Option Plan

On June 15, 2004, our board of directors authorized an additional 3,590,957 shares of common stock to be reserved pursuant to the 2002 Stock Option Plan. Also on June 15, 2004, the board granted options to employees, directors and an outside advisor to the company to purchase an aggregate of 3,110,123 shares of common stock at an exercise price of $0.5329. We recorded a $34,248 non-cash compensation charge during the three months ended June 30, 2004 for the cost of 110,123 options granted to a third party.

4. RESTRUCTURING CHARGES AND RELATED LIABILITIES

During May 2003, we began implementing a plan to streamline our corporate organizational structure, reduce our operating expenses and reduce the cost of providing liquidity to our customers. Since then, we have made substantial progress by merging a number of our wholly-owned subsidiaries and consolidating our physical locations, resulting in ongoing operating cost reductions. Effective as of October 1, 2003, we consolidated our Philadelphia and New York offices by relocating our corporate headquarters and all operations to offices in the Grace Building, 1114 Avenue of the Americas, 22^nd Floor, New York, New York, which we have occupied since June 2002. On June 3, 2004, we completed an agreement to sublease our prior headquarters space at 1835 Market Street, Philadelphia, Pennsylvania. Additionally, in September 2003, we instituted salary reductions for executives and a majority of non-executive employees. We also reduced our headcount by 19% since June 30, 2003 to 30 employees at June 30, 2004.

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In connection with the restructuring, specifically as a result of the finalization of the sublease for our Philadelphia office, we recorded charges of $49,190 during the three months ended June 30, 2004. We also recorded charges of $1,352,406 during the fiscal year ended March 31, 2004 in connection with the restructuring, These charges included severance paid to terminated employees, a charge for our remaining lease obligations on the Philadelphia office location, and losses on the disposition and impairment of assets, including furniture and fixtures, computer equipment and our Philadelphia Stock Exchange memberships.

The activity in the restructuring liabilities during the three months ended June 20, 2004 is as follows:

The expected lease termination costs will be paid over the remaining lease term expiring in July 2010. In accordance with SFAS No. 146 “Accounting for Costs Associated with Exit or Disposal Activities”, we recorded the lease termination liability at its fair value, based on the present value of expected future cash flows, net of estimated sub-rental income.

5. SHORT-TERM AND LONG-TERM OBLIGATIONS

Investment by SOFTBANK and DFJ ePlanet – Subordinated Convertible Notes

On December 30, 2002, we entered into a loan agreement that provided $2.4 million in principal amount to us and required us to issue notes and warrants to the lenders. The loan agreement was executed by and between Vie, SOFTBANK and DFJ ePlanet. In accordance with the loan agreement, we issued SOFTBANK notes with an aggregate principal loan amount of $1.4 million, and issued notes to DFJ ePlanet with an aggregate principal loan amount of $1 million. Each lender’s note was due and payable on May 4, 2006 and accrued simple interest at 8% per annum.

We had the ability to prepay the loan at any time without penalty on 30 days prior written notice to the lenders. The lenders had the ability to convert all or any portion of the outstanding loan amount into shares of our common stock at an initial conversion price of $4.48 per share. The lenders also had the right to convert the outstanding principal amount and accrued and unpaid interest, in whole or in part, into securities of the same class as those issued and sold in any subsequent financing completed during the term of the loan. During October 2003, SOFTBANK and DFJ ePlanet each converted the outstanding principal balance and accrued interest on their notes, or $1,493,333 and $1,062,889, respectively, into 14,933 and 10,629 shares, respectively, of series H preferred.

In connection with the loan agreement, we also issued warrants to purchase 89,286 shares of common stock, which number is equal to $400,000 divided by the exercise price of the warrants. The exercise price of the warrants is initially $4.48 per share. The warrants will expire on December 30, 2005. We recorded the fair value of the warrants, or $342,857, as an initial discount on the notes. The unamortized balance of the discount of $265,971 was charged to interest expense upon conversion of the notes during the fiscal year ended March 31, 2004. We amortized $25,629 of the discount as interest expense and recorded interest expense of $48,000 at the contractual rate of 8% during the three months ended June 30, 2003.

Investment by OptiMark Innovations Inc. and Secured Convertible Note

On May 7, 2002, we closed the transactions contemplated by the securities purchase agreement with OptiMark Innovations dated as of February 4, 2002, and as amended. Pursuant to the purchase agreement, we issued 6,087,076 shares of common stock to Innovations in consideration for $7,272,727 in cash, and certain intellectual property and other non-cash assets. In addition, Innovations loaned us $2,727,273 in cash, evidenced by a senior secured convertible note in favor of Innovations. The note accrues interest at a rate of 7.5% per annum, matures in May 2007, and the principal and accrued interest is convertible at any time into shares of our common stock at a rate

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of $5.15838 per share, subject to customary anti-dilution adjustments. The note is secured by a pledge and security agreement pursuant to which Innovations received a blanket lien on our assets, subject to the terms and conditions of the intercreditor, subordination and standstill agreement by and among RGC International Investors, LDC, Innovations and us.

Since the Innovations note was convertible into shares of our common stock at a rate of $5.15838 per share, and the market price of our common stock was $17.00 per share on the date of the agreement, we recorded the beneficial conversion feature of the note in accordance with EITF 98-5, Accounting for Convertible Securities with Beneficial Conversion Features or Contingency Adjustable Conversion Ratios. We recorded the beneficial conversion feature as an initial discount of $2,727,273 on the note, and we amortized $136,364 as interest expense during each of the three-month periods ended June 30, 2004 and 2003. Also during each of the three-month periods ended June 30, 2004 and 2003, we accrued the contractual interest at a rate of 7.5%, or $51,136, on the Innovations note. The note is reflected on the consolidated balance sheets net of the unamortized discount plus accrued interest. At June 30, 2004, the remaining unamortized discount is $1,556,061, and the accrued interest is $214,807.

We paid Innovations interest of $20,000 on May 24, 2004 against the annual interest payment due on May 7, 2004 in the amount of $204,545. Innovations agreed to defer payment of the remaining interest payment until a later date. On June 18, 2003, Innovations elected to receive $50,000 in cash and to convert the remaining $154,545 into 29,962 shares of our common stock in full satisfaction of the $204,545 interest payment due to Innovations on May 7, 2003.

RGC Bridge Loan and Exchange Agreement – Secured Note

On April 11, 2002, we entered into a securities exchange agreement with RGC International Investors, LDC (RGC) pursuant to which RGC exchanged its 9% secured convertible note for a four-year, 7.5% non-convertible zero-coupon senior secured note in the principal amount of $4,751,876 and a five-year warrant to purchase 90,000 shares of our common stock at an exercise price of $4.48 per share, subject to customary anti-dilution adjustments. The exchange note is secured by a blanket, first priority lien on our assets (except for certain intellectual property assets received by us as consideration in the transaction with Innovations).

We recorded the fair value of the warrant, or $1,188,000, as an initial discount on the exchange note, and we amortized $74,250 as interest expense during each of the three-month periods ended June 30, 2004 and 2003. Also during each of the three-month periods ended June 30, 2004 and 2003, we recorded contractual interest of $89,098 on the note. The note is reflected on the consolidated balance sheets net of the unamortized discount plus accrued interest. At June 30, 2004, the remaining unamortized discount is $550,275, and the accrued interest is $765,508.

The exchange agreement allows us to redeem the exchange note at any time, in whole but not in part, for an amount equal to: 30% of the principal amount thereof plus all accrued and unpaid interest in year one; 53.3% of the principal amount thereof plus all accrued and unpaid interest in year two; 76.6% of the principal amount thereof plus all accrued and unpaid interest in year three; or 100% of the principal amount thereof plus all accrued and unpaid interest thereafter.

The warrant was immediately exercisable as to 22,500 shares of common stock, and becomes exercisable in quarterly installments of 22,500 shares each, beginning October 11, 2002. In addition, the warrant becomes immediately exercisable in full in the event of a change of control of Vie, as such term is defined in the warrant agreement. In no event, however, is RGC entitled to exercise and purchase shares of our common stock in excess of the number of shares of common stock that would result in RGC’s beneficially owning more than 4.9% of our outstanding shares of common stock. On April 15, 2003 and April 16, 2003, RGC exercised warrants to purchase 3,000 and 10,000 shares of our common stock, respectively. We issued an aggregate of 13,000 shares of our common stock and received proceeds of $58,240.

6. STOCKHOLDERS’ DEFICIENCY

Series G Convertible Preferred Stock

Between May 29, 2003 and August 11, 2003, we sold 12,013 shares of our series G convertible preferred stock, par value $0.01, to an individual investor and three separate investment partnerships for an aggregate of $1,201,346. The series G preferred, with respect to dividend rights or rights upon liquidation, ranks junior to all other series of preferred stock and pari passu with shares of our common stock.

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Each share of series G preferred is convertible at the option of the holder into such number of shares of common stock that is determined by dividing the series G preferred original issue price per share ($100) by the series G conversion price, which was initially $5.00. The series G conversion price was adjusted to $0.5329, in accordance with the terms of the amended series G preferred transaction documents, to reflect the same conversion price per share as the series H preferred issued to SOFTBANK on September 30, 2003. The conversion price is also subject to anti-dilution adjustment at any time in the event of stock dividends, stock splits, reverse stock splits, mergers, consolidations, recapitalizations or other similar transactions affecting the capitalization of the company. Assuming conversion in full of the shares of series G preferred at the current conversion price, we would be required to issue 2,254,356 shares of common stock to the series G investors.

Upon issuance and subsequent adjustment to the series G preferred conversion price, the conversion price was below the prevailing market price of the underlying common stock. Therefore, we recorded the beneficial conversion feature of the series G preferred as a return to the preferred stockholders in accordance with EITF 98-5, Accounting for Convertible Securities with Beneficial Conversion Features or Contingency Adjustable Conversion Ratios. The beneficial conversion feature of the preferred stock, represented by the intrinsic value, is calculated as the difference between the conversion price and the market price of the underlying common stock on the dates of issuance, multiplied by the number of shares to be issued upon conversion, and is limited to the amount of gross proceeds received in the transaction. During the three months ended June 30, 2003, a beneficial conversion feature of $247,873 was recognized as a dividend to the preferred stockholders upon issuance of the shares.

Investors in the series G preferred also received warrants to purchase an aggregate of 150,168 shares of our common stock at an exercise price of $8.00. The warrants have a three-year term and became fully exercisable six months after their dates of issuance.

Each share of series G preferred has such number of votes equal to the number of common shares then issuable upon conversion into common stock.

We will be required to file a registration statement, registering the shares issuable upon conversion of the series G preferred and exercise of the related warrants within thirty days after receiving a written request by the holder or holders of a majority of the shares.

7. RELATED PARTY TRANSACTIONS

Relationships with SOFTBANK and DFJ ePlanet

Relationship with SOFTBANK

On September 30, 2003, we issued 35,000 shares of our series H convertible preferred stock for an aggregate of $3.5 million to SOFTBANK Capital Partners LP, SOFTBANK Capital Advisors Fund LP and SOFTBANK Capital LP, each a Delaware limited partnership (SOFTBANK). Additionally, during October 2003, SOFTBANK converted the $1,493,333 of outstanding principal and accrued interest on their subordinated convertible notes into 14,933 shares of series H preferred.

On April 21, 2004, SOFTBANK converted all of its series H preferred into 9,370,115 shares of common stock. SOFTBANK is entitled to 40% of the aggregate voting rights with respect to all classes of our outstanding common and preferred voting stock. SOFTBANK also invests in Innovations, which controls 26% of the aggregate voting rights with respect to all classes of our common and preferred voting stock.

Ronald D. Fisher, the Chairman of our Board of Directors, is also a director of SOFTBANK Corporation, and is the Managing Member of the general partner in each of the SOFTBANK entities listed above that invested in our series H preferred. Directors designated by SOFTBANK, Innovations, these entities or their affiliates recused themselves from consideration of the series H preferred transaction. The series H preferred transaction was approved by a special committee of disinterested directors.

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Relationship with DFJ ePlanet

On October 9, 2003, we issued 15,000 shares of series H preferred for an aggregate of $1.5 million to Draper Fisher Jurvetson ePlanet Ventures L.P., a Cayman Islands limited partnership, Draper Fisher Jurvetson ePlanet Partners Fund, LLC, a California limited liability company, and Draper Fisher Jurvetson ePlanet Ventures GmbH & Co. KG, a German partnership (DFJ ePlanet), on the same terms as the series H preferred shares issued to SOFTBANK. Additionally, during October 2003, DFJ ePlanet converted the $1,062,889 of outstanding principal and accrued interest on their subordinated convertible notes into 10,629 shares of series H preferred.

On April 21, 2004, DFJ ePlanet converted all of its series H preferred into 4,809,324 shares of common stock. DFJ ePlanet is entitled to 21% of the aggregate voting rights with respect to all classes of our outstanding common and preferred voting stock. DFJ ePlanet also invests in Innovations, which controls 26% of the aggregate voting rights with respect to all classes of our common and preferred voting stock.

Series H Convertible Preferred Stock

On September 30, 2003, we issued 35,000 shares of series H preferred at a purchase price of $3.5 million to SOFTBANK. On October 9, 2003, we issued 15,000 shares of series H preferred for an aggregate of $1.5 million to DFJ ePlanet on the same terms as the series H preferred shares issued to SOFTBANK.

On April 21, 2004, after the reverse stock split became effective and we had a sufficient number of available shares to issue to the series H preferred holders, we exercised our right to convert all of the series H preferred shares into common stock. In connection with the 50,000 shares of series H preferred described above, we issued 6,567,836 shares of common stock to SOFTBANK and 2,814,787 shares of common stock to DFJ ePlanet upon the conversion (See Note 3).

Subordinated Convertible Notes

On December 30, 2002, we entered into a loan agreement that provided $2.4 million in principal amount to us and required us to issue subordinated convertible notes and warrants to purchase shares of our common stock. The loan agreement was executed by and between Vie, SOFTBANK and DFJ ePlanet (See Note 5).

On April 21, 2004, after the reverse stock split became effective and we had a sufficient number of available shares to issue to the series H preferred holders, we exercised our right to convert all of the shares of series H preferred into shares of common stock. In connection with the 25,562 shares of series H preferred that were issued upon conversion of the notes described above, we issued 2,802,279 shares of common stock to SOFTBANK and 1,994,537 shares of common stock to DFJ ePlanet upon the series H preferred conversion (See Note 3).

Relationship with Innovations

On May 7, 2002, we closed the transactions contemplated by the securities purchase agreement with Innovations dated as of February 4, 2002, as amended. Pursuant to the purchase agreement, we issued 6,087,076 shares of our common stock to Innovations in consideration for $7,272,727 in cash, certain intellectual property and other non-cash assets. In addition, Innovations loaned us $2,727,273 in cash, evidenced by a senior secured convertible note in favor of Innovations. The note accrues interest at a rate of 7.5% per annum, matures in May 2007, and the principal and accrued interest is convertible at any time into shares of our common stock at a rate of $5.15838 per share, subject to customary anti-dilution adjustments. The note is secured by a pledge and security agreement pursuant to which Innovations received a blanket lien on our assets, subject to the terms and conditions of the intercreditor, subordination and standstill agreement by and among RGC, Innovations and Vie Financial Group. We paid Innovations interest of $20,000 on May 24, 2004 against the annual interest payment due on May 7, 2004 in the amount of $204,545. Innovations agreed to defer payment of the remaining interest payment until a later date. On June 18, 2003, Innovations converted $154,545 of the first year interest payment due and outstanding as of May 7, 2003 into 29,962 shares of Vie common stock, and we paid the $50,000 balance of the interest payment in cash.

As of June 30, 2004, Innovations is entitled to 26% of the aggregate voting rights with respect to all classes of our outstanding common and preferred voting stock.

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In January 2003, we entered into a services agreement with OptiMark, Inc. whereby we provide office space and certain administrative and communications support personnel to OptiMark, Inc. As of June 30, 2004, OptiMark, Inc. owes us a balance of $32,519 under the services agreement.

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Investors’ Rights Agreement

On May 7, 2002, we also entered into an Investors’ Rights Agreement (the Rights Agreement) with Innovations. Pursuant to the Rights Agreement, Innovations acquired certain rights, including but not limited to: (i) preemptive rights to subscribe to future sales of our common stock, (ii) registration rights and (iii) the right to designate a number of directors to our board of directors proportionate to Innovations’ ownership of our common stock. In addition, so long as Innovations holds at least 20% of our common stock, we have agreed that we will not take certain actions without Innovations’ prior approval, including, among other things, (i) the issuance of additional common stock (with certain exceptions), (ii) the repurchase or redemption of our securities, (iii) a merger, consolidation or sale of substantially all of our assets or (iv) engaging in any business other than the business we currently engage in. So long as Innovations has the right to appoint at least one director, certain actions by our board of directors cannot be taken without the approval of at least one of the directors appointed by Innovations. Such actions include, among other things, making capital expenditures in excess of certain limits, acquisitions or sales of assets with a value in excess of $50,000 within any fiscal year, incurring debt in excess of $100,000 (with certain exceptions) and repurchasing or redeeming our securities.

Non-Competition Agreement

We executed a non-competition agreement with Innovations and Holdings upon the closing of the transaction. The parties currently do not compete. This agreement precludes Innovations, OptiMark, Holdings or any entity that they control from competing with us on a worldwide basis in designing, implementing or operating volume-weighted average pricing trading systems or related services in U.S. and Canadian securities for themselves or any third party. The agreement expires in May 2007.

8. NET LOSS PER SHARE

Net loss 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. The effect of potential common stock is not included in diluted earnings per share for the three- month periods ended June 30, 2004 and 2003 because we have incurred net losses; therefore, the effect of our dilutive securities is anti-dilutive in those periods.

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

Overview

Vie Financial Group, Inc. and its subsidiaries provide electronic trading services to institutional investors and broker-dealers. Our sophisticated proprietary trading algorithms and licensed trading technology enable us to deliver superior trade execution quality while considerably reducing information leakage. Our objective is to provide our clients with high-performance trading that is fast, efficient and nearly invisible to the market.

Our current product offering consists of various trade execution services that we provide through our broker-dealer subsidiary Vie Securities, LLC. We offer a suite of proprietary algorithms designed to minimize market impact, provide our customers an anonymous presence in the marketplace, and achieve various benchmarks including, but not limited to, the volume-weighted average price (VWAP).

During the three months ended June 30, 2004, our business continued to face difficult market conditions as a result of pricing pressure and lower levels of portfolio turnover in the U.S. equity markets. In addition, the competition from electronic trade execution providers and from traditional broker-dealers continued to increase. While market volatility remains historically low, large broker-dealers are aggressively competing for the portfolio trades that are a core component of our revenues. In this environment, however, we have managed to make substantial progress in acquiring new customers, expanding the trading products we offer, and increasing the number of shares traded on behalf of customers by 49%. Revenue per share, however, has decreased 43% in the first three months of the current fiscal year compared to the same period last year, and as a result, total revenues have decreased 12%. Despite the decrease in revenues, we recognized a 52% lower loss from operations, due primarily to the lower cost of providing some of our newer product offerings, the lower cost of providing liquidity on our guaranteed VWAP product, and improvements to our trading algorithms.

Despite these recent developments, we have recognized recurring operating losses since our inception and have financed our operations primarily through the issuance of debt and equity securities. As of June 30, 2004, we had an accumulated deficit of $116,924,901 and stockholders’ deficiency of $6,126,908, which raises doubt as to our ability to continue as a going concern. We are actively exploring alternative sources of capital, including additional financing arrangements and strategic relationships with other firms. If we are unable to accomplish either of these objectives or generate sufficient cash flows from operations to fund our business within the next two to three months, we will be unable to continue operating as an independent entity. There is no assurance that we will be successful in accomplishing these objectives, nor can we predict the terms or the impact on existing holders of our common stock of any potential financing or strategic transaction.

Critical Accounting Policies

Revenue Recognition

Revenues earned during each of the three-month periods ended June 30, 2004 and 2003 consist of commissions earned on a per share basis from our customers’ use of our trading services. Our products are offered directly through our subsidiary Vie Securities. Transactions in securities, including commission revenues and related expenses, are recorded on a trade-date basis.

Stock-Based Compensation

We have elected to apply APB Opinion No. 25 and related interpretations in accounting for stock options issued to employees. If we had elected to recognize compensation cost based on the fair value of the options granted to directors and employees at the grant date as prescribed by SFAS No. 123, our net loss for the three months ended June 30, 2004 would have been increased by $791,737.

Results of Operations

For the Three Months Ended June 30, 2004 Compared to the Three Months Ended June 30, 2003

We incurred a net loss from continuing operations totaling $1,508,273 for the three months ended June 30, 2004, compared to $2,893,232 for the three months ended June 30, 2003. The decrease in net loss from continuing operations before preferred stock dividends is a result of a $1,264,570 decrease in the loss from operations and an aggregate decrease in non-operating expenses of $120,389.

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Revenues for the three months ended June 30, 2004 decreased 12.3% to $1,951,705 from $2,225,360 for the three months ended June 30, 2003, primarily as a result of a decrease in the average commission rate per share, and despite an increase in the aggregate number of shares executed on behalf of customers. The increase in the number of shares traded is mainly a result of new customer acquisitions and additional product offerings, while the decrease in the average commission rate per share is mainly a result of industry-wide pricing pressure over the past year. We had two significant customers, defined as those customers contributing 10% or more of our total revenues, which generated approximately 11% and 12%, respectively, of the revenues during the three months ended June 30, 2004, while approximately 34%, 13% and 12%, respectively, of the revenues during the three months ended June 30, 2003, were from three customers.

Salaries and employee benefits decreased 24.2% to $973,479 for the three-month period ended June 30, 2004 from $1,283,408 for the three-month period ended June 30, 2003. The decrease is primarily due to salary reductions and a decrease in the number of employees. During the three-month periods ended June 30, 2004 and 2003, we employed an average of 29 and 37 employees, respectively, including those participating in the furlough programs during 2003. This decrease in the number of employees was part of our plan to reduce operating expenses, and was a result of our view that employee head count and related costs were too high in relation to the level of revenues that were being generated. We also paid $111,821 in sales commissions to employees during the three months ended June 30, 2004, compared to $12,000 in sales commissions recorded during the three months ended June 30, 2003. Our sales commission structure is based on gross profits for each account, which is generally calculated on a per trade basis as revenues less direct execution, clearing, settlement and related charges. The substantial increase in sales commissions paid to employees is due to higher gross profits as a result of lower costs in the current year period compared to the prior year period.

Professional fees increased 61.0% to $398,830 during the three months ended June 30, 2004 from $247,728 during the three months ended June 30, 2003. The increase was primarily a result of higher legal fees, partially offset by a decrease in accounting fees. We incurred $307,720 in legal expenses in the current period, compared to $164,475 in legal costs during the three months ended June 30, 2003. The increase in legal fees was a result of the Ashton Canada arbitration case with the Toronto Stock Exchange, which began in May 2004. The decrease in accounting fees was mainly a result of the consolidation of a number of our subsidiaries.

Brokerage, clearing and exchange fees decreased to $709,938 for the three months ended June 30, 2004 from $1,042,207 for the three months ended June 30, 2003. This decrease in transaction costs is despite the increase in shares executed on behalf of our customers during the three months ended June 30, 2004 as compared to the three months ended June 30, 2003. A significant component of brokerage, clearing and exchange fees are the rebates we pay to other parties to provide liquidity in our system for our customers’ orders. These costs are driven by the number of orders matched internally with participants, referred to as liquidity partners, that post buy and sell orders on our system, versus orders traded through our proprietary algorithms. Although we paid rebates on an increased portion of our order flow to our liquidity partners during the three months ended June 30, 2004 compared to the three months ended June 30, 2003, we negotiated lower rebates with these liquidity partners and with other vendors for clearing and execution services. We expect these costs to continue to decline as a percentage of revenues over the rest of the fiscal year as we continue to increase the use of our proprietary trading algorithms.

Depreciation for the three-month period ended June 30, 2004 decreased 90.1% to $16,275 from $164,057 for the three-month period ended June 30, 2003, primarily as a result of the write-off of assets in connection with our restructuring in October 2003 as well as a portion of our assets becoming fully depreciated during the current period. Capital expenditures were $11,193 and $4,978 for the three months ended June 30, 2004 and 2003, respectively

We recorded a non-cash compensation charge of $34,278 during the three months ended June 30, 2004 for the cost of 110,123 stock options that were granted to an outside advisor to the company on June 15, 2004. Although these options were granted at an exercise price of $0.5329 per share, which was above the market price of $0.35 on the date of grant, we recorded the charge, which was based on a Black-Scholes valuation model, because the options were issued to a third party.

We recorded a 79.0% decrease in the loss on principal trading activities to $258,762 for the three months ended June 30, 2004 from $1,233,825 for the three months ended June 30, 2003. The trading loss reflects the use of

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our trading algorithm to provide liquidity to our customers. We provided liquidity at the VWAP to our customers during the fiscal year by using a combination of liquidity partners and our proprietary trading algorithms. The variable cost of providing this liquidity is reflected in the loss on trading activities and in the rebates we pay to the liquidity partners, which is a component of brokerage, clearing and exchange fees on our statements of operations. We realize trading gains or losses from the difference between the prices we achieve when trading through our algorithms and the prices we guarantee our customers. A combination of factors, including market fluctuations, trading errors and technical and operational issues, resulted in higher than expected trading losses during the three months ended June 30, 2003. In an effort to reduce our cost of providing liquidity, including these trading losses, we began matching a substantial portion of our order flow with our liquidity partners in June 2003. We expect to continue to utilize a mix of liquidity partners and proprietary or licensed trading algorithms over the next fiscal year for our guaranteed VWAP products. This mix allows us to have a greater degree of control over risk and, consequently, have more consistent profit margins than experienced in the past.

Selling, general and administrative expenses totaled $665,894 and $673,616 for the three months ended June 30, 2004 and 2003, respectively. The 1.1% decrease is primarily a result of a $91,563 decrease in occupancy expenses related to the closing of our Philadelphia offices, a $40,000 decrease in insurance premiums related to our directors’ and officers’ policy, and a $19,766 decrease in communications costs, partially offset by a $133,994 increase in costs in connection with services provided under soft dollar arrangements with our customers.

In connection with the relocation of our offices from Philadelphia to New York in October 2003, we finalized a sublease for our primary Philadelphia office location in June 2004. We recorded $655,982 related to the estimated Philadelphia lease obligations during the fiscal year ended March 31, 2004. As a result of the completion of the agreement, we recorded an additional $49,190 restructuring charge during the three months ended June 30, 2004.

Interest income decreased to $1,399 for the three months ended June 30, 2004 from $5,488 for the three months ended June 30, 2003, as a result of decreased rates and the lower average cash and cash equivalents balances.

Interest expense of $354,761 for the three months ended June 30, 2004 was comprised primarily of $187,500 related to the secured convertible note with Innovations and $163,348 related to the secured note with RGC. Interest expense of $427,162 for the three months ended June 30, 2003 was comprised primarily of $187,500 related to the secured convertible note with Innovations, $136,348 related to the secured note with RGC and $73,629 related to the subordinated convertible notes with the SOFTBANK and DFJ ePlanet entities (see “Notes to Unaudited Consolidated Financial Statements”).

Other expense of $47,793 for the three months ended June 30, 2003 represents a loss on the disposal of computer equipment in our majority-owned subsidiary, Ashton Technology Canada, Inc. On June 11, 2003, Ashton Canada filed an arbitration claim against the Toronto Stock Exchange for breach of contract under our agreement to introduce a VWAP trading system as a facility of the exchange. Ashton Canada is no longer operational, has no employees, and currently has the sole objective of focusing on the arbitration claim with the Toronto Stock Exchange. (see Part II, Item 1. “Legal Proceedings.”)

Liquidity and Capital Resources

At June 30, 2004, we had total assets of $2,937,292 compared to $3,688,098 at March 31, 2004. Current assets at June 30, 2004 totaled $2,413,981 and current liabilities from continuing operations were $2,165,767. Since our inception, we have recognized recurring operating losses and have financed our operations primarily through the issuance of debt and equity securities. As of June 30, 2004, we had an accumulated deficit of $116,924,901 and stockholders’ deficiency of $6,126,908, which raises doubt as to our ability to continue as a going concern.

We are actively exploring alternative sources of capital, including additional financing arrangements and strategic relationships with other firms. If we are unable to accomplish either of these objectives or generate sufficient cash flows from operations to fund our business within the next two to three months, we will be unable to continue operating as an independent entity. There is no assurance that we will be successful in accomplishing these objectives, nor can we predict the terms or the impact on existing holders of our common stock of any potential financing or strategic transaction. Further, any such financing or strategic transaction we enter into would be subject to approval by Innovations pursuant to the Investors’ Rights Agreement.

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At June 30, 2004, our principal source of liquidity was cash and cash equivalents of $1,496,428, and receivables from brokers, dealers and other of $428,974, compared to cash and cash equivalents of $2,249,187 and receivables from brokers, dealers and other of $787,245 at March 31, 2004. During the three months ended June 30, 2004, our accounts payable and accrued expenses increased to $2,023,714 from $1,403,431 at March 31, 2004. Although we have made recent substantial progress in increasing our revenues and reducing our operating costs, we have been unable to generate sufficient revenues to fund our operations as anticipated.

Included in our cash and receivables balances at June 30, 2004 is approximately $1.8 million that is invested in the net capital of our broker-dealer operations. We expect to use a portion of our excess net capital to fund our operations, which may limit our broker-dealer business operations. We may therefore be unable to grow and increase revenues at the rate we anticipate, which could adversely affect our financial condition and results of operations.

Aggregate Contractual Obligations

As of June 30, 2004, our other contractual obligations and commercial commitments consisted principally of long-term obligations under the secured note with RGC and the secured convertible note with Innovations, and minimum future rentals under non-cancelable operating leases. There has been no significant change to such arrangements and obligations since March 31, 2004. For additional information, see “Aggregate Contractual Obligations” in our Annual Report on Form 10-K for the fiscal year ended March 31, 2004.

Related Party Transactions

We have a number of business relationships with related parties. For more information with respect to these transactions, see Note 7 to the Consolidated Financial Statements.

Additional Factors That May Affect Future Results

Forward-looking statements in this document and those made from time to time by members of our senior management are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements concerning the expected future financial results or concerning expected financing, business plans, product development, as well as other estimates are only estimates, and there can be no assurance that actual results will not materially differ from our expectations. Factors that could cause actual results to differ materially from results anticipated in forward-looking statements include, but are not limited to, the following:

Risks Related to Our Financial Condition

We may be unable to continue operating as a “going concern”

We have not realized an operating profit and have experienced significant net operating losses since our inception in 1994. As of June 30, 2004, we have accumulated losses of approximately $117 million. The opinion of our independent auditors on our March 31, 2004 financial statements is subject to a “going concern” qualification and states that our recurring losses from operations and stockholders’ deficiency raise substantial doubt about our ability to continue as a going concern. We are actively exploring alternative sources of capital, including additional financing arrangements and strategic relationships with other firms. If we are unable to accomplish either of these objectives or generate sufficient cash flows from operations to fund our business within the next two to three months, we will be unable to continue operating as an independent entity. There is no assurance that we will be successful in accomplishing these objectives, nor can we predict the terms or the impact on existing holders of our common stock of any potential financing or strategic transaction.

The “going concern” opinion from our independent auditors could make it difficult for us to maintain our existing customers and to gain new customers

The opinion of our independent auditors on our March 31, 2004 financial statements is subject to a “going concern” qualification and states that our recurring losses from operations and stockholders’ deficiency raise substantial doubt about our ability to continue as a going concern. Our existing customers may be unwilling to

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continue to do business with a company the financial statements of which are subject to a going concern qualification. Potential new customers may also be unwilling to even discuss doing business with a company the financial statements of which are subject to a going concern qualification. For these reasons, the going concern qualification may have a material adverse effect on our existing business and overall prospects for the future.

Most of our revenues were derived from only a few customers

Although our revenues have historically been concentrated among a small number of customers, our customer mix is susceptible to frequent change. Approximately 23% of the revenues earned during the three months ended June 30, 2004 were from transactions with two customers that each individually comprised greater than 10% of the total revenues for the period. During the three months ended June 30, 2003, approximately 59% of the revenues were from transactions with three customers that each individually comprised greater than 10% of the total revenues for the period. We can give no assurance that any of these customers will continue to do business with us, or that we will successfully obtain additional customers. Our arrangements with customers are not contractual, so our customers are free to trade with multiple service providers. Our future success will depend on continued growth in demand for our electronic trade execution services, and our ability to maintain customers. Further, if we are unable to achieve and maintain a diversified customer base, then the loss of individual customers may materially and adversely affect our business, financial condition and results of operations.

Our business is highly volatile and our quarterly results may fluctuate significantly

During the past few years, the financial markets in the United States have experienced increased volatility and many worldwide financial indices have continued to decline. The demand for our trade execution services is directly affected by factors such as economic and political conditions that may lead to decreased trading activity and prices in the securities markets generally. The future economic environment may be subject to periodic economic downturns, such as recessions, which could also result in reduced trading volumes and prices, and could materially harm our business, financial condition and results of operations. Additionally, these economic factors have resulted in intense price competition in the trade execution business. Although we have experienced decreasing margins on our guaranteed VWAP business as a result, we believe we will realize higher margins from our other program trade execution products as that part of our business grows. Any decline in securities trading volumes, market liquidity and the resulting compression of commission rates could have a material adverse effect on our results of operations.

Problems in our relationships with third parties could have an adverse effect on our business and our results of operations

We place substantial reliance on our relationships with third parties including liquidity partners, clearing agents, exchanges and other financial intermediaries. Any disagreements with or disruptions in service from these third parties could have a material adverse effect on our business and results of operations. We are also exposed to credit risk from third parties that owe us money, securities, or other obligations. Any failure by these third parties to discharge adequately their obligations in a timely manner or any event adversely affecting these third parties could have a material adverse effect on our financial condition and results of operations.

We are subject to net capital requirements that could limit our operations

A significant operating loss or any unusually large charge against our net capital could adversely affect our ability to expand as planned or to maintain our present levels of business, which could have a material adverse effect on our results of operations. The SEC and the NASD have strict rules that require each of our broker-dealer affiliates to maintain sufficient net capital. If we fail to maintain the required net capital, the SEC or the NASD may impose sanctions, including suspending or revoking our broker-dealer’s registrations or memberships. Also, a change in the net capital rules, the imposition of new rules, a change in interpretation of the rules, or any unusually large charge against our net capital could limit our operations. In addition, the net capital requirements limit our ability to transfer funds from our broker-dealer affiliates to the parent company, which may affect our ability to repay our debts or fund our operations.

We may be subject to lawsuits that could seriously harm our results of operations and financial condition

We may be subject to claims as a result of one or more legal matters, as more fully described in “Legal Proceedings” in Part II, Item 1. Any of these matters could give rise to claims or litigation that could subject us to

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liability for damages. We have limited liquidity and financial resources to satisfy any such claims. Moreover, any lawsuits, regardless of their merits, could be time-consuming, require us to incur significant legal expenses and divert management time and attention.

We need additional financing to fund our operations

We are actively exploring alternative sources of capital, which could result in additional financing arrangements or a strategic relationship with another firm. If we are unable to accomplish either of these objectives or attain profitability within the next two to three months, we will be unable to continue operating as an independent entity. There is no assurance that we will be successful. Further, additional financing could take the form of equity or debt offerings, spin-offs, joint ventures, or other collaborative relationships that may require us to issue shares or share revenue. Any such financing strategies would likely impose operating restrictions on us and be dilutive to holders of our common stock, and may not be available on attractive terms or at all. Further, any additional financing we enter into would be subject to approval by Innovations pursuant to the Investors’ Rights Agreement.

Our cash position as of June 30, 2004 was $1,496,428 and receivables from brokers, dealers and others was $428,974. Included in our cash and receivables balances was approximately $1.8 million which was invested in the net capital of our broker-dealer operations. We expect to use a portion of our excess net capital to fund our operations which may limit our broker-dealer business operations. We may therefore be unable to grow and increase revenues at the rate we anticipate, which could adversely affect our financial condition and results of operations.

Risks Related to Your Investment in Our Common Stock

Sales of our shares by our principal stockholders or others may depress our stock price

Our principal common stockholders and their respective ownership amounts as of June 30, 2004 are as follows:

SOFTBANK and DFJ ePlanet also have rights to acquire an additional 89,286 shares of our common stock upon exercise of warrants. Innovations also has rights to acquire an additional 570,350 shares upon conversion of a secured convertible note and related accrued interest. Pursuant to agreements with SOFTBANK, DFJ ePlanet and Innovations, we may be obligated to register the resale of shares of common stock held by each of those entities under certain conditions. The series G preferred investors have rights to acquire 2,256,856 shares of our common stock upon the conversion of the series G preferred and an additional 150,168 shares of our common stock upon exercise of warrants. The series G preferred investors are currently entitled to 10% of the aggregate voting rights of all classes of our common and preferred stock outstanding. We also have certain contractual obligations to register the resale of the shares of common stock issuable upon conversion of the series G preferred. The future public sale of our common stock by SOFTBANK, DFJ ePlanet, Innovations, or the series G preferred holders could dilute our common stock and depress its market value. These factors could also make it more difficult for us to raise funds or complete strategic transactions through future offerings of common stock.

We completed a 1-for-100 reverse stock split which could adversely affect the market price and liquidity in our common stock and could dilute your ownership

We completed a 1-for-100 reverse stock split of our common stock on April 20, 2004. The purposes of the reverse stock split were to create a sufficient number of authorized but unissued shares of our common stock to permit the full conversion of the series H preferred and the conversion or exercise of all other existing convertible securities, for future issuances of common stock or convertible securities, and to reduce the number of outstanding shares of common stock to a number that is more comparable with the market capitalization of similar companies in our industry.

The market price of our common stock after the reverse stock split has not risen in proportion to the reduction in the number of shares of our common stock outstanding as a result of the reverse stock split. We cannot

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predict the effect of the reverse stock split upon the future market price for our common stock, and the history of reverse stock splits for companies in similar circumstances is varied. Now that the reverse stock split has been completed, a decline in the market price of our common stock may result in a greater percentage decline than would occur in the absence of a reverse stock split. Moreover, over the long term, the trading price of our common stock is likely to be a function of fundamental business factors, such as our overall financial condition, revenues, earnings, cash flows and prospects, and overall economic conditions, as opposed to capital restructuring measures.

The possibility exists that liquidity in the market price of our common stock could be adversely affected by the reduced number of shares that are outstanding after the reverse stock split. In addition, the reverse stock split may increase the number of stockholders who own “odd lots” (i.e., a number of shares of our common stock not divisible by 100). Stockholders who hold odd lots may experience difficulty selling their shares and may experience an increase in the cost of selling their shares.

We have a significant number of additional authorized but unissued shares of common stock as a result of the reverse stock split. If we issue additional shares in the future, the dilution to the ownership interest of our existing stockholders may be greater than would otherwise occur had a reverse stock split not been effectuated because the board of directors will have more authorized shares available for issuance.

If we issue additional shares of our common stock upon the exercise of options or warrants or the conversion of our convertible preferred stock, or if we raise additional capital through the issuance of new securities, you will incur dilution and our stock price may decline

Innovations currently holds a secured convertible note that entitles it to acquire an additional 570,350 shares of common stock upon conversion of the note, and the series G preferred investors are entitled to acquire an aggregate of 2,254,356 shares upon conversion of their preferred stock. In addition, we have outstanding options and warrants that may be exercised for an aggregate of 5,852,484 shares of common stock. If Innovations or the series G preferred investors exercise their conversion rights to acquire shares of common stock, our option and warrant holders exercise their securities, or if we raise additional capital through the issuance of new securities, the number of outstanding shares of our common stock will increase. To the extent that the number of outstanding shares of our common stock increases without a corresponding increase in the number of shares of common stock that you hold, you will incur dilution.

We will not pay common stock dividends in the foreseeable future

You will not receive payment of any dividends in the foreseeable future and the return on your investment may be lower than anticipated. We have never paid or declared any cash dividends upon our common stock, nor do we intend to. Our board of directors has discretion to declare cash dividends on our common stock and on our Series B preferred stock. While there are no contractual limitations on our ability to pay cash dividends on our common stock, based on our present financial status and contemplated future financial requirements, we do not anticipate declaring any cash dividends on the common stock. In determining whether to pay dividends, our board of directors considers many factors, including our earnings, capital requirements and financial condition.

Risks Related to Our Management

Our future success is dependent on the retention of certain key personnel

Our future success depends upon the experience, skills and working relationship of our management team. Since May 7, 2002, we experienced a complete change in the members of our management team. On October 9, 2002, we hired Dean Stamos to be our new Chief Executive Officer. We have also experienced turnover in the roles of President, Chief Operating Officer and Chief Financial Officer during the prior fiscal year. The near-term success of our business will depend on the successful integration and reputation of these members of our management team. The longer-term success of our operations will depend in large part upon the hiring and retention of key personnel, which may require, among other things, execution of acceptable employment agreements with these individuals. Our ability to operate successfully may be jeopardized if we are unable to attract and retain skilled management and personnel to conduct our business.

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Sales or grants of stock to our employees and key individuals will reduce your ownership percentage

We seek to attract and retain officers, directors, employees and other key individuals in part by offering them stock options and other rights to purchase shares of common stock. The exercise of these options, the grant of additional options, and the exercise thereof, could have a dilutive effect on our existing stockholders and may adversely affect the market price of our common stock. The exercise of options granted under our stock option plans will reduce the percentage ownership of our then-existing stockholders. We have reserved 5,493,168 shares of common stock for issuance pursuant to our 2002 Stock Option Plan, 64,500 shares of common stock for issuance pursuant to our 1998 Stock Option Plan, 25,500 shares of common stock for issuance pursuant to our 1999 Stock Option Plan and 30,000 shares of common stock for issuance pursuant to our 2000 Incentive Plan.

Our principal stockholders may exercise control over all matters submitted to a vote of stockholders and may not act in the interests of our other stockholders

Innovations, SOFTBANK and DFJ ePlanet are entitled to 26%, 40% and 21%, respectively, of the aggregate voting rights with respect to all classes of our outstanding common and preferred voting stock. SOFTBANK and DFJ ePlanet are also investors in Innovations. As long as SOFTBANK, DFJ ePlanet and Innovations own a majority of our outstanding common and preferred stock, these entities will collectively be able to elect a majority of our board of directors and control the outcome of any other matter submitted to a vote of our stockholders. Such matters could include:

As a result of our principal stockholders’ control, potential acquirers may be discouraged from seeking to acquire control through the purchase of our common stock, which could have a depressive effect on the price of our securities and would make it less likely that stockholders receive a premium for their shares as a result of any such attempt.

In addition, as long as Innovations owns at least 20% of our common stock, Innovations will retain control over certain corporate decisions affecting us, including:

As disclosed in a Schedule 13D filed by OptiMark Holdings, Inc. on May 17, 2002, OptiMark, Inc., a subsidiary of OptiMark Holdings, Inc., and the other stockholders of Innovations have entered into an agreement whereby the parties agreed to use their best efforts to consummate a merger of Innovations with and into Vie Financial Group. Pursuant to the agreement, upon consummation of the merger, each stockholder of Innovations would receive the number of shares of our common stock proportionate to such stockholder’s interest in Innovations prior to the merger. The agreement contemplates that the merger shall take place any time after December 31, 2003, but not later than December 31, 2008.

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Risks Related to Our Operations

Our growth may place strains on our managerial, operational and financial resources

Our business is characterized by rapid technological change, changing customer demands and evolving industry standards. Our future success depends, in part, on how we respond to these demands. These demands will require us to introduce new products and services, enhance existing products and services and adapt our technology in a timely fashion. There can be no assurance that we will be capable of introducing new products and services, enhancing products and services or adapting our technology.

Our current trading, communications and information systems have been designed to perform within finite capacity parameters. Although we believe we can accommodate a substantial increase in activity, our growth may require implementation of new and improved trading, communications and information systems. There can be no assurance that a significant increase in trading volumes or the introduction of new or multiple products will not result in systems failures or have a material adverse effect on our results of operations.

Our trading activities expose our capital to potential losses

We engage in securities trading activities through our subsidiary Vie Securities, which sometimes acts as principal to guarantee the VWAP for customer trades. These trading activities include the purchase, sale or short sale of securities and derivative securities. We sometimes guarantee our customers the VWAP for specified intervals of time at the time customer orders are executed, or at the beginning of the intervals. We then trade the orders through our proprietary trading algorithms with the intention of achieving the same price we have guaranteed the customer. We realize trading gains or losses to the extent of the difference between the prices we achieve and the prices we guaranteed our customers. These activities are subject to a number of risks including price fluctuations, rapid changes in the liquidity of markets, and trading errors, all of which subject our capital and our financial condition to substantial risks on a daily basis.

Our compliance and risk management methods might not be fully effective in reducing our exposure to losses

There can be no assurance that our risk management and compliance procedures will be adequate or effective to detect and deter compliance systems failures. Nor can we assure you that we will be able to manage our systems, technology and regulatory compliance growth successfully. Our inability to do so could have a material adverse effect on our business and our financial condition. The scope of procedures for assuring compliance with applicable rules and regulations has changed as the size and complexity of our business has increased.

Our brokerage operations expose us to liability for errors in handling customer orders

Errors in performing clearing services or execution services, including clerical and other errors related to the handling of customer orders could lead to regulatory sanctions and civil penalties imposed by applicable authorities as well as potential trading losses and potential liability resulting from lawsuits brought by customers or others. In conjunction with our clearing brokers, we provide clearing services, which include the confirmation, receipt, settlement and delivery functions, involved in securities transactions.

Our clearing broker may fail to provide our customers or us with accurate information about securities transactions

We rely on our clearing broker to discharge its obligations to our customers and us on a timely basis. If it fails to do so, our trading operations may suffer. Our trading and information systems are coordinated with the clearing and information systems of our clearing brokers. We rely on these systems to furnish us with certain information necessary to run our business, including transaction summaries, data feeds for compliance and risk management, execution reports and trade confirmations. These systems may experience systems failure, interruptions, capacity constraints, or other errors.

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Financial or other problems experienced by third parties could have an adverse effect on our business and our operating results

We are exposed to credit risk from third parties that owe us money, securities, or other obligations. Any failure by these third parties to discharge adequately their obligations in a timely basis or any event adversely affecting these third parties could have a material adverse effect on our financial condition and results of operations. These parties include our customers, trading counter parties, clearing agents, exchanges and other financial intermediaries.

Conditions beyond our control could adversely affect our business and results of operations

Our business and results of operations are very dependent upon equity trading volumes. Many conditions beyond our control can adversely effect such trading volumes, including national and international economic, political and market conditions, investor sentiment, the availability of funding and capital, the level and volatility of interest rates, legislative and regulatory changes, inflation, and similar broad trends. With reduced trading volumes, we may expect to receive fewer transactions and thus earn fewer commissions from our broker-dealer operations.

Risks Related to Our Technology and Products

We are dependent on new and existing transaction products to generate revenues

Our future revenues will depend primarily on the volume of securities we trade. The success of our program trade execution products is heavily dependent upon their acceptance by broker-dealers, institutional investors and other market participants. Failure to obtain such acceptance could result in lower volumes and a lack of liquidity in our products. While we continue to solicit customers to use our trade execution services, there can be no assurance that we will attract a sufficient number of such customers.

We may receive a substantial portion of our order flow through electronic communications gateways, including a variety of computer-to-computer interfaces and the Internet. Our electronic brokerage services involve alternative forms of order execution. Accordingly, substantial marketing, sales efforts and strategic relationships may be necessary to educate and acquire prospective customers regarding our electronic brokerage services and products. There can be no assurance that our marketing, sales efforts and strategic initiatives will be successful in educating and attracting new customers.

If any of our computer and communications systems fail, our business will be adversely affected

Any computer or communications system failure or decrease in our trading support system performance that causes interruptions in our operations could have a material adverse effect on our business, financial condition and results of operations. We currently do not provide our customers with backup trading systems or complete disaster recovery systems.

Our trading systems and proprietary trading activities depend on the integrity and performance of the computer and communications systems supporting them. Extraordinary trading volumes or other events could cause our computer systems to operate at an unacceptably low speed or even fail. We cannot assure you that our network protections will work. Any significant degradation or failure of our computer systems or any other systems in the trading process could cause customers to suffer delays or errors in trading. These problems could cause substantial losses for customers and could subject us to claims from customers.

Software “bugs,” errors and malfunctions may expose us to losses

Complex software such as ours often contains undetected errors, defects or imperfections. These bugs could result in service interruptions or other problems for us and our customers. Despite rigorous testing, the software used in our products could still be subject to various risks associated with systems errors, malfunctions and employee errors. In addition, because our products often work with software developed by others, including vendors and customers, bugs in others’ software could damage the marketability and reputation of our products. Given the competitive environment for electronic equity trading execution, investors could elect to use our competitors’ products on a temporary or permanent basis to complete their trades. Prolonged service interruptions resulting from natural disasters could also result in decreased trading volumes and the loss of customers. Problems regarding our licensed and proprietary trading algorithms could result in material tracking errors, significant principal trading losses, and the loss of customers.

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Our networks may be vulnerable to security breaches

Our networks may be vulnerable to unauthorized access, computer viruses and other security problems. Persons who circumvent security measures could wrongfully use our confidential information or our customers’ confidential information or cause interruptions or malfunctions in our operations. The secure transmission of confidential information over public networks is a critical element of our operations. We have not in the past experienced network security problems. We may be required to expend significant additional resources to protect against the threat of security breaches or to alleviate problems caused by any breaches. We can provide no assurance that our current or future security measures will protect against all security risks in the future.

We may not receive accurate and timely financial data from our third-party suppliers, which may cause us to lose customers and be subject to litigation

We receive consolidated New York Stock Exchange listed trading information, including real-time quotes, last sale reporting, volume and price information and error reports from a number of third parties, including the New York Stock Exchange, the Consolidated Tape Association and the Securities Industry Automation Corporation. We use this information to develop trading strategies and execute orders, as well as provide information to our customers.

If these suppliers fail to supply accurate or timely information, our customers may develop an adverse perception of our trading services and cease doing business with us. We may also be subject to claims for negligence or other theories based on the nature and content of information we provide our customers. Any liability arising from third party supplied data could have a material adverse effect on our financial condition and results of operations.

Our competitive position may be adversely affected by others’ unauthorized use of our intellectual property

Our success is dependent, in part, upon our proprietary intellectual property. We generally protect these property rights as trade secrets through employee and third party confidentiality and non-disclosure agreements, license agreements, and other intellectual property protection methods. We have applied for federal patent protection relating to current product lines, but no patents have been issued. We have not filed for federal copyright or trademark protection relating to current product lines. Unauthorized third parties could copy or reverse engineer certain portions of our products or obtain or use information that we regard as proprietary. In addition, our trade secrets could become known to or be independently developed by our competitors, and third parties may try to challenge, invalidate or circumvent the mechanisms we select to protect our rights.

Risks Related to Our Industry

We are subject to risks associated with the securities industry generally

The securities business is subject to various risks, including customer default, employees’ misconduct, errors and omissions by traders and order takers, and litigation. These risks are often difficult to detect beforehand or to deter. Losses associated with these risks could have a material adverse effect on our business, financial condition and results of operations.

We derive most of our revenue from trading in existing equity securities, including most of the securities in the S&P 500, Russell 1000, and Nasdaq 100 indices. Any reduction in revenues resulting from a decline in the secondary market trading volume for these equity securities could have a material adverse effect on our business and results of operations. Additionally, further declines in cash flows into the U.S. equity markets or a slowdown in equity trading activity by broker-dealers and other institutional investors may have an adverse effect on the securities markets generally, and could result in lower revenues from our trading services.

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Our business could be adversely affected by extensive government regulation

The securities markets and the brokerage industry in which we operate are subject to extensive regulation. We face the risk of significant intervention by regulatory authorities in all jurisdictions in which we conduct business. In our case, the impact of regulation extends beyond “traditional” areas of securities regulation, such as disclosure and prohibitions on fraud and manipulation by market participants, to the regulation of the structure of markets.

The securities industry has been subject to several fundamental regulatory changes. In the future, the industry may become subject to new regulations or changes in the interpretation or enforcement of existing regulations, which may adversely affect our business. The markets for equity securities have been subject to the most significant regulatory changes. We cannot predict the extent to which any future regulatory changes can affect our business.

On February 26, 2004, the SEC published proposed “Regulation NMS” for public comment. If adopted, Regulation NMS would incorporate four substantive rules related to the regulatory structure of the U.S. equity markets. Subject to expressly delineated exceptions, proposed Rule 611 of Regulation NMS would require national securities exchanges, national securities associations, and order execution facilities (which would include, among other persons, broker-dealers such as Vie Securities that execute orders internally by crossing orders as agent) to establish, maintain, and enforce policies and procedures reasonably designed to prevent the execution of “trade-throughs.” For purposes of the proposed rule, a trade-through means the purchase (or sale) of a security listed on the NYSE, American Stock Exchange (“Amex”) or Nasdaq at a price that is higher (lower) than the best offer (best bid) disseminated through the market at the time the transaction was executed. Proposed Rule 610 would impose new standards governing access to quotations and the execution of orders for equity securities by requiring market centers and market participants that make their quotes publicly available through a national securities exchange or national securities association to permit all market participants access to their limit order books on a non-discriminatory basis. The proposal also would limit the fees that market participants could charge for access to their quotations to a de minimis amount, and require SROs to reduce the incidence of so-called “locked” and “crossed” markets. Proposed Rule 612 generally would prohibit market participants from accepting, ranking or displaying orders, quotes or indications of interest in increments finer than one penny. Finally, Regulation NMS would amend various national market system joint industry quotation and trade reporting plans to modify the formulas for allocating net income among the exchanges and national securities associations that are the participants of such plans. We cannot predict whether or when any or all of proposed Regulation NMS, either as currently proposed or as may be later modified by the SEC, ultimately will be adopted by the SEC. As a result, we cannot predict the extent to which any future regulatory changes associated with Regulation NMS would affect our business.

Our industry is highly competitive

The algorithmic trade execution and analysis services that we offer compete with services offered by leading brokerage firms and transaction processing firms, and with providers of electronic trading, trade order management systems and financial information services. We also compete with various national and regional securities exchanges and execution facilities, alternative trading systems, electronic crossing networks and other share matching systems for trade execution services. The marketplace for algorithmic trade execution products and services has become highly competitive with the increasing customer demand for such executions. Customers demand confidentiality and competitive trade execution quality and commission rates. Our key customer mix is susceptible to constant change as a result of customers’ sensitivity to commission rates and willingness to engage multiple service providers. As our customer relationships are not contractual, there is no guarantee that our customers will continue to do business with us. Because our customer base has historically been concentrated among a few firms, there is no guarantee that the loss of individual firms will not have a material adverse effect on our business, results of operations or financial condition.

Although we feel our products offer benefits over those of our competitors, there is no assurance that our products will adequately address all the competitive criteria in a manner that results in a competitive advantage.

Many of our competitors have substantially greater financial, research, development, sales, marketing and other resources than we have and many of their products have established operating histories. While we believe that our products and services offer certain competitive advantages, our ability to maintain these advantages will require continued investment in product development, additional marketing, and customer support activities. We may not have sufficient resources to continue to make these investments, while our competitors may continue to devote significantly more resources to their services.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We use various management tools to monitor our exposure to market risks. Our exposure to market risk has not changed materially from that described in our Annual Report on Form 10-K, as amended, for the fiscal year ended March 31, 2004. For a further discussion of our market risks and risk management policy, refer to Item 7A Quantitative and Qualitative Disclosure About Market Risk of our Annual Report on Form 10-K for the fiscal year ended March 31, 2004.

ITEM 4. CONTROLS AND PROCEDURES

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, reviewed and evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, our disclosure controls and procedures are effective.

There have been no changes in our internal control over financial reporting that occurred during our most recent completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

In May 2003, two former employees filed separate claims against us with the U.S. Department of Labor/ Occupational Safety & Health Administration (DOL). The claims both allege employment practice issues under the Sarbanes-Oxley Act of 2002. On June 12, 2003, we responded to both claims and denied all allegations. Under the Sarbanes-Oxley Act, claimants can file a civil suit if the DOL has not issued a final decision within 180 days of the filing of the complaint. On January 30, 2004, the former employees filed a complaint in the United States District Court for the Eastern District of Pennsylvania. Although we believe the allegations are without merit, the outcome of these proceedings is uncertain. We do not expect a material adverse impact on our financial condition and results of operations as a result of these claims.

On June 7, 2000, our subsidiary, Ashton Canada, entered into a written agreement with the Toronto Stock Exchange Inc. for the integration of Ashton Canada’s eVWAP trade match software, equipment and communications facilities with the Toronto Stock Exchange’s continuous auction market for securities. After Ashton Canada had designed and implemented the eVWAP software and assisted the Toronto Stock Exchange in securing all necessary approvals of the Ontario Securities Commission, the Toronto Stock Exchange, without proper justification or excuse, suspended the integration of eVWAP. Thereafter, following failure by the parties to resolve this matter, on June 11, 2003, Ashton Canada filed an arbitration claim against the Toronto Stock Exchange seeking damages of US $30 million for breach of contract, interest in the amount for a period as may be determined by the arbitrator, and costs of the arbitration. The arbitration was filed under the Ontario Arbitrations Act. On August 22, 2003, the Toronto Stock Exchange filed a counterclaim against Ashton Canada seeking specific performance of the integration agreement, or in the alternative, a declaration that it is entitled to terminate the agreement without penalty. The arbitration case began in May 2004, and closing arguments were submitted to the arbitrator in June 2004. The outcome of these claims is uncertain at this time.

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ITEM 2. CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY SECURITIES

On April 21, 2004, we exercised our right to convert all of the shares of series H preferred into shares of common stock. We issued 9,370,115 shares to SOFTBANK and 4,809,324 shares to DFJ ePlanet upon conversion of the series H preferred.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(A) Exhibits

(B) Reports on Form 8-K

We filed a Current Report on Form 8-K on May 25, 2004, on which we reported under Item 5, Other Events, that Vie issued a press release announcing the appointment of a new Director and the filling of vacancies on its Audit Committee.

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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.

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