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

                                    FORM 10-K
(Mark One)
[X] ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE
ACT OF 1934 For the fiscal year ended December 31, 2007

[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to _____________.

                         Commission file number 0-28152

                         Affinity Technology Group, Inc.
             (Exact name of registrant as specified in its charter)

                                    Delaware
         (State or other jurisdiction of incorporation or organization)

                                   57-0991269
                      (I.R.S. Employer Identification No.)

                           1310 Lady Street, Suite 601
                               Columbia, SC 29201
                    (Address of principal executive offices)
                                   (Zip code)

                                (803) 758-2511  (Registrant's  telephone number,
             including area code)

         Securities registered pursuant to Section 12(b) of the Act:
                                      None

         Securities registered pursuant to Section 12(g) of the Act:
                   Common Stock, par value $.0001 per share
                                (Title of class)

      Indicate by check mark if the registrant is a well-known seasoned
issuer, as defined in Rule 405 of the Securities Act. Yes [_]   No [X]

      Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the Act. Yes [_]   No [X]

      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 [_]


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<PAGE>



      Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [_]

      Indicate  by check mark  whether  the  registrant  is a large  accelerated
filer, an accelerated  filer, a  non-accelerated  filer, or a smaller  reporting
company.  See the definitions of "large accelerated filer,"  "accelerated filer"
and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

            Large Accelerated Filer [_]      Accelerated Filer [_]
            Non-Accelerated Filer   [_]      Smaller Reporting Company [X]

      Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act).  Yes [_]   No [X]

      The aggregate  market value of the Registrant's  outstanding  Common Stock
held by non-affiliates of the Registrant was approximately $2,991,000 as of June
29, 2007.  For purposes of such  calculation,  persons who hold more than 10% of
the outstanding shares of Common Stock, directors and officers of the Registrant
and certain of their  immediate  family members have been treated as affiliates.
This determination is not conclusive.

      There were 47,142,398 shares of the Registrant's  Common Stock outstanding
as of March 15, 2008.

                       DOCUMENTS INCORPORATED BY REFERENCE

      Certain portions of the  Registrant's  proxy statement with respect to the
2008 Annual Meeting of Stockholders of the Registrant have been  incorporated by
reference herein in response to certain Items in Part III of this report.


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<PAGE>


                                  Introduction

      As used in this report,  unless the context otherwise requires,  the terms
"we,"  "our," "us" (or similar  terms),  the  "Company"  or  "Affinity"  include
Affinity Technology Group, Inc. and its subsidiaries, except that when used with
reference to common stock or other securities described herein and in describing
the positions held by management of the Company, the term includes only Affinity
Technology Group, Inc. The Company maintains a web site at  http://www.affi.net,
although  the contents of such web site are not  incorporated  into this report.
The Company has made its annual reports on Form 10-K,  quarterly reports on Form
10-Q,  and  current  reports  on Form 8-K and any  amendments  to these  reports
available  through  its web site free of charge  through a link to the SEC's web
site. These documents are available for access as soon as reasonably practicable
after we electronically file these documents with the SEC.

                             Forward-Looking Statements

      Statements  in this report,  including in Part I, Item 1,  "Business"  and
Part II, Item 7,  "Management's  Discussion and Analysis of Financial  Condition
and Results of Operations,"  that are not descriptions of historical facts, such
as statements about the Company's future  prospects and cash  requirements,  are
forward-looking  statements and are made pursuant to the safe harbor  provisions
of  the  Private  Securities  Litigation  Reform  Act of  1995.  Forward-looking
statements  typically are identified by words such as "may,"  "will,"  "should,"
"anticipate,"  "estimate,"  "expect," "plan," "believe," predict,"  "potential,"
"intend,"  "continue"  and similar  expressions,  although some  forward-looking
statements may be expressed differently.  Forward-looking statements are subject
to known and unknown risks, assumptions that may prove inaccurate, uncertainties
and other  factors,  including  those set forth below in Part I, Item 1A,  "Risk
Factors,"  that  could  cause  actual  results to differ  materially  from those
expressed or implied by these forward-looking  statements. You are cautioned not
to place undue reliance on these forward-looking statements, which speak only as
of the date they are made.  The  Company  undertakes  no ongoing  obligation  to
update  these   forward-looking   statements   if  we  learn  that  any  of  the
forward-looking statements or the underlying assumptions are incorrect.

Part I

Item 1. Business

        Overview

      Affinity   Technology   Group,  Inc.  was  incorporated  as  a  Delaware
corporation  in 1994.  Its  principal  executive  offices  are located at 1310
Lady Street,  Suite 601,  Columbia,  South Carolina  29201,  and its telephone
number is (803) 758-2511.

      Affinity  was  formed to  develop  and  market  technologies  that  enable
financial  institutions  and other  businesses  to  provide  consumer  financial
services  electronically  with  reduced or no human  intervention.  Products and
services  previously  offered by Affinity include its DeciSys/RT loan processing
system,  which automated the processing and  consummation of consumer  financial
services  transactions;  the Affinity  Automated  Loan Machine (the ALM),  which
allowed an applicant  to apply for and, if approved,  obtain a loan in as little
as ten minutes;  the  Mortgage  ALM,  which  allowed an applicant to apply for a
mortgage loan;  e-xpertLender,  which permitted a financial  institution to make
automated lending decisions through its call centers and branches;  iDEAL, which
permitted  automobile  lenders to make  automobile  lending  decisions  for loan
applications originated at automobile dealers; and rtDS, which permitted lenders
to deliver  credit  decisions to applicants  over the  Internet.  Due to capital
constraints,  we have  suspended  all  efforts  to further  develop,  market and
operate these products and services.  Our last processing contract terminated in
late 2002,  and we have no plans in the near term to engage in further  sales or
other activities  related to our products or services,  other than to attempt to
license certain of the patents that we own.  Currently,  our business activities
consist  exclusively of attempting to enter into license  agreements  with third
parties to license our rights  under  certain of our patents and in pursuing the
patent  litigation  described  below in an effort to  protect  our  intellectual
property and obtain  recourse  against alleged  infringement of our patents.  In
2007, our sole revenues from  operations  were  generated  from one  outstanding
license of our patents.


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<PAGE>


      Patents and Legal Matters

      In conjunction with our product development activities, we applied for and
obtained  three  patents.   We  have  been  granted  two  patents  covering  our
fully-automated  loan  processing  systems  (U.S.  Patent Nos.  5,870,721 C1 and
5,940,811  C1). In August 2000,  the U.S.  Patent and Trademark  Office  ("PTO")
issued to us a patent covering the fully-automated  establishment of a financial
account including credit accounts (U.S. Patent No. 6,105,007 C1).

      All of these  patents have been subject to  reexamination  by the PTO as a
result of challenges to such patents by third  parties.  On January 28, 2003, we
received a Reexamination  Certificate  (U. S. Patent No.  5,870,721 C1) from the
PTO which formally concluded the reexamination of U. S. Patent No. 5,870,721. On
December 20, 2005,  we received a  Reexamination  Certificate  (U.S.  Patent No.
5,940,811 C1) from the PTO which formally  concluded the  reexamination  of U.S.
Patent No. 5,940,811. On July 25, 2006, we received a Reexamination  Certificate
(U.S.  Patent  No.  6,105,007  C1) from the PTO  which  formally  concluded  the
reexamination  of U.S.  Patent  No.  6,105,007  and  which  indicated  that  the
reexamination  resulted in the full  allowance of all the claims of this patent.
It is possible that third parties may bring additional actions to contest all or
some of our patents. We can give no assurances that we will not lose all or some
of the claims covered by our existing patents.

      In June 2003, we filed a lawsuit against Federated Department Stores, Inc.
("Federated"), and certain of its subsidiaries alleging that Federated infringed
one of our patents (U. S. Patent No.  6,105,007).  In September 2003, we filed a
similar  lawsuit  against  Ameritrade  Holding  Corporation  and its subsidiary,
Ameritrade, Inc. (collectively "Ameritrade"),  alleging infringement of the same
patent.  Both  lawsuits  were  filed  in the  United  States  District  Court in
Columbia,  South  Carolina  (the  "Columbia  Federal  Court"),  and both  sought
unspecified  damages.  In 2004, at the request of Federated and Ameritrade,  the
PTO  determined  to  reexamine  U.S.  Patent No.  6,105,007.  As a result of the
reexamination  of U.S.  Patent No.  6,105,007,  we,  jointly with  Federated and
Ameritrade,  requested the Columbia  Federal Court to stay the lawsuits  against
Federated and Ameritrade pending resolution of the reexamination of U. S. Patent
No.  6,105,007.  In March 2006,  we were notified that the PTO had concluded the
reexamination of U.S. Patent No. 6,105,007 and that such reexamination  resulted
in the full  allowance  of all the  claims  of this  patent.  As a result of the
completion of the PTO's reexamination of U.S. Patent No. 6,105,007,  the stay of
these lawsuits against  Federated and Ameritrade was automatically  lifted,  and
the lawsuits proceeded.

      In November 2003,  Household  International,  Inc.  ("Household")  filed a
declaratory  judgment  action against us in the United States  District Court in
Wilmington,  Delaware (the "Delaware Federal Court"). In its complaint Household
requested the Delaware  Federal Court to rule that  Household was not infringing
any of the claims of our patents (U.S.  Patent No. 5,870,721 C1, No.  5,940,811,
and No.  6,105,007) and that the patents were not valid. We filed  counterclaims
against Household  claiming that Household  infringed U. S. Patent No. 5,870,721
C1, No. 5,940,811,  and No. 6,105,007.  We also filed a motion with the Delaware
Federal Court to transfer the case to the Columbia Federal Court. In April 2004,
the Delaware  Federal  Court granted our motion to transfer the case to Columbia
Federal Court. As a result of the  reexamination  of U.S. Patent No.  6,105,007,
we,  jointly with  Household,  requested  and  received a stay of the  Household
action from the  Columbia  Federal  Court  pending the  resolution  of the PTO's
reexamination  of  U.S.  Patent  No.  6,105,007.  As  discussed  above,  the PTO
subsequently   concluded  the   reexamination  of  U.S.  Patent  No.  6,105,007.
Accordingly,  the stay of this lawsuit was automatically lifted, and the lawsuit
proceeded.

      In accordance with the patent  infringement  lawsuits with  Federated,  TD
Ameritrade  (formerly  Ameritrade) and HSBC (formerly  Household),  as described
above,  a "Markman  Hearing"  was held in December  2006.  Markman  hearings are
proceedings  under U.S.  patent law in which  plaintiffs and defendants  present
their  arguments to the court as to how they  believe the patent  claims - which
define  the scope of the  patent  holder's  rights  under the patent - should be
interpreted  for purposes of  determining at trial whether the patents have been
infringed. For purposes of the Markman hearing, the Federated, TD Ameritrade and
HSBC cases were  consolidated  into one hearing and held by the Columbia Federal
Court.  As a result  of the  Markman  proceedings  the  Columbia  Federal  Court
interpreted  and construed the meaning of numerous claim terms which bear on the
scope of our patents.  Although  most claim terms were  construed in a manner we
believe are favorable,  the trial judge  interpreted and construed certain claim
terms,  most notably those related to the term "remote  interface" as claimed in
our  second  loan  processing  patent  (U.S.  Patent No.  5,940,811  C1) and our
financial   account  patent  (U.S.   Patent  No.  6,105,007  C1),  in  a  manner
unacceptable and unfavorable to us. In these patents,  the Court interpreted and
construed  "remote  interface" to mean computer  equipment,  including  personal
computer equipment,  that is not owned by a consumer.  The Court applied no such
limitation  in  construing  the term  "remote  interface"  under our first  loan
processing patent (U.S. Patent No. 5,870,721 C1).


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<PAGE>


      Subsequent to the Markman  ruling,  Federated,  Ameritrade  and HSBC filed
summary  judgment  motions with the Columbia  Federal Court  requesting that the
lawsuits be  dismissed.  In March 2007,  the Columbia  Federal Court granted the
summary  judgment motions filed by Federated and Ameritrade and in April 2007 it
granted the summary  judgment  motions filed by HSBC.  Accordingly,  our lawsuit
with each of the  defendants was  dismissed.  The basis of the Columbia  Federal
Court's rulings stemmed from the interpretation and application of certain claim
terms the Court  interpreted  and  defined as part of the  Markman  Hearing,  as
discussed above.

We have  appealed  to the U.S.  Court of Appeals for the  Federal  Circuit  (the
"Federal Appeals Court") and have requested the Federal Appeals Court to reverse
certain of the Markman  rulings made by the Columbia  Federal Court and grant to
us more  favorable  interpretations  and  definitions  related to certain of the
claim terms in our patents.  Additionally,  the  defendants  have  requested the
Federal  Appeals Court to reverse  certain  Markman rulings that we believe were
favorable to us. Oral  arguments in our cases were heard by the Federal  Appeals
Court on December 3, 2007. Unless we can obtain a more favorable  interpretation
of certain claim terms and maintain the favorable rulings we obtained during the
Markman hearing,  it is possible the scope of our patents could be significantly
limited. Furthermore, we believe it is unlikely that the U.S. Supreme Court, the
only  further  appeals  body beyond the Federal  Appeals  Court,  will review or
reconsider  their rulings and,  therefore,  we believe that the Federal  Appeals
Court's rulings will be dispositive  and will probably  determine the outcome of
our business. Moreover, we believe that the rulings made by the Columbia Federal
Court, including the Markman rulings that necessitated our appeal to the Federal
Appeals  Court,  has and will  continue  to hinder our  ability  to license  our
patents.  Further, our appeal will likely require substantial  resources and may
require  an  extended  period of time to  complete,  which  will in turn  likely
increase the already  significant  costs and expected time required to prosecute
our existing  infringement  actions.  We do not believe  that our existing  cash
resources  will be  sufficient  to enable us to  complete  our  appeal  and,  if
successful,  to complete the  prosecution  of our  lawsuits  against the alleged
infringers. Accordingly, to remain viable in the near term, it is likely that we
will be required  to raise  additional  capital  through the sale of debt and/or
equity securities or from licensing our patents.  We can give no assurance that,
in such event, we will be able to raise the resources  necessary to complete our
appeal.  We also can give no assurance  that, even if we are able to finance our
appeal to completion, such appeal will result in a favorable outcome. Even if we
are successful in pursuing our appeal to completion and a favorable outcome,  we
cannot  assure you that we will then have  sufficient  funding to  continue  our
underlying lawsuits or that such lawsuits would succeed in obtaining a favorable
outcome for us.

      In addition, we and our founder, Jeff Norris, were defendants in a lawsuit
filed by Temple  Ligon on November 30, 1996 in the Court of Common Pleas for the
County of Richland in Columbia,  South Carolina.  Mr. Ligon claimed, among other
things,  that  Affinity  and Mr.  Norris  breached an agreement to give him a 1%
equity  interest in Affinity in  consideration  of services  Mr. Ligon claims to
have performed in 1993 and 1994 in  conjunction  with the formation of Affinity,
and sought monetary damages of $5,463,000.  This lawsuit initially resulted in a
jury verdict against us of $68,000.  However,  Mr. Ligon subsequently  requested
and was granted a new trial. In January 2004,  this lawsuit  resulted in another
jury verdict  against us of $382,148.  In connection with the litigation and the
resulting  jury  verdict,  we filed  post-trial  motions with the trial court in
which, among other things, we claimed that the jury verdict should be set aside.
On July 23,  2004,  the trial  judge  granted  our  motions,  set aside the jury
verdict,  and ordered entry of a judgment in favor of us. The plaintiff appealed
the trial  judge's  ruling to the South  Carolina  Court of Appeals  (the "South
Carolina Appeals Court").  On October 30, 2006, the South Carolina Appeals Court
reversed the trial judge's decision and reinstated the jury verdict of $382,148.
Our petition to the South  Carolina  Appeals  Court for a rehearing of this case
was denied, and we petitioned the South Carolina Supreme Court to hear this case
and to grant us relief from this ruling.  In October 2007, we were notified that
the South  Carolina  Supreme  Court had denied our  petition  to hear this case.
Accordingly,  we have no further  legal  recourse and a judgment will be entered
against us of $382,148,  plus accrued interest. At this time, we do not have the
cash resources to pay this judgment. We will continue to evaluate our options to
resolve or postpone any  payments  related to this  matter;  however,  if we are
required  to pay more  than an  insignificant  amount  in  connection  with this
judgment  in the near  term,  we would be forced to  consider  alternatives  for
winding down our  business,  which may include  offering our patents for sale or
filing for bankruptcy protection.


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<PAGE>


      To date,  we have  generated  substantial  operating  losses and have been
required to use a substantial  amount of cash resources to fund our  operations.
At December 31, 2007, we had cash and cash  equivalents of $50,217 and a working
capital  deficit of  $4,257,741.  We  generally  have been  unable to enter into
licensing  agreements with potential licensees upon terms that are acceptable to
us and, as discussed  above,  we have sought  recourse  through  litigation with
alleged infringers of our patents. Additionally and as also discussed above, our
lawsuits  against the alleged  infringers  have been  dismissed  by the Columbia
Federal Court,  and we have appealed to the Federal  Appeals  Court.  We are not
certain as to the length of time it will take to complete our appeal.  We do not
believe that our existing  cash  resources  will be  sufficient  to complete the
appeals  process and, if successful,  to allow us to complete the prosecution of
our lawsuits against the alleged  infringers.  Accordingly,  to remain viable in
the near term, it is likely that we will be required to raise additional capital
through the sale of debt and/or equity securities or from licensing our patents.
We can give no  assurances,  however,  that we will be able to raise  additional
capital or  generate  capital  from our patent  licensing  business at all or in
amounts sufficient to complete our appeal.  Unless we raise additional  capital,
we may have to consider  alternatives  for winding down our business,  which may
include offering our patents for sale or filing for bankruptcy protection.

      Patent Licensing Agent

      On May 27, 2003,  our  decisioning.com,  Inc.  subsidiary,  which owns our
patent portfolio,  entered into a legal representation  agreement with Withrow &
Terranova,  PLLC ("W&T"), pursuant to which decisioning.com appointed W&T as its
exclusive  representative  for the solicitation and negotiation of agreements to
license our patents.  (This  arrangement  replaced the former  patent  licensing
agent agreement between  decisioning.com and Information  Ventures LLC d/b/a LPS
Group, which was terminated on April 30, 2003.) Under the agreement,  W&T agreed
to promote,  market,  solicit,  and  negotiate the licensing of our patents with
third  parties and to represent  decisioning.com  as legal counsel in connection
with any patent  litigation  associated with the enforcement of our patents.  As
compensation for its services under the agreement, W&T was to receive 25% of all
revenues received by decisioning.com  under any patent agreements and 25% of all
amounts   paid  in   settlement   of  any   patent   litigation   commenced   by
decisioning.com.  The  term of the  agreement  is for the  life of the  patents,
subject to either  party's  right to  terminate  the  agreement  for "cause," as
specified in the agreement, and without cause following the third anniversary of
the agreement.  If the agreement is terminated by  decisioning.com,  W&T will be
entitled to continue to receive  compensation  attributable to patent agreements
negotiated  prior to  termination  and, if such  termination  is without  cause,
compensation for certain future patent agreements.

      In July 2006, we engaged McBride Law, PC (the "McBride Firm") to assist us
and W&T in connection with our patent licensing program and related  litigation.
In conjunction  with the engagement of the McBride Firm we amended our agreement
with W&T and agreed to pay W&T and the  McBride  Firm a fee equal to 19% and 6%,
respectively,  of all  amounts  received  from  parties  against  whom  we  have
commenced  litigation,  all other revenues received by us pursuant to any patent
agreements  (subject to reduction in certain  events),  and all amounts received
from the sale of our  patents.  We have also  agreed to pay W&T and the  McBride
Firm 50% of their billing rates for their services.  Otherwise, the terms of the
agreements  with W&T and McBride  Law are  consistent  with the terms  discussed
above.

      Competition

      The market for  technologies  that  enable  electronic  commerce is highly
competitive  and is  subject  to  rapid  innovation  and  technological  change,
shifting consumer  preferences,  new product  introductions and competition from
traditional  methods  having all or some of the same  features  as  technologies
enabling electronic  commerce.  Competitors in this market have frequently taken
different  strategic  approaches  and  have  launched  substantially   different
products or services in order to exploit the same perceived market  opportunity.
Until the market actually validates a strategy through widespread  acceptance of
a product or  service,  it is  difficult  to identify  all current or  potential
market participants.  There can be no assurance that the technologies covered by
our patents will be competitive technologically or otherwise.


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<PAGE>


      Electronic commerce technologies in general, including the methods covered
by our  patents,  compete  with  traditional  methods for  processing  financial
transactions. The success of our patent licensing efforts will depend in part on
consumer  acceptance of electronic commerce and industry use of systems that are
covered by our patents.

      Intellectual Property

      We were  issued two  patents in 1999  covering  systems  and  methods  for
real-time loan  processing over a computer  network  without human  intervention
("System and Method for Real-time Loan Approval," U.S. Patent No. 5,870,721, and
"Closed-loop  Financial  Transaction  Method  and  Apparatus,"  U.S.  Patent No.
5,940,811). Both of our patents covering fully automated loan processing systems
expire in 2013 and have been subject to  reexamination by the PTO at the request
of third  parties who  challenged  the validity of the  patents.  On January 28,
2003, we received a Reexamination  Certificate  (U.S.  Patent No.  5,870,721 C1)
relating  to the  completion  of the PTO's  reexamination  of U. S.  Patent  No.
5,870,721.  On December 20, 2005, we received a Reexamination  Certificate (U.S.
Patent No.  5,940,811 C1) relating to the completion of the PTO's  reexamination
of U.S. Patent No. 5,940,811.

      In  August  2000,   we  were  issued  a  patent   covering  the  automated
establishment  of a financial  account  without human  intervention  ("Automatic
Financial Account Processing  System," U.S. Patent No.  6,105,007).  This patent
also expires in 2013.  On June 23, 2004, we were notified by the PTO that it had
granted a reexamination  request previously filed by Federated and Ameritrade to
reexamine  U. S.  Patent  No.  6,105,007.  On  July  25,  2006,  we  received  a
Reexamination  Certificate  (U.S.  Patent No.  6,105,007  C1) from the PTO which
formally  concluded the  reexamination  of U.S.  Patent No.  6,105,007 and which
indicated  that the  reexamination  resulted  in the full  allowance  of all the
claims of this patent.

      As  discussed  above,  we  had  lawsuits  pending  against  Federated  and
Ameritrade in the Columbia Federal Court involving our claim that both Federated
and  Ameritrade  infringed  U.  S.  Patent  No.  6,105,007  C1.  We had  similar
litigation  pending  against  Household   International,   Inc.   ("Household"),
involving our claim that Household  infringed U.S. Patent No.  5,870,721 C1, No.
5,940,811 C1 and No. 6,105,007 C1. As also explained above, the Columbia Federal
Court has  dismissed  those  lawsuits  and we are in the  process  of  appealing
certain Markman rulings made by the Columbia Federal Court which we believe were
the basis of the dismissal of our lawsuits.

      Other  parties may take actions to challenge  our patents.  We can make no
assurances  that we will  not  lose  all or some of the  claims  covered  by our
existing patents as the result of such challenges or other litigation, including
actions initiated by us, regarding our patents.

      Our success is completely dependent upon our ability to defend and license
our  patents.  There can be no  assurance  that we will be able to  protect  our
intellectual  property  rights  under  our  patents.  Moreover,  there can be no
assurance that new  technological  innovations  will not be developed and widely
accepted  by the market  which will  render  obsolete  the types of systems  and
methods over which we believe we have proprietary intellectual property rights.

      Employees

      At December 31, 2007 and 2006, we employed 2 full-time employees.  We have
no collective bargaining agreements.


                                       7
<PAGE>


Item 1A. Risk Factors

      An investment in our common stock  involves  numerous types of risks and a
high degree of risk generally.  You should carefully consider the following risk
factors,  in addition to the other  information  contained  in this  report,  in
evaluating our Company and any potential  investment in our common stock. If any
of  the  following  risks  or  uncertainties  occurs,  our  business,  financial
condition and operating results could be materially and adversely affected,  the
trading price of our common stock could decline and you could lose all or a part
of your investment in our common stock. The risks and uncertainties described in
this section are not the only ones facing us. Additional risks and uncertainties
not  presently  known  to us or that  we  currently  deem  immaterial  may  also
materially and adversely  affect our business,  operating  results and financial
condition.

      We have limited capital  resources and have continued to incur significant
operating  losses,  all of which threaten and raise  substantial doubt about our
ability to continue as a going concern.

      We have generated net losses of  $73,422,095  since our inception and have
financed our operations  primarily  through net proceeds from our initial public
offering in May 1996 and cash  generated  from  operations  and other  financing
transactions. Net proceeds from our initial public offering were $60,088,516.

      Our  substantial  operating  losses have  required us to use a substantial
amount of cash  resources to fund our  operations.  Net cash used by  operations
during the year ended December 31, 2007, was $976,761, and at December 31, 2007,
we had a working capital  deficit of $4,257,741.  See Part 1, Item 1, "Business"
and  Part  II,  Item 7,  "Management's  Discussion  and  Analysis  of  Financial
Condition and Results of  Operations--Liquidity."  We generally have been unable
to enter into licensing  agreements with potential licensees upon terms that are
acceptable to us, and have pursued  litigation  against alleged  infringers,  as
described  further  in Part 1,  Item 1,  "Business."  To  pursue  an  appeal  of
unfavorable  rulings  issued  in  December  2006 in a  Markman  hearing,  and to
continue vigorously pursue these lawsuits generally,  we anticipate that we will
need to increase our operating  expenses due to, among other  things,  increased
litigation  costs and related  expenses.  Accordingly,  to remain viable through
2008, it is critical that we raise  additional  capital through the sale of debt
and/or equity  securities or from  licensing our patents.  No assurances  can be
given that we will be able to raise additional  capital or generate capital from
our patent licensing  business.  Unless we raise additional capital, we may have
to  consider  alternatives  for  winding  down our  business,  which may include
offering our patents for sale or filing for bankruptcy protection.

      The report of our  independent  registered  public  accounting firm on our
audited  financial  statements  included  with this report  contains a statement
noting that our recent  history of losses,  combined with other  factors,  raise
substantial doubt about our ability to continue as a going concern. Although our
plans to address these issues are  discussed in Note 1 to the audited  financial
statements included in this report and elsewhere in this report, these plans are
subject  to  numerous  risks and  contingencies,  many of which are  beyond  our
control,  and we can give no  assurance as to whether or how long we may be able
to succeed in addressing  these issues and  maintaining our viability as a going
concern.

      We have  incurred and continue to incur  significant  debt relative to our
revenues  and if we  are  unable  to  repay  this  debt  when  due,  as we  have
experienced in the past, our  operations and  flexibility  may be restricted and
the viability of our Company may be threatened.

      In 2002,  we  initiated a  convertible  note  program  under which we were
authorized  to issue up to  $1,500,000  principal  amount of our 8%  convertible
secured notes (the "notes").  In February 2006, the convertible note program was
amended  to allow us to issue up to  $3,000,000  of our  notes.  Prior to August
2006, we had issued an aggregate of $1,575,336  principal  amount of notes under
this program,  including  notes with an aggregate  principal  amount of $536,336
that have been converted into shares of our common stock.

      These notes bear interest at 8%, are convertible  into our common stock at
a  conversion  rate of $.20 per share (for notes  issued prior to the April 2006
amendment to the program) or $.50 per share (for notes issued in May 2006),  and
are secured by our equity  interest  in our  decisioning.com,  Inc.  subsidiary,
which owns our patent  portfolio.  Principal  and  interest  under  these  notes
generally becomes payable in full on the second anniversary of the date on which
these notes were issued.  However, under the terms of the notes, the full amount
of principal and interest  under all notes may be declared  immediately  due and
payable in certain events, including bankruptcy or similar proceedings involving
us, a default in the payment of  principal  and  interest  under any note,  or a
change in control of the Company.


                                       8
<PAGE>


       From June 2004 through August 2006, we were in default  regarding payment
of principal and interest due under certain of the notes. Accordingly,  the full
amount of principal and interest  outstanding under all notes was payable at the
option of all  noteholders.  At December 31, 2005,  the amount of principal  and
accrued interest outstanding under all of the notes was $1,595,906.

      In August 2006, we and the holders of all  outstanding  notes entered into
an amended and restated note purchase  agreement under which such holders agreed
to extend the maturity  date of such notes by  exchanging  them  (including  all
interest  accrued  thereon)  for new  two-year  notes due in August  2008 in the
aggregate  principal  amount of  $1,268,027.  Under the  amended  note  purchase
agreement,  we may  issue  notes  in the  aggregate  principal  amount  of up to
$5,000,000  (including the notes issued to current noteholders,  as described in
the  preceding  sentence)  having an exercise  price  determined  by us and each
investor at the time of issuance.

      The new notes  issued in August  2006 have the same terms as the old notes
exchanged therefor, except that the new notes will mature in August 2008. Of the
new notes issued,  notes with a principal  amount of $1,115,068 are  convertible
into  shares of our common  stock at $.20 per share,  and notes with a principal
amount of $152,959 are  convertible  into shares of our common stock at $.50 per
share.  The new notes include a note in the principal  amount of $166,863 issued
to our Chief  Executive  Officer and a note in the principal  amount of $122,115
issued to a subsidiary of The South Financial  Group.  The South Financial Group
Foundation,  a non-profit  foundation  established by the South Financial Group,
owns approximately 10% of our outstanding capital stock.

      In September 2006, we sold additional  convertible  notes in the aggregate
principal  amount of  $1,905,000.  The terms of these  notes are the same as the
notes we previously  issued,  except that they may be converted  into our common
stock at a rate of $.42 per share.

      Although our  refinancing in August 2006 (due in August 2008) of the notes
under which we were  previously in default and our additional  issuance of notes
in September 2006 (due in September  2008) have afforded us additional  time and
resources to execute our  business  strategy,  we can give no assurance  that we
will be  successful in doing so or in  generating  revenues  sufficient to repay
this  indebtedness  when due. In such an event,  the  lenders  under these notes
would have the option to declare  all amounts  under the notes due and  payable,
and our resulting inability to pay could force us to liquidate or otherwise wind
down our  business  operations,  including  our possible  filing for  bankruptcy
protection and the potential loss of our patents  through sale or foreclosure by
the holders of the notes pursuant to their security interest in our patents.

      Our business  depends  exclusively on the success of our patent  licensing
program, which if unsuccessful, will threaten our survival.

      Due to capital  constraints,  we have suspended efforts to deploy our loan
processing  products and services.  Our business  activities  currently  consist
exclusively of attempting to license  certain of our patents.  Our prospects are
wholly  dependent  on our ability to finance and  execute a  sustainable  patent
licensing program.  Even though we believe there are companies that may be using
systems,  processes and methods covered by our patents,  it is not known whether
we will be able to enter into any new licensing agreements. Moreover, we may not
have the resources to sustain our patent licensing  program,  enforce our patent
rights,  finance  any  related  litigation,  or  successfully  negotiate  patent
licenses on terms that will generate meaningful future revenues.

      We are  further  subject  to the risk that  negotiations  to  license  our
patents may be lengthy and that it may be necessary for us to become involved in
additional litigation to assert and protect our intellectual property rights. To
date,  we generally  have been unable to enter into  licensing  agreements  with
potential  licensees upon terms that are acceptable to us. As a result,  we have
been forced to become involved in litigation with alleged infringers. Currently,
we are  involved  in the  appeal of  adverse  rulings  related  to three  patent
litigation actions. We believe that this appeal and, if successful,  the related
lawsuits,  may  take an  extended  period  of time to  complete.  We can give no
assurance that we will have the resources  necessary to complete our appeal and,
if successful, the related lawsuits or that we will be successful in obtaining a
favorable  outcome.  Prolonged  patent  litigation could have a material adverse
effect on our business, operating results and financial position.


                                       9
<PAGE>


      Challenges  to our patents could  significantly  diminish or eliminate any
potential value these patents may have to us.

      All of our  patents  have been  subject to  reexamination  by the PTO as a
result of challenges  to such patents by third  parties.  Additionally,  we have
pursued lawsuits against alleged infringers of our patents. For more information
regarding these reexaminations and lawsuits,  see Part I, Item 1, "Business." In
conjunction with these lawsuits, a Markman hearing was held in December 2006, in
which the court  interpreted  certain of our  patent's  claim  terms in a manner
unacceptable  and  unfavorable  to us.  Unless  we can  obtain a more  favorable
interpretation of the claim terms,  through our appeal of the ruling,  which may
require substantial  resources and extended time to complete,  it is likely that
the scope of our patents would be significantly limited.

      Defendants in these  lawsuits have  challenged the validity of our patents
by requesting reexaminations and otherwise, and we expect that current or future
defendants  will  continue to  challenge  the validity of our patents and assert
non-infringement  as a defense. It is also possible that other third parties may
bring additional actions to contest all or some of our patents.  We may lose all
or some of the claims covered by our existing patents as a result of existing or
future  challenges.  The  loss  of all or some of our  claims  or a  significant
limitation of such claims could have a material adverse effect on our ability to
execute a  successful  patent  licensing  program.  Moreover,  if other  parties
request  reexaminations of or otherwise  challenge our patents in the future, we
are  subject  to the  risk  that  such  proceeding  may not be  resolved  to our
satisfaction  on a  timely  basis,  if at all.  Any such  proceeding  may have a
material  adverse  effect  on our  business,  operating  results  and  financial
position.  Further,  in the  event  a  challenge  to our  patents  results  in a
significant loss of all or some of our claims, our only remedy may be to contest
the  decision,  which  would  likely be a lengthy  process.  Due to our  limited
capital resources,  we do not believe that we could successfully  contest such a
decision without additional cash resources.

      If the  e-commerce  channels and processes on which our patents depend are
rendered  obsolete,  incompatible,  or undesirable due to changes in technology,
the  underlying  laws  governing  patents,   shifting  consumer  preferences  or
competition  from products and services  delivered by more  traditional or other
means,  our business and the potential  value of our patents would be materially
and adversely affected.

      Our patents are specific to the  e-commerce  businesses  of the  financial
services  industry and  generally  cover the automated  establishment  of loans,
financial  accounts  and  credit  accounts  using  specific  e-commerce  related
systems, processes and methods. The market for products and services that enable
e-commerce is subject to change and technological development, shifting consumer
preferences, new product introductions and competition from traditional products
and  services  having all or some of the same  features as products and services
which enable e-commerce. It is possible that new products or technologies may be
developed that may render obsolete the systems, processes and methods over which
we believe we have  intellectual  property  rights.  Moreover,  the  delivery of
products and services through  e-commerce  channels is not fully developed,  and
competition  from  traditional  channels  to  deliver  these same  products  and
services  is  intense.  Any  wide-scale  rejection  of  e-commerce  channels  by
consumers will have a material adverse effect on our business, operating results
and financial position.

      Because  of the  highly  technical  and  specialized  business  of  patent
licensing,  our success depends on the expertise and efforts of third parties we
engage at significant expense.

      Patent  licensing is a highly  technical and  specialized  business  which
requires  that we rely on the  services  of  third  parties.  We have  appointed
Withrow & Terranova, PLLC ("W&T") as our exclusive patent licensing agent. Under
the terms of the  agreement,  W&T has  agreed,  among other  things,  to perform
market  research,  initiate the sales of patent  license  agreements,  negotiate
patent  licensing  arrangements  with third  parties,  and represent us as legal
counsel in connection with the enforcement of our patents.  Accordingly,  we are
dependent  on the efforts of W&T to  successfully  execute our patent  licensing
program.  Additionally,  the agreement requires W&T to coordinate the engagement
of experts,  on terms  satisfactory  to us, if litigation  becomes  necessary to
enforce  our patent  rights.  Moreover,  experts  frequently  request and charge
significant fees. In addition,  because of the specialized knowledge required to
perform  these  duties,  we may not be able to  critically  evaluate the advice,
efforts,  judgments and recommendations of these experts and to know whether our
interests would be better served by additional or different advice or expertise.
To the extent the advice,  efforts,  judgments or  recommendations  of our third
party  experts  prove  inferior  to other  alternatives,  our  patent  licensing
program,  business  prospects  and financial  condition  may be  materially  and
adversely affected.


                                       10
<PAGE>


      Our quarterly results tend to fluctuate significantly,  which could have a
material adverse effect on the price of our common stock.

      Since inception,  our quarterly  results have fluctuated and have not been
susceptible to meaningful  period-to-period  comparisons. We believe that we may
continue to  experience  significant  fluctuations  in our  quarterly  operating
results in the  foreseeable  future.  We  anticipate  that our  period-to-period
revenue and  operating  results will depend on numerous  factors,  including our
ability to successfully negotiate and enter into patent licensing agreements and
the timing, terms and the pricing attributes of any such agreements.

      We believe that period-to-period  comparisons of our operating results are
not  meaningful  and  should  not be  relied  upon as an  indication  of  future
performance.  The  uncertainty  regarding the extent and timing of our revenues,
coupled with the risk of  substantial  fluctuations  in our quarterly  operating
results may have a material adverse effect on the price of our common stock.

      The loss of the services of our Chairman,  President  and Chief  Executive
Officer  could have a material  adverse  effect on our business and our existing
financial  condition and adversely  affect our ability to recruit and retain key
employees and executives to further our business interests.

      We are highly  dependent on the services of our  Chairman,  President  and
Chief  Executive  Officer,  Joseph  A.  Boyle,  but do not  have  an  employment
agreement  with Mr. Boyle or "key man"  insurance on his life. The complete loss
of the  services  of Mr.  Boyle  could  have a  material  adverse  effect on our
business,  operating  results and  financial  condition.  Based on our  existing
financial condition,  we maintain a minimal staff and have not sought to recruit
new key  employees  and  executives  who possess the  experience,  knowledge and
skills to assist us in  furthering  our  business  interests  or  expanding  our
operations.  In any event,  we believe that it would be difficult to attract and
retain such employees in light of our existing financial condition.

      We  have  a  significant   number  of  securities   outstanding  that  are
convertible  into our common stock, and the conversion of these securities could
result in substantial dilution to existing stockholders.

      We have issued  notes that are  convertible  into  common  stock at $0.20,
$0.50 and $0.42 per share,  which conversion prices could be substantially  less
than the  market  price of the  common  stock  at the  time of  conversion.  The
issuance  of stock at a price that is less than the market  price  could have an
immediate  adverse effect on the market price of our common stock.  In addition,
we have issued options and warrants to acquire  shares of our common stock.  See
Notes 4 & 5 to our audited financial statements included in this report for more
information  regarding these  convertible  notes,  options and warrants.  We may
issue  additional  convertible  notes or warrants in connection  with  financing
arrangements  and may grant additional stock options that may further dilute our
common stock.  The exercise of such  securities  would have a dilutive effect on
our common stock.  Also, to the extent that persons who acquire shares under all
the foregoing  agreements sell those shares in the open market, the price of our
shares may decrease due to additional shares in the market.

      Our  common  stock is  subject to  significant  fluctuations  in price and
volume,  which  could  cause  rapid and  significant  losses in the value of our
common stock and subject us to litigation from stockholders.

      Our common stock price has been volatile and has  experienced  substantial
and  sudden  fluctuations  in  response  to a number of events and  factors.  In
addition,  the  stock  market  has  experienced  significant  price  and  volume
fluctuations  that  have  especially   affected  the  market  prices  of  equity
securities of many companies directly and indirectly  involved in the technology
sector, and that often have been unrelated to the operating  performance of such
companies.  These broad  market  fluctuations  have  adversely  affected and may
continue to adversely  affect the market price of our common stock. In the past,
following  periods of volatility in the market price of a company's  securities,
securities  class action  litigation  has often been  instituted  against such a
company.  The  institution  of  such  litigation  against  us  could  result  in
substantial costs and a diversion of management's attention and resources, which
would have a material  adverse  effect on our  business,  operating  results and
financial condition.


                                       11
<PAGE>


      Our  common  stock is  considered  a penny  stock  and is not  traded on a
regulated  market such as NASDAQ or a major  stock  exchange.  Accordingly,  our
common stock may be more difficult to trade,  and investors may lose the benefit
of certain  rules and  regulations  that govern  securities  traded in regulated
markets.

      Our common stock is traded on the OTC Bulletin  Board.  Securities  in the
OTC  market  are  generally  more  difficult  to trade  than those on the NASDAQ
National  Market,  the NASDAQ SmallCap Market or the major stock  exchanges.  In
addition, accurate price quotations are also more difficult to obtain.

      The  trading  market  for our  common  stock is also  subject  to  special
regulations  governing  the sale of penny stock.  A "penny  stock" is defined by
regulations of the Securities and Exchange Commission as an equity security with
a market  price of less than $5.00 per share.  If you buy or sell a penny  stock
from a broker or dealer,  these regulations  require that you receive,  prior to
the transaction,  a disclosure  explaining the penny stock market and associated
risks.  Furthermore,  trading in our common stock is  generally  subject to Rule
15g-9 of the Exchange  Act.  Under this rule,  broker-dealers  who recommend our
securities to persons other than established  customers and accredited investors
must make a special  written  suitability  determination  for the  purchaser and
receive the purchaser's written agreement to a transaction prior to sale.

      Penny stock  regulations  tend to reduce  market  liquidity  of our common
stock,  because  they  limit  the  broker-dealers'   ability  to  trade,  and  a
purchaser's  ability to sell the stock in the secondary market. The low price of
our common  stock will have a negative  effect on the amount and  percentage  of
transaction costs paid by individual  shareholders.  The low price of our common
stock  may also  limit  our  ability  to raise  additional  capital  by  issuing
additional shares.

      In  addition,  companies  whose  securities  are listed on NASDAQ or other
major stock exchanges are required to comply with certain  corporate  governance
and  disclosure  requirements  that are  designed to protect  investors in those
stocks. Because our common stock is not so regulated,  our observance of many of
these requirements and practices is not mandated, and to the extent we determine
not  to  observe  such  practices  or  are  unable  to do  so  because  of  cost
constraints,  investors  in our common  stock will not have the benefit of these
protections,  and the price of our common stock may be materially  and adversely
affected.

      Certain  provisions  of Delaware  law and our  governing  documents  could
prevent or delay a change in control of our Company,  and could adversely affect
the value of our common stock.

      Certain  provisions  of  Delaware  law and the  Company's  Certificate  of
Incorporation and bylaws could have the effect of making it more difficult for a
third party to acquire,  or of  discouraging  a third party from  attempting  to
acquire,  control of the  Company.  Such  provisions  could limit the price that
certain investors might be willing to pay in the future for shares of our common
stock. These provisions of Delaware law and our Certificate of Incorporation and
bylaws may also have the effect of discouraging  or preventing  certain types of
transactions  involving an actual or threatened change of control of the Company
(including  unsolicited  takeover attempts),  even though such a transaction may
offer our  stockholders the opportunity to sell their stock at a price above the
prevailing market price. Certain of these provisions allow us to issue preferred
stock with  rights  senior to those of the common  stock and other  rights  that
could  adversely  affect the  interests of holders of common  stock  without any
further vote or action by our stockholders. The issuance of preferred stock, for
example,  could  decrease  the  amount  of  earnings  or  assets  available  for
distribution to the holders of common stock or could adversely affect the rights
and powers,  including  voting  rights,  of the holders of the common stock.  In
certain  circumstances,  such issuance  could have the effect of decreasing  the
market price of the common stock,  as well as having the  anti-takeover  effects
discussed above.


                                       12
<PAGE>


Item 1B.  Unresolved Staff Comments

      Not applicable.

Item 2.  Properties

      Our  principal  executive  offices are located at 1310 Lady Street,  Suite
601, in Columbia,  South Carolina.  Such office space encompasses  approximately
900 square  feet and is  currently  under a prepaid  two-year  lease  which will
expire in December  2008.  We also lease  warehouse  space  located in Columbia,
South Carolina, which encompasses approximately 4,000 square feet. Such space is
under a month-to-month lease.

Item 3.  Legal Proceedings

      The  information  above in Part I,  Item 1,  "Business--Patents  and Legal
Matters," is incorporated herein by reference in response to this Item 3.

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

      Not applicable.

Item 4A.  Executive Officers

      The  information  regarding our executive  officers set forth in Part III,
Item  10  of  this  report  under  "Directors  and  Executive  Officers  of  the
Registrant" is incorporated herein in response to this Item 4A.


                                       13
<PAGE>


Part II

Item 5. Market for Registrant's  Common Equity,  Related  Stockholder  Matters
and Issuer Purchases of Equity Securities

(a)   Since  February  12,  2001,  our  common  stock  has  traded  on the OTC
         Bulletin  Board under the symbol  "AFFI." Our common  stock traded on
         the Nasdaq  SmallCap  Market  from  March 27,  2000 to  February  12,
         2001.  Prior to March  27,  2000,  the  Company's  common  stock  was
         traded on the Nasdaq  National  Market.  The following table presents
         the high and low sales  prices of our  Common  Stock for the  periods
         indicated  during  2007  and  2006 as  reported  by the OTC  Bulletin
         Board. The quotations  reflect  inter-dealer  prices,  without retail
         mark-up,  mark-down  or  commissions  and  may not  represent  actual
         transactions.  As of March 13,  2008,  there were  approximately  415
         stockholders of record of our Common Stock.

                                                   Sales Price Per
                                                   ---------------
                                                        Share
                                                        -----
                                                     High        Low
                                                     ----        ---
                     2007
                     First Quarter                   0.20       0.07
                     Second Quarter                  0.16       0.06
                     Third Quarter                   0.10       0.07
                     Fourth Quarter                  0.19       0.07
                     2006
                     First Quarter                   0.85       0.08
                     Second Quarter                  0.82       0.16
                     Third Quarter                   0.60       0.15
                     Fourth Quarter                  0.50       0.15

         On March 13, 2008, the high and low sales prices of our common stock on
         the OTC Bulletin Board were $ 0.14 and $ 0.13, respectively.

         We have never paid dividends on our capital stock.  We intend to retain
         earnings,  if any, for use in our business and do not anticipate paying
         any cash dividends in the foreseeable future.

         On November 22, 2007, The Company issued 1,875,000 shares of its common
         stock to Withrow and Terranova, PLLC ("W&T), the Company's patent agent
         and counsel in consideration of $150,000 in legal services  provided in
         connection  with our appeal to the Federal Appeals Court of the adverse
         rulings of the Columbia  Federal Court as described  under Part I, Item
         I, "Business - Patents and Legal Matters." These securities were issued
         in an exempt private  transaction  not involving any public offering in
         reliance on  exemptions  under  Section 4(2) of the  Securities  Act of
         1933.

(b)   Not applicable

(c)   Not applicable


                                       14
<PAGE>


Item 6.  Selected Financial Data

      The following  table presents  selected  financial data of the Company for
the  periods  indicated.   The  following  financial  data  should  be  read  in
conjunction  with the information set forth under  "Management's  Discussion and
Analysis of Financial  Condition and Results of  Operations,"  our  Consolidated
Financial  Statements and Notes thereto and other information included elsewhere
in this report.

<TABLE>
<CAPTION>
<S>                            <C>           <C>             <C>            <C>            <C>
                                                       Year Ended December 31,
                                  2007          2006           2005           2004           2003
                              ------------- -------------- -------------- -------------- --------------
Statement of Operations Data:
Revenues                       $    33,333   $     33,333    $    20,261    $   287,298    $   517,647
                              ------------- -------------- -------------- -------------- --------------
Cost and expenses:
    Cost of revenues                 3,333          3,333          2,026         64,265          1,765
    General and administrative
      expenses                   1,271,864      2,606,386        486,607        732,285        996,711
                              ------------- -------------- -------------- -------------- --------------
Total costs and expenses         1,275,197      2,609,719        488,633        796,550        998,476
                              ------------- -------------- -------------- -------------- --------------
Operating loss                  (1,241,864)    (2,576,386)      (468,372)      (509,252)      (480,829)
Interest income                     14,964         17,907            182          1,967            694
Interest expense                  (251,254)      (141,043)       (98,197)       (95,990)       (80,373)
Litigation accrual reversal              -              -              -        386,148              -
                              ------------- -------------- -------------- -------------- --------------
Net loss                       $(1,478,154)  $ (2,699,522)   $  (566,387)   $  (217,127)   $  (560,508)
                              ============= ============== ============== ============== ==============
Loss per share - basic and
 diluted                       $     (0.03)  $      (0.06)   $     (0.01)   $     (0.01)   $     (0.01)
                              ============= ============== ============== ============== ==============
Shares used in computing
    net loss per share          45,467,740     44,194,562     42,207,884     41,926,272     41,512,897
                              ============= ============== ============== ============== ==============
</TABLE>


<TABLE>
<CAPTION>
<S>                             <C>                <C>            <C>               <C>               <C>
                                                                     December 31,
                                    2007               2006           2005              2004              2003
                                ----------------- -------------- -------------- ----------------- --------------------
Balance Sheet Data:
Cash and cash equivalents       $     50,217       $  1,026,978   $     13,776      $     62,756      $    578,398
Working capital                   (4,257,741)           (34,451)    (1,992,056)       (1,524,772)         (909,356)
Total assets                         133,712          1,112,246        152,311           121,240           618,002
Convertible notes and accrued
 interest                          3,476,342  (2)     3,225,089      1,595,906   (2)   1,383,149  (2)    1,291,841 (1)
Stockholder's deficiency          (4,251,364)        (3,279,752)    (2,048,371)       (1,513,523)       (1,329,579)
</TABLE>
--------------------------------
(1)  Of the amount  outstanding  under the convertible  notes as of December 31,
     2003, $756,336 was classified as a current liability and,  accordingly,  is
     included in the working  capital of the Company at December 31,  2003,  set
     forth above.

(2)  All amounts  outstanding  under the  convertible  notes as of December  31,
     2007,  2005  and  2004,  were  classified  as  a  current   liability  and,
     accordingly, are included in the working capital of the Company at December
     31, 2007, 2005 and 2004, set forth above.


                                       15
<PAGE>


Item 7.     Management's Discussion and Analysis of Financial Condition and
Results of Operations

Overview

      Affinity was formed in 1994 to develop and market technologies that enable
financial  institutions  and other  businesses  to  provide  consumer  financial
services  electronically with reduced or no human  intervention.  Due to capital
constraints,  we have suspended efforts to deploy products and services that use
our  loan  processing  system,   DeciSys/RT,  in  order  to  focus  our  efforts
exclusively  on attempting  to license  certain of our patents.  Currently,  our
business  activities  consist  exclusively  of  attempting to enter into license
agreements with third parties to license our rights under certain of our patents
and in  pursuing  patent  litigation  in an effort to protect  our  intellectual
property  and obtain  recourse  against  alleged  infringement  of our  patents.
Accordingly,  our prospects are wholly dependent on these efforts to finance and
execute a sustainable patent licensing program.

      As more fully  described above in Part I, Item 1,  "Business--Patents  and
Legal  Matters" in  conjunction  with our  product  development  activities,  we
applied for and obtained three patents, two of which cover  fully-automated loan
processing systems and one of which covers the fully-automated  establishment of
a financial account,  including credit accounts.. All of these patents have been
subject to  reexamination  by the U.S. Patent and Trademark  Office ("PTO") as a
result of third party  challenges.  It is possible  that third parties may bring
additional  actions to contest  all or some of our  patents,  and we can give no
assurance  that we will  not  lose  all or some  of the  claims  covered  by our
existing patents.

      In  addition,   as  described   more  fully  above  in  Part  I,  Item  1,
"Business--Patents  and Legal  Matters,"  we have been  involved  in lawsuits to
determine whether our patents are being infringed.  In December 2006, a "Markman
Hearing"  was  held in  connection  with  these  infringement  actions.  Markman
hearings  are  proceedings  under  U.S.  patent  law  in  which  plaintiffs  and
defendants  present  their  arguments  to the court as to how they  believe  the
patent claims - which define the scope of the patent  holder's  rights under the
patent - should be interpreted  for purposes of determining at trial whether the
patents have been infringed. For purposes of the Markman hearing, the Federated,
TD Ameritrade and HSBC cases were  consolidated into one hearing and held by the
United States  District  Court for the State of South  Carolina  (the  "Columbia
Federal Court").  As a result of the Markman  proceedings,  the Columbia Federal
Court  interpreted  and construed the meaning of numerous claim terms which bear
on the scope of the  patents.  Although  most claim  terms were  construed  in a
manner we believe are  favorable,  the trial  judge  interpreted  and  construed
certain claim terms,  most notably those related to the term "remote  interface"
as claimed in our second loan processing  patent (U.S.  Patent No. 5,940,811 C1)
and our financial  account  patent (U.S.  Patent No.  6,105,007 C1), in a manner
unacceptable and unfavorable to us. In these patents,  the Court interpreted and
construed  "remote  interface" to mean computer  equipment,  including  personal
computer equipment,  that is not owned by a consumer.  The Court applied no such
limitation  in  construing  the term  "remote  interface"  under our first  loan
processing patent (U.S. Patent No. 5,870,721 C1).

      We appealed to the U.S.  Court of Appeals  for the  Federal  Circuit  (the
"Federal Appeals Court") and have requested the Federal Appeals Court to reverse
certain of the Markman  rulings made by the Columbia  Federal Court and grant to
us more  favorable  interpretations  and  definitions  related to certain of the
claim terms in our patents.  Additionally,  the  defendants  have  requested the
Federal  Appeals Court to reverse  certain  Markman rulings that we believe were
favorable to us. Oral  arguments in our cases were heard by the Federal  Appeals
Court on December 3, 2007. Unless we can obtain a more favorable  interpretation
of certain claim terms and maintain the favorable rulings we obtained during the
Markman hearing,  it is possible the scope of our patents could be significantly
limited. Furthermore, we believe it is unlikely that the U.S. Supreme Court, the
only  further  appeals  body beyond the Federal  Appeals  Court,  will review or
reconsider  their rulings and,  therefore,  we believe that the Federal  Appeals
Court's rulings will be dispositive  and will probably  determine the outcome of
our business. Moreover, we believe that the rulings made by the Columbia Federal
Court, including the Markman rulings that necessitated our appeal to the Federal
Appeals  Court,  has and will  continue  to hinder our  ability  to license  our
patents.  Further, our appeal will likely require substantial  resources and may
require  an  extended  period of time to  complete,  which  will in turn  likely
increase the already  significant  costs and expected time required to prosecute
our existing  infringement  actions.  We do not believe  that our existing  cash
resources  will be  sufficient  to enable us to  complete  our  appeal  and,  if
successful,  to complete the  prosecution  of our  lawsuits  against the alleged
infringers.  Accordingly,  to remain  viable in the near term, it is likely that
the Company  will be required to raise  additional  capital  through the sale of
debt and/or  equity  securities or from  licensing  our patents.  We can give no
assurance that, in such event, we will be able to raise the resources  necessary
to complete our appeal.  We also can give no assurance that, even if we are able
to finance  our appeal to  completion,  such  appeal  will result in a favorable
outcome.  Even if we are  successful in pursuing our appeal to completion  and a
favorable  outcome,  we cannot  assure  you that we will  then  have  sufficient
funding to continue our underlying  lawsuits or that such lawsuits would succeed
in obtaining a favorable outcome for us.


                                       16
<PAGE>


      In addition, we and our founder, Jeff Norris, were defendants in a lawsuit
filed by Temple  Ligon on November 30, 1996 in the Court of Common Pleas for the
County of Richland in Columbia,  South Carolina.  Mr. Ligon claimed, among other
things,  that  Affinity  and Mr.  Norris  breached an agreement to give him a 1%
equity  interest in Affinity in  consideration  of services  Mr. Ligon claims to
have performed in 1993 and 1994 in  conjunction  with the formation of Affinity,
and sought monetary damages of $5,463,000.  This lawsuit initially resulted in a
jury verdict against us of $68,000.  However,  Mr. Ligon subsequently  requested
and was granted a new trial. In January 2004,  this lawsuit  resulted in another
jury verdict  against us of $382,148.  In connection with the litigation and the
resulting  jury  verdict,  we filed  post-trial  motions with the trial court in
which, among other things, we claimed that the jury verdict should be set aside.
On July 23,  2004,  the trial  judge  granted  our  motions,  set aside the jury
verdict,  and ordered entry of a judgment in favor of us. The plaintiff appealed
the trial  judge's  ruling to the South  Carolina  Court of Appeals  (the "South
Carolina Appeals Court").  On October 30, 2006, the South Carolina Appeals Court
reversed the trial judge's decision and reinstated the jury verdict of $382,148.
Our petition to the South  Carolina  Appeals  Court for a rehearing of this case
was denied, and we petitioned the South Carolina Supreme Court to hear this case
and to grant us relief from this ruling.  In October 2007, we were notified that
the South  Carolina  Supreme  Court had denied our  petition  to hear this case.
Accordingly,  we have no further  legal  recourse and a judgment will be entered
against us of $382,148,  plus accrued interest. At this time, we do not have the
cash resources to pay this judgment. We will continue to evaluate our options to
resolve or postpone any  payments  related to this  matter;  however,  if we are
required  to pay more  than an  insignificant  amount  in  connection  with this
judgment  in the near  term,  we would be forced to  consider  alternatives  for
winding down our  business,  which may include  offering our patents for sale or
filing for bankruptcy protection.

      To date,  we have  generated  substantial  operating  losses and have been
required to use a substantial  amount of cash resources to fund our  operations.
At December 31, 2007, we had cash and cash  equivalents of $50,217 and a working
capital  deficit of  $4,257,741.  We  generally  have been  unable to enter into
licensing  agreements with potential licensees upon terms that are acceptable to
us and, as discussed  above,  we have sought  recourse  through  litigation with
alleged infringers of our patents. Additionally and as also discussed above, our
lawsuits  against the alleged  infringers  have been  dismissed  by the Columbia
Federal Court,  and we have initiated an appeal to the Federal Appeals Court. We
are not certain as to the length of time it will take to complete our appeal. We
do not believe that our existing cash  resources  will be sufficient to complete
the appeals process and, if successful,  to allow us to complete the prosecution
of our lawsuits against the alleged infringers. Accordingly, to remain viable in
the near term, it is likely that we will be required to raise additional capital
through the sale of debt and/or equity securities or from licensing our patents.
We can give no  assurances,  however,  that we will be able to raise  additional
capital or  generate  capital  from our patent  licensing  business at all or in
amounts sufficient to complete our appeal.  Unless we raise additional  capital,
we may have to consider  alternatives  for winding down our business,  which may
include offering our patents for sale or filing for bankruptcy protection.

      The report of our  independent  registered  public  accounting firm on our
audited  financial  statements  included  with this report  contains a statement
noting that our recent  history of losses,  combined with other  factors,  raise
substantial doubt about our ability to continue as a going concern. Although our
plans to address these issues are  discussed in Note 1 to the audited  financial
statements included in this report and elsewhere in this report, these plans are
subject  to  numerous  risks and  contingencies,  many of which are  beyond  our
control,  and we can give no  assurance as to whether or how long we may be able
to succeed in addressing  these issues and  maintaining our viability as a going
concern.

Critical Accounting Policies

      We apply certain accounting  policies which are important in understanding
our results of  operations  and the  information  presented in the  consolidated
financial statements.  We consider critical accounting policies to be those that
require more  significant  judgments  and  estimates in the  preparation  of our
financial  statements  and include the  valuation  reserve on net  deferred  tax
assets. We record a valuation allowance to reduce our deferred tax assets to the
amount that we estimate is more likely than not to be  realized.  As of December
31, 2007, we recorded a valuation allowance that reduced our deferred tax assets
to zero.


                                       17
<PAGE>


Results of Operations

      Revenues.  Our revenues from continuing  operations were $33,333,  $33,333
and $20,261 for the years ended December 31, 2007, 2006 and 2005,  respectively.
The types of revenue we recognized are as follows:

<TABLE>
<CAPTION>
<S>                     <C>             <C>     <C>            <C>     <C>                 <C>
                                            Years ended December 31,
                              2007                    2006                     2005
                      ----------------------- ---------------------- ---------------------------
                          Amount       % of      Amount      % of       Amount         % of
                                      Total                  Total                     Total
                      -------------- -------- ------------ --------- ------------- -------------
Patent license revenue  $     33,333    100.0   $   33,333     100.0   $    20,261         100.0
</TABLE>

      Patent license revenue. We recognized patent licensing revenue of $33,333,
$33,333  and $20,261 in 2007,  2006 and 2005,  respectively.  In 2007,  2006 and
2005, we recognized patent licensing revenue associated with the annual fee from
one patent license agreement executed in 1999.


Costs and Expenses

      Costs of  Revenues.  Costs of revenues  for the years ended  December  31,
2007,  2006 and 2005  were  $3,333  $3,333  and  $2,026,  respectively.  Cost of
revenues consists of commissions paid to our patent licensing agents.

      General and Administrative  Expenses.  General and administrative  ("G&A")
expenses  for the year ended  December  31,  2007 were  $1,271,864,  compared to
$2,606,386  and  $486,607  for the  years  ended  December  31,  2006 and  2005,
respectively.  G&A expenses have  fluctuated  significantly  over the past three
years and depend to a great extent on the level of our business  activities  and
particularly,  the level of litigation in which we are involved in a period. The
components of G&A expenses incurred in 2007, 2006 and 2005 are as follows:

<TABLE>
<CAPTION>
<S>                       <C>                   <C>        <C>         <C>   <C>               <C>
                                       Years ended December 31,
                                    2007                      2006                   2005
                        ---------------------------- ---------------------- -----------------------
                           Amount          % of          Amount      % of     Amount       % of
                                          Total                      Total                 Total
                        ------------- -------------- -------------- ------- ----------- -----------
Salaries and benefits     $   400,846           31.5       $268,381    10.3  $  248,415        51.1
Stock-based compensation      356,542           28.0        874,081    33.5           -           -
Professional fees             416,583           32.8        971,773    37.3     138,768        28.5
Litigation accrual                  -              -        382,148    14.7           -           -
Insurance                      47,530            3.7         47,078     1.8      54,251        11.1
Rent                           29,184            2.3         20,518     0.8      25,820         5.3
Other                          21,179            1.7         42,407     1.6      19,353         4.0
                        ------------- -------------- -------------- ------- ----------- -----------
                          $ 1,271,864          100.0     $2,606,386   100.0  $  486,607       100.0
                        ============= ============== ============== ======= =========== ===========
</TABLE>


      G&A expenses decreased by $1,334,522 in 2007 compared to 2006. The overall
decrease was primarily  attributable  to decreases in stock-based  compensation,
professional fees and a nonrecurring  litigation accrual which was recognized in
2006 and explained further below. The overall decrease was offset by an increase
of $132,465 in salaries and  benefits  expenses in 2007  compared to 2006.  This
increase was due to the full-time  employment of our Chief Executive  Officer in
2007 (compared to part-time  employment in 2006) and higher rates of pay for our
employees in 2007  compared to 2006.  Professional  fees  decreased in 2007 as a
result of lower levels of activity associated with our patent litigation in 2007
compared to 2006.  In 2007,  stock-based  compensation  consisted  solely of the
recognition of expenses associated with stock options issued in periods prior to
2007. As more fully  explained  below,  we issued a substantive  number of stock
options and warrants in 2006.


                                       18
<PAGE>


      G&A expenses  increased  $2,119,779 in 2006 compared to 2005. As indicated
in the above table, G&A expenses increased $2,089,234 as a result of an increase
in stock  compensation,  professional fees and a litigation accrual. In 2006, we
issued  options  to  our   executives  and  directors  in  conjunction   with  a
non-qualified  option  plan  adopted by our Board of  Directors.  We also issued
warrants to our investment  advisor for services  associated with the investment
advisor's assistance in raising capital and other advisory services. As a result
of  the  option  and  warrant  grants,   we  recognized   non-cash   stock-based
compensation  expense of $874,081.  Professional fees increased $833,005 in 2006
compared to 2005, most of which was related to our patent infringement lawsuits.
In March 2006,  we were notified by the PTO that the  reexamination  of our U.S.
Patent No.  6,105,007 had been  concluded.  The conclusion of the  reexamination
resulted in the lifting of the stays of our patent  infringement  lawsuits  with
Federated,  TD Ameritrade and HSBC. The lawsuits  proceeded during the remainder
of 2006 with a corresponding  increase in legal and other  professional fees. We
also accrued  $382,148 to reflect the  reinstatement by the South Carolina Court
of Appeals of a jury verdict previously set aside by the trial judge in 2004.

Interest Income

      Interest  income was  $14,964,  $17,907  and $182 in 2007,  2006 and 2005,
respectively,  and primarily  reflects interest income  attributable to our cash
balances. The decrease in interest income in 2007 compared to 2006 is related to
lower  average cash  balances in 2007.  The increase in interest  income in 2006
over 2005, is related to the interest  earned on cash balances  associated  with
the sale of our convertible  notes in September 2006 in the aggregate  principal
amount of $1,905,000.

Interest Expense

      Interest  expense was  $251,254,  $141,043  and $98,197 in 2007,  2006 and
2005,  respectively.  Interest expense is primarily associated with the interest
on  $3,480,336  aggregate  principal  amount  of  convertible  notes  issued  in
installments  in June  2002  ($830,336),  March  2003  ($200,000),  August  2003
($25,000),  November  2003  ($150,000),  December 2003  ($50,000),  January 2004
($25,000),  May  2005  ($75,000),   August  2005  ($45,000)  and  December  2005
($25,000), May 2006 ($150,000) and September 2006 ($1,905,000). Of the aggregate
note principal  issued,  aggregate  principal in the amount of $568,697 has been
converted into shares of our common stock. Additionally,  in August 2006, and in
accordance  with  the  issuance  of  new  notes  in  satisfaction  of  our  then
outstanding  notes,  $229,027  of  accrued  interest  was  converted  into  note
principal.  The increase in interest  expense in 2007  compared to 2006 and 2006
compared to 2005 is  attributable  to the increase in the average amounts of the
convertible notes outstanding.

Litigation Accrual Reversal

      We have been a defendant  in a lawsuit  which  resulted in a jury  verdict
against us in January  2004. We had recorded a reserve in 2003 for the estimated
loss in this  litigation  of $386,148 as a result of the jury  verdict.  In July
2004, the trial judge ruled on post-trial  motions submitted by us and set aside
the jury verdict,  and  accordingly,  in the third quarter of 2004,  the Company
reversed the $386,148  accrual and recognized a like amount as other income.  As
discussed  above under the caption  "General and  Administrative  Expenses," the
South Carolina Court of Appeals reinstated the jury verdict in 2006.

Income Taxes

      We have  recorded a  valuation  allowance  for the full  amount of our net
deferred  income tax assets as of December 31, 2007,  2006,  and 2005,  based on
management's evaluation of the recognition criteria as set forth in Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes."


                                       19
<PAGE>


Liquidity and Capital Resources

      We have generated net losses of  $73,422,095  since our inception and have
financed our operations  primarily  through net proceeds from our initial public
offering in May 1996 and cash  generated  from  operations  and other  financing
transactions. Net proceeds from our initial public offering were $60,088,516.

      Net cash used by operations  during the year ended  December 31, 2007, was
$976,761,  compared to  $1,058,217  and $194,285  used by operations in 2006 and
2005, respectively.  The decrease in cash used by operations in 2007 compared to
2006 was primarily the result of a decrease in professional fees associated with
our patent litigation,  offset by an increase in employee  compensation expense.
Our patent  lawsuits were stayed in 2004 and during 2005 pending the  conclusion
of the  reexamination  of U.S.  Patent No.  6,105,007,  our patent  covering the
automated  establishment of financial accounts.  As discussed in Part 1, Item 1,
"Business--Patents  and Legal Matters," the reexamination was concluded in 2006,
the stay of the  lawsuits  was lifted  and the  lawsuits  proceeded.  As further
discussed in Part 1, Item 1,  "Business--Patents and Legal Matters," we received
an adverse  Markman  ruling in December 2006 which led to less legal activity in
2007.  At December  31,  2007,  cash and liquid  investments  were  $50,217,  as
compared to  $1,026,978  at December  31, 2006.  At December  31, 2007,  working
capital  was a deficit  of  $4,257,741  as  compared  to a deficit of $34,451 at
December 31, 2006. For purposes of determining  working  capital at December 31,
2007,  $3,476,342 of principal and accrued interest under our convertible  notes
are  included as current  liabilities.  At December  31, 2006 such  amounts were
classified as non-current liabilities.

      To date,  we have  generated  substantial  operating  losses and have been
required to use a substantial  amount of cash resources to fund our  operations.
At December 31, 2007, we had cash and cash  equivalents of $50,217 and a working
capital  deficit of  $4,257,741.  We  generally  have been  unable to enter into
licensing  agreements with potential licensees upon terms that are acceptable to
us and, as discussed  above,  we have sought  recourse  through  litigation with
alleged infringers of our patents. Additionally and as also discussed above, our
lawsuits  against the alleged  infringers  have been  dismissed  by the Columbia
Federal Court,  and we have appealed to the Federal  Appeals  Court.  We are not
certain as to the length of time it will take to complete our appeal.  We do not
believe that our existing  cash  resources  will be  sufficient  to complete the
appeals  process and, if successful,  to allow us to complete the prosecution of
our lawsuits against the alleged  infringers.  Accordingly,  to remain viable in
the near term, it is likely that we will be required to raise additional capital
through the sale of debt and/or equity securities or from licensing our patents.
We can give no  assurances,  however,  that we will be able to raise  additional
capital or  generate  capital  from our patent  licensing  business at all or in
amounts sufficient to complete our appeal.  Unless we raise additional  capital,
we may have to consider  alternatives  for winding down our business,  which may
include offering our patents for sale or filing for bankruptcy protection.

      The report of our  independent  registered  public  accounting firm on our
audited  financial  statements  included  with this report  contains a statement
noting that our recent  history of losses,  combined with other  factors,  raise
substantial doubt about our ability to continue as a going concern. Although our
plans to address these issues are  discussed in Note 1 to the audited  financial
statements included in this report and elsewhere in this report, these plans are
subject  to  numerous  risks and  contingencies,  many of which are  beyond  our
control,  and we can give no  assurance as to whether or how long we may be able
to succeed in addressing  these issues and  maintaining our viability as a going
concern.

      In 2002,  we  initiated a  convertible  note  program  under which we were
authorized  to issue up to  $1,500,000  principal  amount of our 8%  convertible
secured notes (the "notes").  In February 2006, the convertible note program was
amended  to allow us to issue up to  $3,000,000  of our  notes.  Prior to August
2006, we had issued an aggregate of $1,575,336  principal  amount of notes under
this program,  including  notes with an aggregate  principal  amount of $536,336
that have been converted into shares of our common stock.

      These notes bear interest at 8%, are convertible  into our common stock at
a  conversion  rate of $.20 per share (for notes  issued prior to the April 2006
amendment to the program) or $.50 per share (for notes issued in May 2006),  and
are secured by our equity  interest  in our  decisioning.com,  Inc.  subsidiary,
which owns our patent  portfolio.  Principal  and  interest  under  these  notes
generally becomes payable in full on the second anniversary of the date on which
these notes were issued.  However, under the terms of the notes, the full amount
of principal and interest  under all notes may be declared  immediately  due and
payable in certain events, including bankruptcy or similar proceedings involving
us, a default in the payment of  principal  and  interest  under any note,  or a
change in control of the Company.


                                       20
<PAGE>


       From June 2004 through August 2006, we were in default  regarding payment
of principal and interest due under certain of the notes. Accordingly,  the full
amount of principal and interest  outstanding under all notes was payable at the
option of all  noteholders.  At December 31, 2005,  the amount of principal  and
accrued interest outstanding under all of the notes was $1,595,906.

      In August 2006, we and the holders of all  outstanding  notes entered into
an amended and restated note purchase  agreement under which such holders agreed
to extend the maturity  date of such notes by  exchanging  them  (including  all
interest  accrued  thereon)  for new  two-year  notes due in August  2008 in the
aggregate  principal  amount of  $1,268,027.  Under the  amended  note  purchase
agreement,  we may  issue  notes  in the  aggregate  principal  amount  of up to
$5,000,000  (including the notes issued to current noteholders,  as described in
the  preceding  sentence)  having an exercise  price  determined  by us and each
investor at the time of issuance.

      The new notes  issued in August  2006 have the same terms as the old notes
for which they were  exchanged,  except that the new notes will mature in August
2008. Of the new notes issued,  notes with a principal  amount of $1,115,068 are
convertible  into shares of our common stock at $.20 per share, and notes with a
principal  amount of $152,959 are convertible into shares of our common stock at
$.50 per share. The new notes include a note in the principal amount of $166,863
issued to our Chief  Executive  Officer  and a note in the  principal  amount of
$122,115  issued  to a  subsidiary  of The  South  Financial  Group.  The  South
Financial Group  Foundation,  a non-profit  foundation  established by the South
Financial Group,  owns  approximately 10% of the Company's  outstanding  capital
stock.

      In September 2006, we sold additional  convertible  notes in the aggregate
principal  amount of  $1,905,000.  The terms of these  notes are the same as the
notes previously issued by us, except that they may be converted into our common
stock at a rate of $.42 per share.

Contractual Obligations

      The following table sets forth our long-term debt and other obligations at
December 31, 2007.

<TABLE>
<CAPTION>
<S>               <C>         <C>           <C>             <C>          <C>       <C>
                                                       Payment Due By Period
                                           ------------------------------------------------
                                Total       Less than 1           1-3   3-5 years More than
                                                 year             years            5 years
                            -------------- --------------- ------------ --------- ---------
Convertible Notes (1)         $  3,476,342  $    3,476,342            -  $      -  $      -
Operating Lease Obligations          1,200           1,200            -         -         -
                            -------------- --------------- ------------ --------- ---------
Total                         $  3,477,542  $    3,477,542  $         -  $      -  $      -
                            ============== =============== ============ ========= =========
</TABLE>

(1)  Convertible  notes consist of the Company's  convertible  notes,  including
     accrued interest.


Item 7A.  Quantitative and Qualitative Disclosures about Market Risk

Not applicable.

Item 8.  Financial Statements and Supplementary Data

      The  report  of  Independent   Registered   Public   Accounting  Firm  and
consolidated  financial  statements are set forth below (see item 15(a) for list
of financial statements):


                                       21
<PAGE>


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders
Affinity Technology Group, Inc.
Columbia, South Carolina

      We have audited the accompanying  consolidated  balance sheets of Affinity
Technology  Group,  Inc. and  subsidiaries  (collectively,  the "Company") as of
December  31,  2007  and  2006,  and  the  related  consolidated  statements  of
operations,  changes in stockholders'  equity  (deficiency),  and cash flows for
each of the years in the  three-year  period  ended  December  31,  2007.  These
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

      We conducted  our audits in  accordance  with the  standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain  reasonable  assurance about whether the
financial  statements  are free of  material  misstatement.  An  audit  includes
consideration  of  internal  control  over  financial  reporting  as a basis for
designing audit  procedures that are appropriate in the  circumstances,  but not
for the purpose of expressing an opinion on the  effectiveness  of the Company's
internal  control  over  financial  reporting.  Accordingly,  we express no such
opinion. An audit also includes examining,  on a test basis, evidence supporting
the  amounts  and  disclosures  in  the  financial  statements,   assessing  the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation.  We believe that our
audits provide a reasonable basis for our opinion.

      We  were  not  engaged  to  examine   management's   assertion  about  the
effectiveness  of  Affinity  Technology  Group,  Inc.'s  internal  control  over
financial  reporting as of December 31, 2007 included in the  accompanying  Form
10-K and, accordingly, we do not express an opinion thereon.

      In our opinion,  the consolidated  financial  statements referred to above
present fairly, in all material respects, the consolidated financial position of
the Company as of December 31, 2007 and 2006,  and the  consolidated  results of
its operations and its cash flows for each of the years in the three-year period
ended  December 31, 2007, in conformity  with  accounting  principles  generally
accepted in the United States of America.

      The accompanying financial statements have been prepared assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note 1 to the
financial  statements,  the Company has limited capital resources,  has incurred
recurring operating losses and has an accumulated  deficit.  These matters raise
substantial  doubt  about the  ability  of the  Company to  continue  as a going
concern.  Management's  plans in regard to these  matters are also  discussed in
Note 1. The  financial  statements  do not  include any  adjustments  that might
result from the outcome of this uncertainty.


                                    /s/ SCOTT McELVEEN, L.L.P.


Columbia, South Carolina
March 26, 2008


                                       22
<PAGE>

<TABLE>
<CAPTION>
<S>                                                    <C>                  <C>
               Affinity Technology Group, Inc. and Subsidiaries

                           Consolidated Balance Sheets

                                                                   December 31,
                                                            2007                 2006
                                                       -----------------------------------
Assets
Current assets:
  Cash and cash equivalents                            $      50,217        $   1,026,978
  Prepaid expenses                                            77,118               77,702
                                                       -----------------------------------
Total current assets                                         127,335            1,104,680
Property and equipment, net                                    6,377                7,566
                                                       -----------------------------------
Total assets                                           $     133,712        $   1,112,246
                                                       ===================================


Liabilities and stockholders' deficiency
Current liabilities:
  Accounts payable                                     $      19,681        $     248,834
  Accrued expenses                                           786,046              445,284
  Accrued compensation and related benefits                  410,905              411,680
  Convertible notes                                        3,140,666                    -
  Current portion of deferred revenue                         27,778               33,333
                                                       -----------------------------------
Total current liabilities                                  4,385,076            1,139,131
Non-current liabilities:
  Convertible notes                                                -            3,140,666
  Accrued interest                                                 -               84,423
  Deferred revenue                                                 -               27,778
                                                       -----------------------------------
Total non-current liabilities                                      -            3,252,867
                                                       -----------------------------------
Total liabilities                                          4,385,076            4,391,998
                                                       -----------------------------------
Commitments and contingent liabilities
Stockholders' deficiency:
  Common stock, par value $0.0001; authorized
   100,000,000 shares, issued 49,310,406 shares in
   2007 and 47,435,406 shares in 2006                          4,931                4,744
  Additional paid-in capital                              72,671,087           72,164,732
  Treasury stock, at cost (2,168,008 shares at
   December 31, 2007 and 2006)                            (3,505,287)          (3,505,287)
  Accumulated deficit                                    (73,422,095)         (71,943,941)
                                                       -----------------------------------
Total stockholders' deficiency                            (4,251,364)          (3,279,752)
                                                       -----------------------------------
Total liabilities and stockholders' deficiency         $     133,712        $   1,112,246
                                                       ===================================
</TABLE>

See accompanying notes.


                                       23
<PAGE>


               Affinity Technology Group, Inc. and Subsidiaries

                      Consolidated Statements of Operations

<TABLE>
<CAPTION>
<S>                                        <C>                 <C>                 <C>
                                                           Years ended December 31,
                                                2007               2006                2005
                                          ------------------ -----------------   -----------------
Revenues:
   Patent license revenue                  $         33,333    $       33,333      $       20,261

Costs and expenses:
   Cost of revenues                                   3,333             3,333               2,026
   General and administrative expenses            1,271,864         2,606,386             486,607
                                          ------------------ -----------------   -----------------
                                                  1,275,197         2,609,719             488,633
                                          ------------------ -----------------   -----------------
Operating loss                                   (1,241,864)       (2,576,386)           (468,372)
Other income (expenses):
   Interest income                                   14,964            17,907                 182
   Interest expense                                (251,254)         (141,043)            (98,197)
                                          ------------------ -----------------   -----------------
Net loss                                   $     (1,478,154)   $   (2,699,522)     $     (566,387)
                                          ================== =================   =================
Net loss per share - basic and diluted     $          (0.03)   $        (0.06)     $        (0.01)
                                          ================== =================   =================
Shares used in computing net loss per
 share                                           45,467,740        44,194,562          42,207,884
                                          ================== =================   =================
</TABLE>


See accompanying notes.


                                       24
<PAGE>


                  Affinity Technology Group, Inc. and Subsidiaries

            Consolidated Statements of Stockholders' Equity (Deficiency)

<TABLE>
<CAPTION>

                                         Common Stock
                                  --------------------------
                                      Shares       Amount    Additional Paid- Treasury Stock    Accumulated         Total
                                                                in Capital                         Deficit       Stockholders'
                                                                                                                    Equity
                                                                                                                  (Deficiency)
                                  -------------- ----------- ---------------- --------------- ---------------- -----------------

<S>                                   <C>         <C>         <C>              <C>             <C>              <C>
Balance at December 31, 2004          44,230,910  $    4,423  $    70,665,373  $  (3,505,287)  $  (68,678,032)  $    (1,513,523)
Note payable conversion to
    common stock                         152,194          15           30,424              -                -            30,439
Issuance of common stock
    as finder's fees                      10,000           1            1,099              -                -             1,100
Net loss                                       -           -                -              -         (566,387)         (566,387)
                                  -------------- ----------- ---------------- --------------- ---------------- -----------------
Balance at December 31, 2005          44,393,104       4,439       70,696,896     (3,505,287)     (69,244,419)       (2,048,371)
Note payable conversion to
    common stock                       2,834,302         284          566,576              -                -           566,860
Issuance of common stock
    as finder's fees                       8,000           1            3,199              -                -             3,200
Stock option exercise                    200,000          20           23,980              -                -            24,000
Amortization of stock options                  -           -          674,081              -                -           674,081
Amortization of warrants                       -           -          200,000              -                -           200,000
Net loss                                       -           -                -              -       (2,699,522)       (2,699,522)
                                  -------------------------- ---------------- --------------- ---------------- -----------------
Balance at December 31, 2006          47,435,406       4,744       72,164,732     (3,505,287)     (71,943,941)       (3,279,752)
Amortization of stock options                  -           -          356,542              -                -           356,542
Issuance of common stock
    as legal fees                      1,875,000         187          149,813              -                -           150,000
Net loss                                       -           -                -              -       (1,478,154)       (1,478,154)
                                  -------------------------- ---------------- --------------- ---------------- -----------------
Balance at December 31, 2007          49,310,406  $    4,931  $    72,671,087  $  (3,505,287)  $  (73,422,095)  $    (4,251,364)
                                  ============== =========== ================ =============== ================ =================
</TABLE>

See accompanying notes.


                                       25
<PAGE>


               Affinity Technology Group, Inc. and Subsidiaries
                      Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>
<S>                                           <C>               <C>                <C>
                                                          Years ended December 31,
                                                  2007              2006               2005
                                            ----------------- ------------------ ------------------
Operating activities
Net loss                                      $   (1,478,154)   $    (2,699,522)   $      (566,387)
Adjustments to reconcile net loss to net
 cash used in operating activities:
    Depreciation and amortization                      1,189              4,360              6,453
    Common stock issued for legal services           150,000                  -                  -
    Amortization of stock compensation               356,542            874,081                  -
    Deferred revenue                                 (33,333)           (33,333)            79,738
    Other                                                  -              3,651                796
    Changes in current assets and
     liabilities:
       Accounts receivable                                 -            100,000           (100,000)
       Prepaid expenses                                  584            (43,963)            13,496
       Accounts payable                             (229,153)           129,066             98,266
       Accrued expenses                              256,339            518,880             90,127
       Accrued compensation and related
        benefits                                        (775)            88,563            183,226
                                            ----------------- ------------------ ------------------
Net cash used in operating activities               (976,761)        (1,058,217)          (194,285)
                                            ----------------- ------------------ ------------------

Investing activities
Purchases of property and equipment                        -             (7,581)                 -
Proceeds from sale of property and equipment               -                  -                305
                                            ----------------- ------------------ ------------------
Net cash (used in) provided by investing
 activities                                                -             (7,581)               305
                                            ----------------- ------------------ ------------------

Financing activities
Proceeds from convertible notes                            -          2,055,000            145,000
Exercise of stock options                                  -             24,000                  -
                                            ----------------- ------------------ ------------------
Net cash provided by financing activities                  -          2,079,000            145,000
                                            ----------------- ------------------ ------------------
Net increase (decrease) in cash                     (976,761)         1,013,202            (48,980)
Cash and cash equivalents at beginning of
 year                                              1,026,978             13,776             62,756
                                            ----------------- ------------------ ------------------
Cash and cash equivalents at end of year      $       50,217    $     1,026,978    $        13,776
                                            ================= ================== ==================
</TABLE>

See accompanying notes.


                                       26
<PAGE>


               Affinity Technology Group, Inc. and Subsidiaries

                  Notes to Consolidated Financial Statements


1.    The Company - Going Concern

      Affinity Technology Group, Inc., (the "Company") was formed to develop and
market  technologies that enable financial  institutions and other businesses to
provide  consumer  financial  services  electronically  with reduced or no human
intervention.  Products and services  previously  offered by the Company include
its  DeciSys/RT  loan  processing  system,  which  automated the  processing and
consummation of consumer financial services transactions; the Affinity Automated
Loan  Machine  (the  "ALM"),  which  allowed an  applicant  to apply for and, if
approved,  obtain a loan in as little as ten minutes;  the Mortgage  ALM,  which
allowed  an  applicant  to  apply  for a  mortgage  loan;  e-xpertLender,  which
permitted a financial  institution to make automated  lending  decisions through
its call centers and branches; iDEAL, which permitted automobile lenders to make
automobile  lending  decisions  for loan  applications  originated at automobile
dealers;  and rtDS,  which  permitted  lenders to deliver  credit  decisions  to
applicants  over the  Internet.  Due to capital  constraints,  the  Company  has
suspended all efforts to further develop,  market and operate these products and
services.  The Company's last processing  contract  terminated in late 2002, and
the  Company  has no plans in the near term to engage in further  sales or other
activities related to its products or services, other than to attempt to license
certain  of  the  patents  that  it  owns.  Currently,  the  Company's  business
activities  consist  exclusively of attempting to enter into license  agreements
with third parties to license the Company's  rights under certain of its patents
and in pursuing the patent  litigation in an effort to protect this intellectual
property and obtain recourse against alleged infringement of these patents.

      To date, the Company has generated  substantial  operating  losses and has
been  required  to use a  substantial  amount  of cash  resources  to  fund  its
operations.  At December 31, 2007, the Company had cash and cash  equivalents of
$50,217 and a working capital deficit of $4,257,741.  The Company  generally has
been unable to enter into licensing  agreements  with  potential  licensees upon
terms that are acceptable to it and has sought recourse through  litigation with
alleged  infringers of its patents.  The Company's  lawsuits against the alleged
infringers  have been dismissed by the United States District Court in Columbia,
South  Carolina,  and the Company has appealed to United States Court of Appeals
for the Federal  Circuit (the "Federal  Court of  Appeals").  The Company is not
certain  as to the  length  of time it will take to  complete  its  appeal.  The
Company does not believe that its existing cash  resources will be sufficient to
complete  the appeals  process and, if  successful,  to allow it to complete the
prosecution  of its lawsuits  against the alleged  infringers.  Accordingly,  to
remain  viable in the near term,  it is likely that the Company will be required
to raise additional capital through the sale of debt and/or equity securities or
from licensing its patents. The Company can give no assurances, however, that it
will be able to raise  additional  capital or generate  capital  from its patent
licensing  business  at all or in amounts  sufficient  to  complete  its appeal.
Unless  it  raises  additional  capital,   the  Company  may  have  to  consider
alternatives  for winding  down its  business,  which may include  offering  its
patents for sale or filing for bankruptcy protection.

      In addition,  the Company and its founder, Jeff Norris, were defendants in
a lawsuit  filed by Temple  Ligon on  November  30,  1996 in the Court of Common
Pleas for the County of Richland in Columbia, South Carolina. Mr. Ligon claimed,
among other things,  that Affinity and Mr. Norris  breached an agreement to give
him a 1% equity  interest in Affinity in  consideration  of services  Mr.  Ligon
claims to have performed in 1993 and 1994 in  conjunction  with the formation of
Affinity,  and sought  monetary  damages of $5,463,000.  This lawsuit  initially
resulted  in  a  jury  verdict  against  us  of  $68,000.   However,  Mr.  Ligon
subsequently  requested  and was  granted a new  trial.  In January  2004,  this
lawsuit  resulted in another jury verdict against us of $382,148.  In connection
with the litigation and the resulting jury verdict, the Company filed post-trial
motions with the trial court in which,  among other things,  it claimed that the
jury verdict should be set aside.  On July 23, 2004, the trial judge granted the
Company's motions,  set aside the jury verdict,  and ordered entry of a judgment
in favor of the Company.  The plaintiff appealed the trial judge's ruling to the
South Carolina Court of Appeals (the "South Carolina Appeals Court"). On October
30, 2006, the South Carolina  Appeals Court reversed the trial judge's  decision
and reinstated the jury verdict of $382,148. The Company's petition to the South
Carolina  Appeals  Court  for a  rehearing  of  this  case  was  denied,  and it
petitioned  the South  Carolina  Supreme Court to hear this case and to grant it
relief from this ruling.  In October  2007,  the Company was  notified  that the
South  Carolina  Supreme  Court had  denied  its  petition  to hear  this  case.
Accordingly,  the Company has no further  legal  recourse and a judgment will be
entered against it of $382,148, plus accrued interest. At this time, the Company
does not have the cash resources to pay this judgment. The Company will continue
to  evaluate  its options to resolve or postpone  any  payments  related to this
matter;  however, if it is required to pay more than an insignificant  amount in
connection  with this  judgment in the near term, it would be forced to consider
alternatives  for winding  down its  business,  which may include  offering  its
patents for sale or filing for bankruptcy protection.


                                       27
<PAGE>


      Management's  plans with respect to addressing the matters discussed above
are to continue to pursue its appeal  through the Federal Court of Appeals,  and
if  successful,  to continue its patent  infringement  lawsuits.  The  Company's
currently limited capital resources will not be sufficient to enable the Company
to complete its appeal and, if  successful,  to complete its  prosecution of its
infringement  lawsuits. In the event the Company's current capital resources are
not sufficient,  management  intends to attempt to raise  additional  capital to
continue the  prosecution  of its appeal and patent  infringement  lawsuits.  No
assurance can be given that management will be successful in raising  additional
capital if needed to continue the operations of the Company.

      There is  substantial  doubt about the Company's  ability to continue as a
going  concern.  The  financial  statements  do not include any  adjustments  to
reflect the possible future effects on the  recoverability and classification of
assets or amounts and  classification  of liabilities  that may result from this
uncertainty.  However,  management  believes that any adjustments to reflect the
possible future effects on the  recoverability  and classification of assets and
amounts of  liabilities  would not  materially  change the  Company's  financial
position.

2.    Summary of Significant Accounting Policies

Principles of Consolidation

      The consolidated  financial  statements include the accounts of Affinity
Technology  Group,  Inc.  and  its  subsidiaries,   Affinity  Bank  Technology
Corporation,  Affinity Clearinghouse Corporation, Affinity Credit Corporation,
Affinity  Processing   Corporation,   Affinity  Mortgage   Technology,   Inc.,
decisioning.com,  Inc.  ("decisioning.com"),  and  Multi  Financial  Services,
Inc.  All  significant  inter-company  balances  and  transactions  have  been
eliminated in consolidation.

Cash and Cash Equivalents

      The Company  considers  all highly liquid  investments  with a maturity of
three months or less when purchased to be cash equivalents.

Fair Value of Financial Instruments

      The  carrying  amounts  reported  in the  balance  sheet for cash and cash
equivalents, accounts payable and notes payable approximate their fair values.


                                       28
<PAGE>


Property and Equipment

      Property and equipment are recorded at cost. Depreciation and amortization
are computed using the  straight-line  method over the estimated useful lives of
the  assets.  Estimated  useful  lives  range  from five to ten years for office
furniture and fixtures and three to five years for all other depreciable assets.
Depreciation  expense was approximately  $1,000,  $4,000 and $6,000 during 2007,
2006 and 2005, respectively.

Revenue Recognition

      Patent  licensing - The Company  recognizes  revenue from patent licensing
activities  pursuant to the provisions of each license  agreement  which specify
the periods to which the related license and corresponding revenue applies.

      Deferred   revenues  -  Deferred   revenues  relate  to  unearned  revenue
associated with cash received for patent licenses. Such revenue is recognized in
the period the patent license entitles the licensee to use technology covered by
the Company's patents.

Cost of Revenues

      Cost of revenues  consists  solely of  commissions  paid to the  Company's
patent  licensing  agents.  Commissions  paid or accrued by the Company  totaled
$3,333, $3,333 and $2,026 for the years ended December 31, 2007, 2006, and 2005,
respectively.

Stock Based Compensation

      The Company adopted Statement of Financial  Accounting  Standards ("SFAS")
No.  123R,  "Share-Based  Payments"  ("SFAS  123R"),  on January  1, 2006.  This
statement  requires the Company to  recognize  the cost of employee and director
services  received in exchange for the stock options it has awarded.  Under SFAS
123R the Company is required to recognize  compensation  expense over an award's
vesting period based on the award's fair value at the date of grant. The Company
has elected to adopt SFAS 123R on a modified prospective basis; accordingly, the
financial  statements  for the  periods  prior to January 1, 2006 do not include
stock based  compensation  under the fair value  method.  The  Company  uses the
Black-Scholes option pricing model to value its stock option grants.

      Prior to  January  1,  2006,  the  Company  applied  APB  Opinion  No. 25,
"Accounting  for Stock Issued to Employees" for  measurement  and recognition of
stock based  transactions  with its employees and directors.  If the Company had
recognized  compensation  expense for its stock based  transactions based on the
fair value method  prescribed by SFAS 123R,  net loss and net loss per share for
the year ended December 31, 2005 would have been as follows:

                                             2005
                                     ---------------------
Net loss:
As reported                            $         (566,387)
Add: stock-based compensation expense
 included in reported net income                        -
Deduct: stock-based compensation
 expense determined under the fair
 value based method for all awards                 (6,543)
                                     ---------------------
Pro forma net loss                     $         (572,930)
                                     =====================

Net loss per common share:
  As reported:
    Basic and diluted                  $            (0.01)
                                     =====================
  Pro forma:
    Basic and diluted                  $            (0.01)
                                     =====================


                                       29
<PAGE>


      See Note 5 for more information regarding the Company's stock compensation
plans and the assumptions  used to prepare the pro forma  information  presented
above.

Net Loss Per Share of Common Stock

      All net loss  per  share of  Common  Stock  amounts  presented  have  been
computed  based on the  weighted  average  number  of  shares  of  Common  Stock
outstanding  in accordance  with SFAS 128.  Stock warrants and stock options are
not included in the  calculation  of dilutive  loss per common share because the
Company  has  experienced   operating  losses  in  all  periods  presented  and,
therefore, the effect would be antidilutive.

New Accounting Standards

      The  following is a summary of recent  authoritative  pronouncements  that
affect  accounting,  reporting,  and disclosure of financial  information by the
Company:

      In September  2006,  the Financial  Accounting  Standards  Board  ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 157, "Fair Value
Measurement,"  effective  for our fiscal year  beginning  January 1, 2008.  This
Statement  defines fair value,  establishes a framework for measuring fair value
and expands disclosures about fair value  measurements.  This Statement does not
require any new fair value  measurements,  but simplifies  and codifies  related
guidance   within  GAAP.   This   Statement   applies  under  other   accounting
pronouncements that require or permit fair value measurements.  The Company does
not  expect  this  pronouncement  to have a  material  impact  on its  financial
statements.

      In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for
Financial  Assets and  Financial  Liabilities"  ("SFAS No.  159"),  which  gives
companies the option to measure eligible financial assets, financial liabilities
and firm  commitments  at fair  value  (i.e.,  the  fair  value  option),  on an
instrument-by-instrument basis, that are otherwise not permitted to be accounted
for at fair value under other accounting standards. The election to use the fair
value option is available when an entity first  recognizes a financial  asset or
financial liability or upon entering into a firm commitment.  Subsequent changes
in fair value must be  recorded  in  earnings.  SFAS No.  159 is  effective  for
financial  statements issued for fiscal years beginning after November 15, 2007.
The Company is in the process of  evaluating  the  impacts,  if any, of adopting
this pronouncement.

      Other  accounting  standards that have been issued or proposed by the FASB
or other  standards-setting  bodies that do not require  adoption until a future
date are not expected to have a material  impact on the  Company's  consolidated
financial statements upon adoption.

Income Taxes

      Deferred income taxes are calculated using the liability method prescribed
by Statement of Financial  Accounting  Standards No. 109, "Accounting for Income
Taxes" ("SFAS 109").


Concentrations of Credit Risk

      The Company is not exposed to any concentration of credit risk.

Use of Estimates

      The  preparation  of financial  statements  in conformity  with  generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that affect the amounts  reported in the financial  statements  and
accompanying notes. Actual results could differ from those estimates.


                                       30
<PAGE>


Reclassification

      Certain amounts in 2005 and 2006 have been reclassified to conform to 2007
presentations  for  comparability.  These  reclassifications  have no  effect on
previously reported stockholders' equity (deficiency) or net loss.

3.    Property and Equipment

Property and equipment consists of the following:

<TABLE>
<CAPTION>
<S>                                              <C>               <C>
                                                           December 31,
                                                     2007               2006
                                               -------------------------------------
Data processing equipment                        $        22,032   $         22,032
Office furniture and fixtures                             19,087             19,087
Other equipment                                           11,038             11,038
Purchased software                                         3,770              3,770
                                               -------------------------------------
                                                          55,927             55,927
Less accumulated depreciation and amortization           (49,550)           (48,361)
                                               -------------------------------------
                                                 $         6,377   $          7,566
                                               =====================================
</TABLE>


4.    Convertible Notes

      The  contractual  maturities of the principal  outstanding  related to the
Company's convertible notes at December 31, 2007 are as follows:

Contractual Maturity Date   Principal Outstanding
------------------------- ------------------------
       August 2008          $            1,235,666
     September 2008                      1,905,000
                           -----------------------
          Total             $            3,140,666
                           =======================

      In 2002, the Company  initiated a convertible  note program under which it
was authorized to issue up to $1,500,000  principal amount of its 8% convertible
secured notes (the "notes").  In February 2006, the convertible note program was
amended to allow the Company to issue up to  $3,000,000  of its notes.  Prior to
August 2006, the Company had issued an aggregate of $1,575,336  principal amount
of notes under this program,  including notes with an aggregate principal amount
of $536,336 that have been converted into shares of the Company's  common stock.
These notes bear interest at 8%, are convertible into the Company's common stock
at a conversion rate of $.20 per share (for notes issued prior to the April 2006
amendment to the program) or $.50 per share (for notes issued in May 2006),  and
are  secured by the  Company's  equity  interest  in its  decisioning.com,  Inc.
subsidiary,  which owns the Company's patent  portfolio.  Principal and interest
under these notes generally becomes payable in full on the second anniversary of
the date on which  these  notes  were  issued.  However,  under the terms of the
notes, the full amount of principal and interest under all notes may be declared
immediately due and payable in certain events,  including  bankruptcy or similar
proceedings  involving  the Company,  a default in the payment of principal  and
interest under any note, or a change in control of the Company.

       From June 2004 through August 2006, the Company was in default  regarding
payment of principal and interest due under  certain of the notes.  Accordingly,
the full  amount  of  principal  and  interest  outstanding  under all notes was
payable at the option of all noteholders.


                                       31
<PAGE>


      In August  2006,  the  Company and the  holders of all  outstanding  notes
entered into an amended and restated  note purchase  agreement  under which such
holders  agreed to extend the  maturity  date of such notes by  exchanging  them
(including  all interest  accrued  thereon) for new two-year notes due in August
2008 in the aggregate  principal  amount of  $1,268,027.  Under the amended note
purchase  agreement,  the  Company may issue  notes in the  aggregate  principal
amount of up to $5,000,000  (including the notes issued to current  noteholders,
as described in the preceding  sentence)  having an exercise price determined by
the Company and each investor at the time of issuance.

      The new notes  issued in August  2006 have the same terms as the old notes
for which they were  exchanged,  except that the new notes will mature in August
2008. Of the new notes issued,  notes with a principal  amount of $1,115,068 are
convertible  into shares of the  Company's  common stock at $.20 per share,  and
notes with a principal  amount of $152,959  are  convertible  into shares of the
Company's  common stock at $.50 per share.  The new notes  include a note in the
principal amount of $166,863 issued to the Company's Chief Executive Officer and
a note in the principal  amount of $122,115  issued to a subsidiary of The South
Financial Group. The South Financial Group Foundation,  a non-profit  foundation
established  by  the  South  Financial  Group,  owns  approximately  10%  of the
Company's outstanding capital stock.

      In September  2006, The Company sold additional  convertible  notes in the
aggregate principal amount of $1,905,000.  The terms of these notes are the same
as the notes previously issued by the Company, except that they may be converted
into the Company's common stock at a rate of $.42 per share.

5.    Stockholders' Deficiency

Preferred Stock

      Pursuant  to the  Company's  Certificate  of  Incorporation,  the Board of
Directors has the  authority,  without  further action by the  stockholders,  to
issue up to 5,000,000 shares of preferred stock in one or more series and to fix
the designations,  powers, preferences,  privileges, and relative participating,
optional or special rights and the qualifications,  limitations, or restrictions
thereof,  including dividend rights,  conversion rights, voting rights, terms of
redemption and liquidation preferences,  any or all of which may be greater than
the rights of the  common  stock.  At  December  31,  2007 and 2006 there are no
shares of preferred stock issued or outstanding.

Stock Option Plans

      During 2007, the Company had one  stockholder-approved  stock option plan,
the 1996 Incentive  Stock Option Plan.  Prior to 2007, the Company  additionally
had the 1995 Stock  Option  Plan.  Under the 1995 Stock  Option Plan the Company
granted  incentive  stock options and  nonqualified  stock options to employees,
directors,  consultants and independent  contractors.  This plan closed in April
1996. In 2006, all outstanding  and unexercised  stock options granted under the
plan  expired.  Accordingly,  at December  31, 2006,  there were no  outstanding
options under the 1995 Stock Option Plan.

      In April 1996, the Company  adopted the 1996 Incentive  Stock Option Plan.
This plan closed in April 2006. Under the terms of the plan,  incentive  options
were issued at an exercise  price not less than the estimated  fair market value
on the date of grant.  Generally,  options  granted vest ratably over a 60 month
term.  The 1996 Incentive  Stock Option Plan was amended and restated  effective
May 28, 1999,  to increase the number of shares of common  stock  available  for
issuance  from  1,900,000 to 2,900,000 and to permit  non-employee  directors to
participate  in the  1996  Stock  Option  Plan.  Under  the  Company's  director
compensation  program  in effect  from April  1999 to March  2002,  non-employee
directors  received  options  under  the 1996  Incentive  Stock  Option  Plan to
purchase  5,000  shares of common  stock of the Company on the 5th  business day
after each annual shareholder  meeting. In March 2002, the Company adopted a new
director  compensation program as a component of the 1996 Incentive Stock Option
Plan under which all non-employee directors received a one-time grant of options
to purchase  100,000 shares of the Company's stock at the closing sales price of
the Company's common stock on the business day immediately  prior to the date of
grant.  Such options vested ratably over a two-year  period.  Under the program,
all non-employee directors on the Board were granted options to purchase 100,000
shares on March 20, 2002.


                                       32
<PAGE>


      Additionally,  on July  14,  2006,  the  Board  of  Directors  granted  to
executives  of the  Company  and to its  non-employee  directors  an  additional
4,350,000 options to purchase the Company's common stock ("The 2006 Stock Option
Grant").  Included  in the 2006  Stock  Option  Grant  were  options  granted to
executive officers to purchase 3,350,000 shares of the Company's common stock at
an exercise  price of $0.50.  One-third of the options  granted to the executive
officers  vested  at the  date of grant  and the  remainder  vest in two  annual
installments on the first and second anniversaries of the date of grant.

      The 2006 Stock Option Grant also included  options granted to non-employee
directors to purchase  1,000,000  shares of the Company's common stock. Of these
options,  500,000  options are  exercisable at $0.35 per share and vested at the
grant date. The remaining 500,000 options granted to non-employee  directors are
exercisable at $0.50, and vest in two equal installments on the first and second
anniversaries of the grant date. The closing price of the Company's common stock
was $0.35 on the day  immediately  preceding  the date of the 2006 Stock  Option
Grant.

      All the options  granted  pursuant to the 2006 Stock  Option  Grant have a
contractual  term of 10 years and a remaining  contractual  term of 8.5 years at
December 31, 2007. During 2007, none of the options were exercised or forfeited.
At the grant date and at December 31, 2007, the weighted-average  exercise price
was $0.48.  At December 31, 2006,  the  weighted-average  exercise  price of the
2,983,332 options exercisable pursuant to the 2006 Stock Option Grant was $0.47.
At the date of grant, the options granted had a  weighted-average  fair value of
$0.26 and total  compensation  cost was  $1,136,000.  Of the total  compensation
costs  related  to  the  2006  Stock  Option  Grant,   the  Company   recognized
compensation  expense of $671,556 and  $355,333 in 2006 and 2007,  respectively,
and will recognize  $109,111 in 2008. At December 31, 2007, the closing price of
the Company's common stock was less than the weighted-average  exercise price of
options which were outstanding and which were  exercisable;  accordingly,  there
was no intrinsic value associated with such options.

A summary of activity under the 1996 Option Plans is as follows:

                                                     Options       Outstanding
                                                ----------------- --------------
                                    Shares                           Weighted
                                  Available          Number       Average Price
                                  For Grant         of Shares       Per Share
                               ---------------- ----------------- --------------
1996 Incentive Stock Option
 Plan
Balance at December 31, 2004           594,750         2,133,320    $       0.50
Options granted                              -                 -    $       0.00
Options cancelled/forfeited             99,620           (99,620)   $       0.34
                               ---------------- ----------------- --------------
Balance at December 31, 2005           694,370         2,033,700    $       0.51
Plan Closed                           (694,370)                -               -
Options exercised                            -          (200,000)   $       0.12
Options cancelled/forfeited                  -          (100,000)   $       1.47
                               ---------------- ----------------- --------------
Balance at December 31, 2006                 -         1,733,700    $       0.50
Options cancelled/forfeited                  -           (70,000)   $       3.75
                               ---------------- ----------------- --------------
Balance at December 31, 2007                 -         1,663,700    $       0.37
                               ================ ================= ==============


                                       33
<PAGE>


      A summary of stock options exercisable and stock options outstanding under
the 1996 Incentive Stock Option Plan is as follows:

<TABLE>
<CAPTION>
<S>                   <C>         <C>                    <C>         <C>                           <C>
                                  1996 Incentive Stock Option Plan
------------------------------------------------------------------------------------------------------

                      Options Exercisable                         Options Outstanding
                      at December 31, 2007                        At December 31, 2007
               ================================== ====================================================
                                                                                         Weighted
                                    Weighted                           Weighted          Average
   Range of                          Average                           Average          Remaining
   Exercise         Number            Price            Number           Price          Contractual
    Prices       Exercisable        Per Share       Outstanding       Per Share        Life (years)
-------------- ---------------- ----------------- ---------------- ---------------- ------------------
 $0.09 - $0.94        1,415,000   $          0.20        1,440,000   $         0.20                3.6
 $1.06 - $3.75          223,700   $          1.43          223,700   $         1.43                2.2
               ---------------- ----------------- ---------------- ---------------- ------------------
 $0.09 - $3.75        1,638,700   $          0.37        1,663,700   $         0.37                3.4
               ================ ================= ================ ================ ==================
</TABLE>

      At December 31, 2007, the closing price of the Company's  common stock was
less than the  weighted-average  exercise price of options granted in accordance
with  the  1996  Stock  Option  Plan  which  were  outstanding  and  which  were
exercisable;  accordingly,  there was no intrinsic  value  associated  with such
options.  In  2007,  the  Company  recognized  $1,208  of  compensation  expense
associated with options granted under this plan and additional compensation cost
of $350 will be recognized in 2008.

       The fair value of each option award is estimated using the  Black-Scholes
option-pricing  at the  date of  grant.  The  following  table  sets  forth  the
assumptions used by the Company to estimate the fair value of options granted in
2006.  Expected  volatility is based on historical monthly stock prices starting
on April 26,  1996.  Historical  data and other  factors  that could  affect the
Company and its options  programs are used to estimate the expected option life.
The  risk-free  rate for periods  within the  contractual  life of the option is
based on the U.S. Treasury yield in effect at the time of grant.

                                                            2006
                                                  ---------------
                       Dividend yield                          -
                       Expected volatility                   138%
                       Risk-free rate of return             4.82%
                       Expected option life, years             3


      For  purposes  of  preparing  its  pro  forma   stock-based   compensation
disclosures as set forth in Note 2, the Company  estimated the fair value at the
date  of  grant  for the  options  issued  prior  to 2006  using  the  following
assumptions:  expected volatility,  85% to 142%; risk free rate of return, 1.99%
to 6.60%; dividend yield, 0%; and expected option life, 3 years.

      The  Black-Scholes  and other option pricing models were developed for use
in estimating fair value of traded options,  which have no vesting  restrictions
and are fully transferable. In addition, option-pricing models require the input
of highly  subjective  assumptions.  The Company's  employee  stock options have
characteristics  significantly  different  than  those of  traded  options,  and
changes  in the  subjective  assumptions  can  materially  affect the fair value
estimate.

      Stock Warrants

       In July  2006,  the  Company  engaged  Morgan  Keegan & Company  ("Morgan
Keegan")  to act as its  exclusive  financial  advisor to assist the  Company in
raising capital and with the Company's  patent  licensing  program and strategic
and  financial  alternatives.  Under the terms of the  engagement,  the  Company
issued to Morgan Keegan,  as an advisory fee, a warrant with a five-year term to
purchase 2,500,000 shares of the Company's common stock for $0.50 per share. The
warrant was  exercisable at the date of issuance and the Company  recognized the
estimated  fair value of the  warrant as an expense  of  $200,000.  The  Company
estimated the fair value of the warrant in a manner  consistent  with its method
for estimating the fair value of its stock options as discussed above.


                                       34
<PAGE>


6.    Employee Benefit Plans

      The Company has an employee savings plan (the Savings Plan) that qualifies
as a deferred salary  arrangement  under Section 401(k) of the Internal  Revenue
Code.  Under the Savings  Plan,  participating  employees may defer a portion of
their pretax earnings,  up to the Internal  Revenue Service annual  contribution
limit.

7.    Leases

      The Company has a prepaid  two-year  lease on its principal  office space.
The  lease  expires  in  December   2008.   Additionally,   the  Company  has  a
month-to-month  operating lease for the rental of its warehouse.  Future minimum
lease payments under these leases at December 31, 2007 are approximately $1,200,
all of which is payable in 2008. In 2007,  2006,  and 2005 the Company  incurred
rent expense,  including rent associated with cancelable rental  agreements,  of
approximately $29,000, $21,000 and $24,000, respectively.

8.    Income Taxes

      As of  December  31,  2007,  the  Company  had  federal  and state tax net
operating loss  carryforwards  of approximately  $71,411,000.  The net operating
loss carryforwards will begin to expire in 2009, if not utilized.

      Deferred income taxes reflect the net tax effect of temporary  differences
between the carrying  amounts of assets and liabilities for financial  reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax assets and liabilities consist of the following:

                                          December 31,
                                     2007                2006
                              ------------------- -------------------
Deferred tax assets:
   Net operating loss
    carryforwards               $     26,636,000   $      26,091,000
   Accrued expenses                       43,000              37,000
Other                                          -                   -
                              ------------------- -------------------
Total deferred tax assets             26,679,000          26,128,000
                              ------------------- -------------------
Deferred tax liabilities:
   Other                                       -                   -
                              ------------------- -------------------
Total deferred tax liabilities                 -                   -
                              ------------------- -------------------
Less: Valuation allowance            (26,679,000)        (26,128,000)
                              ------------------- -------------------
Total net deferred taxes        $              -   $               -
                              =================== ===================

      The Company has recorded a valuation  allowance for the full amount of its
net deferred tax assets as of December 31, 2007 and 2006,  based on management's
evaluation of the evidential recognition requirements under the criteria of SFAS
109.  The main  component of the  evidential  recognition  requirements  was the
Company's  cumulative  pretax losses since  inception.  The provision for income
taxes at the  Company's  effective  rate did not differ from the  provision  for
income taxes at the statutory rate for 2007, 2006, and 2005.

9.    Segment Information

      The Company  conducts its business within one industry segment - financial
services technology. To date, all revenues generated have been from transactions
with North American customers. Single entities accounted for 100% of revenues in
2007, 2006, and 2005.


                                       35
<PAGE>


10.   Related Party Transactions

      In December  2003,  the Company  sold a two year  convertible  note in the
principal amount of $100,000 to a subsidiary of The South Financial Group, which
at that time owned approximately 12% of the Company's  outstanding common stock.
In June  2002,  the  Company  sold a two year  convertible  secured  note to its
Chairman,  President  and Chief  Executive  Officer in the  principal  amount of
$125,000.  These notes bear interest at 8%, and  principal and accrued  interest
were due in December 2005 and June 2004,  respectively.  As discussed more fully
in Note 4, in August  2006 the Company  exchanged  its  outstanding  convertible
notes for new  convertible  notes.  In accordance  with the exchange the Company
issued new convertible  notes to a subsidiary of The South Financial Group, Inc.
and to the  Company's  Chief  Executive  Officer  in the  principal  amounts  of
$122,115 and $166,863, respectively.

      In 2006  and 2005 the  Company  leased  office  space  from a holder  of a
portion of its convertible  notes. The lease was on a  month-to-month  basis and
was  terminated in January 2007.  Rental expense for the office space was $6,000
and $9,250 in 2006 and 2005, respectively.

11.   Commitments and Contingent Liabilities

      The Company and its founder,  Jeff Norris,  were  defendants  in a lawsuit
filed by Temple  Ligon on November 30, 1996 in the Court of Common Pleas for the
County of Richland in Columbia,  South Carolina.  Mr. Ligon claimed, among other
things,  that  Affinity  and Mr.  Norris  breached an agreement to give him a 1%
equity  interest in Affinity in  consideration  of services  Mr. Ligon claims to
have performed in 1993 and 1994 in  conjunction  with the formation of Affinity,
and sought monetary damages of $5,463,000.  This lawsuit initially resulted in a
jury verdict against us of $68,000.  However,  Mr. Ligon subsequently  requested
and was granted a new trial. In January 2004,  this lawsuit  resulted in another
jury verdict  against us of $382,148.  In connection with the litigation and the
resulting  jury  verdict,  the Company filed  post-trial  motions with the trial
court in which,  among other things,  it claimed that the jury verdict should be
set aside. On July 23, 2004, the trial judge granted the Company's motions,  set
aside the jury verdict, and ordered entry of a judgment in favor of the Company.
The plaintiff  appealed the trial judge's  ruling to the South Carolina Court of
Appeals (the "South  Carolina  Appeals  Court").  On October 30, 2006, the South
Carolina  Appeals Court  reversed the trial judge's  decision and reinstated the
jury verdict of $382,148.  The Company's  petition to the South Carolina Appeals
Court for a  rehearing  of this case was  denied,  and it  petitioned  the South
Carolina  Supreme  Court to hear  this  case and to grant it  relief  from  this
ruling.  In October  2007,  the Company  was  notified  that the South  Carolina
Supreme  Court had  denied its  petition  to hear this  case.  Accordingly,  the
Company has no further legal recourse and a judgment will be entered  against it
of $382,148,  plus accrued interest. At this time, the Company does not have the
cash resources to pay this  judgment.  The Company will continue to evaluate its
options to resolve or postpone any payments related to this matter;  however, if
it is required to pay more than an insignificant  amount in connection with this
judgment  in the near  term,  it would be forced to  consider  alternatives  for
winding down its  business,  which may include  offering its patents for sale or
filing for bankruptcy protection.


                                       36
<PAGE>


12.   Quarterly Results of Operations (Unaudited)

<TABLE>
<CAPTION>
<S>                  <C>          <C>              <C>               <C>
                       First          Second            Third           Fourth
                      Quarter        Quarter           Quarter          Quarter
                    ------------ ---------------- ----------------- ---------------
Year ended December
 31, 2007
Revenue              $    8,333   $        8,334   $         8,333   $      8,333
Gross profit              7,500            7,500             7,500          7,500
Net loss               (442,691)        (476,016)         (309,876)      (249,571)
Net loss per share -
 basic and diluted        (0.01)           (0.01)            (0.01)         (0.01)

Year ended December
 31, 2006
Revenue              $    8,333   $        8,334   $         8,333   $      8,333
Gross profit              7,500            7,500             7,500          7,500
Net loss                (89,946)        (219,965)       (1,610,054)      (779,557)
Net loss per share -
 basic and diluted        (0.00)           (0.00)            (0.04)         (0.02)
The sum of certain net loss per share amounts  differs from the annual  reported
total due to rounding.
</TABLE>


Item 9.     Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure

      Not applicable

Item 9A.  Controls and Procedures

Disclosure Controls and Procedures

      The Company has carried out an evaluation,  under the supervision and with
the  participation of the Company's Chief Executive  Officer and Chief Financial
Officer,  of the  effectiveness  of the design and  operation  of the  Company's
disclosure  controls and  procedures as defined in Rule 13a-15 of the Securities
Exchange  Act of 1934 (the  "Exchange  Act").  Based upon that  evaluation,  the
Company's Chief Executive Officer and Chief Financial Officer concluded that the
Company's  disclosure  controls and procedures were effective as of December 31,
2007, in recording,  processing,  summarizing and reporting information required
to be  disclosed by the Company  (including  consolidated  subsidiaries)  in the
Company's Exchange Act filings.

      There were no changes in the  Company's  internal  control over  financial
reporting  that occurred  during the Company's  most recent fiscal  quarter that
materially  affected,  or  are  reasonably  likely  to  materially  affect,  the
Company's internal control over financial reporting.

Management's Annual Report on Internal Control Over Financial Reporting


      Management of the Company is responsible for  establishing and maintaining
adequate internal control over financial reporting.  Management has assessed the
effectiveness  of internal  control over financial  reporting using the criteria
established in Internal Control-Integrated  Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO).

      The  Company's  internal  control  over  financial  reporting is a process
designed to provide reasonable  assurance regarding the reliability of financial
reporting and the preparation of financial  statements for external  purposes in
accordance with generally accepted accounting principles. The Company's internal
control over financial reporting includes those policies and procedures that (1)
pertain to the maintenance of records that, in reasonable detail, accurately and
fairly reflect the  transactions  and dispositions of the assets of the Company;
(2) provide reasonable  assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting  principles,  and that receipts and  expenditures  of the Company are
being made only in accordance with authorizations of management and directors of
the Company; and (3) provide reasonable assurance regarding prevention or timely
detection of  unauthorized  acquisitions,  use, or  disposition of the Company's
assets that could have a material effect on the financial statements.


                                       37
<PAGE>


      Because of its  inherent  limitations,  internal  control  over  financial
reporting may not prevent or detect misstatements. Therefore, even those systems
determined to be effective can provide only reasonable assurance with respect to
financial  statement  preparation  and  presentation.  Also,  projections of any
evaluation  of  effectiveness  to future  periods  are  subject to the risk that
controls may become  inadequate  because of changes in  conditions,  or that the
degree of compliance with the policies or procedures may deteriorate.

      Based on the testing performed using the criteria  established in Internal
Control-Integrated  Framework  issued by the  COSO,  management  of the  Company
believes  that the  Company's  internal  control over  financial  reporting  was
effective as of December 31, 2007.

      This annual report does not include an attestation report of the Company's
independent  registered public  accounting firm regarding  internal control over
financial  reporting.  Management's  report is not subject to attestation by the
Company's  registered  public accounting firm pursuant to temporary rules by the
Securities  and  Exchange  Commission  that permit the  Company to provide  only
management's report in this annual report.

      This report of management  on internal  control over  financial  reporting
shall not be deemed to be filed for purposes of Section 18 of the Securities and
Exchange Act of 1934 or otherwise subject to the liabilities of that section.

Item 9B.  Other Information

      Not applicable


                                       38
<PAGE>


Part III

Item 10.      Directors, Executive Officers and Corporate Governance

              Executive Officers and Directors of the Registrant

 Name                      Age         Position with the Company
 ----                      ---         -------------------------
 Joseph A. Boyle           54          Chairman, President, Chief Executive
                                       Officer, and Chief Financial Officer
 S. Sean Douglas           39          Executive Vice President and Chief
                                       Operating Officer
 Robert M. Price           77          Director
 Peter R. Wilson           55          Director

Joseph A. Boyle became  President and Chief  Executive  Officer of the Company
in January  2000 and  Chairman  in March  2001.  Mr.  Boyle has also served as
Chief  Financial  Officer of the Company since  September 1996. Mr. Boyle also
held the title of Senior Vice  President  from September 1996 to January 2000.
Mr. Boyle has  previously  served as Secretary  and  Treasurer of the Company.
To conserve the  Company's  limited  financial  resources,  Mr. Boyle has from
time to time reduced his time  commitment  to and  compensation  received from
the  Company.   From  January  2005  until  June  2006,  Mr.  Boyle  performed
consulting  services  for a local  financial  institution.  From April 2003 to
August  2004,  Mr.  Boyle also was a partner of  Elliott  Davis,  LLC, a South
Carolina  public  accounting  firm.  Prior to joining the  Company,  Mr. Boyle
served as Price  Waterhouse,  LLP's engagement  partner for most of its Kansas
City,  Missouri,  financial  services  clients  and was a member of the firm's
Mortgage Banking Group. Mr. Boyle was employed by Price  Waterhouse,  LLP from
June 1982 to August 1996.  Mr. Boyle is a director of UCI Medical  Affiliates,
Inc. and serves as the chairman of its Audit Committee.

S. Sean Douglas became  Executive Vice President and Chief Operating  Officer of
the  Company  in March  2003.  Mr.  Douglas  also held the title of Senior  Vice
President of Finance,  Operations and  Administration  of the Company from March
2002 to March 2003.  From January 2000 to March 2002, Mr. Douglas held the title
of Vice President and  Controller of the Company.  From November 1995 to January
2000, Mr. Douglas was the Company's accounting manager.

Robert M. Price has served as a director of the Company since  November 1994. He
has been President of PSV,  Inc., a technology  consulting  business  located in
Burnsville,  Minnesota,  since 1990.  Between 1961 and 1990, Mr. Price served in
various executive  positions,  including  Chairman and Chief Executive  Officer,
with Control Data Corporation,  a mainframe  computer  manufacturer and business
services  provider.  Mr.  Price is a graduate of Duke  University,  and earned a
master's degree at the Georgia Institute of Technology.  Mr. Price is a director
of PNM Resources and Datalink Corporation.

Dr.  Peter R. Wilson has been a director of the  Company  since March 1994.  Dr.
Wilson  served as Secretary of the Company from March 1994 until  February  1996
and has been an  Associate  Professor  at the Fuqua  School of  Business at Duke
University  since  September  1991.  He was an  Assistant  Professor at New York
University's  Stern School of Business between January 1983 and August 1991. Dr.
Wilson  teaches  in the  areas of  financial  accounting,  financial  reporting,
financial  statement  analysis  and  strategic  cost  management.  He  earned  a
bachelor's degree and a Ph.D. in accounting at the University of North Carolina.

                               Board of Directors

      The  business  and  affairs  of the  Company  are  managed by or under the
direction  of the  Board of  Directors,  as  provided  by  Delaware  law and our
By-Laws.  The directors establish overall policies and standards for the Company
and review the performance of management. The directors are kept informed of our
operations  at meetings of the Board,  through  reports and analyses and through
discussions with management.


                                       39
<PAGE>


Meetings of the Board

      The Board of Directors  met five times during the year ended  December 31,
2007. All directors  participated  in at least 100% of all meetings of the Board
of Directors  and the  committees of the Board of Directors on which they served
during 2007.

Committees of the Board

      The  Board  of  Directors  has  established  an  Audit  Committee  and a
Compensation  Committee.  There is no  nominating  committee  of the  Board of
Directors.

      The Audit Committee, established in 1996, has the authority to appoint and
remove our  independent  public  accounting  firm, with whom the Audit Committee
reviews  the scope of audit and  non-audit  assignments  and related  fees,  the
accounting  principles used by us in financial reporting and the adequacy of our
internal control procedures.  The members of the Audit Committee, which met once
during the year ended December 31, 2007, are Dr. Peter R. Wilson  (Chairman) and
Robert M. Price.

      The Compensation Committee has the authority,  among other things, to: (i)
determine the cash and non-cash  compensation of each of our executive  officers
and any other  employee  with an annual  salary  in  excess  of  $100,000;  (ii)
consider and  recommend to the Board such general and specific  employee  equity
and  other  incentives  as it may from time to time  deem  advisable;  and (iii)
administer our stock option plans.  The members of the  Compensation  Committee,
which met one time during the year ended  December 31, 2007, are Robert M. Price
(Chairman) and Dr. Peter R. Wilson.

      The  Board  of  Directors  has  not  established  a  nominating  committee
primarily because it believes that the current composition and size of the Board
permit  candid  and open  discussion  regarding  potential  new  candidates  for
director.  The entire Board of Directors  currently  operates as our  nominating
committee,  and all  directors  participate  in the  consideration  of  director
nominees. Of the three directors currently serving on the Board, we believe that
Dr.  Peter R. Wilson and Robert M. Price are  independent  directors  within the
meaning of the NASDAQ  Marketplace  Rules  applicable  to  directors  and audit,
compensation and nominating  committee members of companies listed on the NASDAQ
Global  Market.  The Company does not believe  that Messrs.  Wilson or Price are
parties to other  transactions,  relationships  or  arrangements  not  otherwise
disclosed  in this  report that affect  their  independence.  There is no formal
process  or  policy  that  governs  the  manner in which we  identify  potential
candidates  for  director,  and the  Board  of  Directors  has not  adopted  any
specific,  minimum qualifications that must be met to be nominated to serve as a
director.  Historically,  however, the Board of Directors has considered several
factors in evaluating  candidates  for  nomination  to the Board,  including the
candidate's  knowledge of our business,  the candidate's business experience and
credentials,  and whether the candidate would represent the interests of all our
stockholders  as opposed to a specific group of  stockholders.  We do not have a
formal policy with respect to our consideration of director nominees recommended
by our  stockholders  because the Board of Directors  believes  that it has been
able to give appropriate consideration to candidates recommended by stockholders
in prior years on a case-by-case basis.

                        Audit Committee Financial Expert

      The Board of  Directors  has  determined  that Dr.  Peter R.  Wilson is an
"audit committee  financial expert" for purposes of the rules and regulations of
the Securities and Exchange  Commission  adopted pursuant to the  Sarbanes-Oxley
Act of 2002.  Mr. Wilson also is an independent  director  within the meaning of
the NASDAQ  Marketplace Rules applicable to audit committee members of companies
listed on the NASDAQ Global Market.

      Additional  information  required  by this Item will be  contained  in the
Registrant's  definitive proxy statement  relating to its 2008 Annual Meeting of
Stockholders under the captions "Board of Directors - Code of Ethics," "Board of
Directors--Nominees  for  Director,"  and "Section  16(a)  Beneficial  Ownership
Reporting Compliance," which are incorporated by reference herein.


                                       40
<PAGE>


Item 11.  Executive Compensation

      The  information  required  by Item 11 is  incorporated  by  reference  to
information  in the  registrant's  proxy  statement  relating to its 2008 Annual
Meeting of Shareholders under the caption "Executive Compensation."


Item 12.      Security  Ownership of Certain  Beneficial Owners and Management
and Related Stockholder Matters

      Certain  information  required  by  this  Item  will be  contained  in the
Registrant's  definitive proxy statement  relating to its 2008 Annual Meeting of
Stockholders  under the caption  "Security  Ownership of Management  and Certain
Beneficial Owners," which is incorporated by reference herein.

<TABLE>
<CAPTION>
<S>                        <C>                     <C>            <C>
                                                                 Number of securities
                     Number of securities    Weighted-average     remaining available
                       to be issued upon     exercise price of    for future issuance
                          exercise of       outstanding options,     under equity
    Plan Category     outstanding options,  warrants and rights   compensation plans
                      warrants and rights                             (excluding
                                                                  securities reflected
                                                                     in column (a))
-------------------- --------------------- --------------------- ---------------------
                              (a)                   (b)                   (c)
-------------------- --------------------- --------------------- ---------------------
Equity compensation
  plans approved by
   security holders        1,663,700               $0.37                   -
-------------------- --------------------- --------------------- ---------------------
Equity compensation
 plans not approved
 by security holders       6,850,000               $0.49                   -
-------------------- --------------------- --------------------- ---------------------
        Total              8,513,700               $0.47                   -
-------------------- --------------------- --------------------- ---------------------
</TABLE>

      The table set forth above does not include any information with respect to
shares of common  stock that may be issued upon the  conversion  of  convertible
notes that have been issued by the  Company.  At December  31,  2007,  there was
$3,476,342  of principal  and accrued  interest  outstanding  under these notes,
which could be converted into an aggregate of 11,364,171 shares of the Company's
common stock at a conversion  price of $0.20  ($1,203,466  principal and accrued
interest),  $0.42 ($2,102,859 principal and accrued interest) or $0.50 ($170,017
principal and accrued interest) per share.

      As set forth in the above  table,  we issued  stock  options and  warrants
exercisable  into  6,850,000  of shares of our  common  stock.  Of such  amount,
4,350,000 were stock options  granted to employees and  non-employee  directors.
The grant of these stock  options will be discussed in detail in Part III,  Item
11.,  "Executive  Compensation,"  and  Note  5  to  our  consolidated  financial
statements  included  herein also discusses  these stock options and warrants to
purchase  2,500,000 shares of our common stock issued to Morgan Keegan & Company
for advisory and other services.

Item 13.      Certain   Relationships,   Related   Transactions  and  Director
Independence

Related Transactions

      Since  June 2002,  we have  primarily  financed  our  operations  from the
proceeds  received through the issuance of convertible  notes. In June 2002, our
Chief Executive  Officer purchased a convertible note in the principal amount of
$125,000. Additionally, in December 2003, we sold a two-year convertible note in
the principal  amount of $100,000 to a subsidiary of The South  Financial  Group
("TSFG"),  which at the time owned approximately 12%of our common stock. In June
2004, all of our then outstanding  convertible notes,  including the note issued
to our Chief Executive Officer and the subsidiary of TFSG, went into default. In
August 2006, we reached an agreement  with the holders of our notes  outstanding
at that time (the  "existing  notes"),  under which we  exchanged  the  existing
notes,  all of which were in default,  for new notes.  The  principal of the new
notes  included  the original  principal of the existing  notes plus the accrued
interest on the existing  notes and matured in August 2008. In  accordance  with
the exchange,  we issued to our Chief  Executive  Officer and the  subsidiary of
TSFG new notes in the amount of $166,863 and $122,115, respectively.  Additional
information  regarding our convertible notes and this transaction with our Chief
Executive Officer is discussed in Part II, Item 7., "Management's Discussion and
Analysis of  Financial  Condition  and  Results of  Operations  - Liquidity  and
Capital  Resources"  and  in  Note 4 to our  consolidated  financial  statements
included herein.


                                       41
<PAGE>


Director Independence

      Information  regarding  the  independence  of  our  outside  directors  is
contained  in Part III,  Item 10.,  "Directors  and  Executive  Officers  of the
Registrant - Board of Directors."

Item 14.  Principal Accountant Fees and Services

      Information  required  by  this  item  is  incorporated  by  reference  to
information in the Registrant's  definitive proxy statement relating to its 2008
Annual Meeting of Stockholders, under the caption "Accounting Fees."


                                       42
<PAGE>


Part IV

Item 15.  Exhibits, Financial Statement Schedules

(a)  (1)  The following consolidated financial statements of Affinity Technology
          Group,  Inc. and  subsidiaries  included in this Annual Report on Form
          10-K are  included  in Item 8.
     i.   Consolidated Balance Sheets as of December 31, 2007 and 2006.
     ii.  Consolidated Statements of Operations for the years ended December 31,
          2007, 2006, and 2005.
     iii. Consolidated  Statements of Stockholders'  Equity (Deficiency) for the
          years ended December 31, 2007, 2006, and 2005.
     iv.  Consolidated Statements of Cash Flows for the years ended December 31,
          2007, 2006, and 2005.
     v.   Notes to Consolidated Financial Statements.

     (2)  Exhibits:

      Documents  incorporated by reference to exhibits that have been filed with
the Company's  reports or proxy statements under the Securities  Exchange Act of
1934 are  available to the public over the  Internet  from the SEC's web site at
http://www.sec.gov.  You may also read and copy any such  document  at the SEC's
public reference room located at 100 F Street, N.E., Room 1580, Washington, D.C.
20549 under the Company's SEC file number (0-28152).

Exhibit
 Number        Description
--------------------------------------------------------------------------------
  3.1          Certificate of Incorporation of Affinity  Technology Group, Inc.,
               which is hereby  incorporated  by reference to Exhibit 3.1 to the
               Registration  Statement on Form S-1 of Affinity Technology Group,
               Inc. (File No. 333-1170).
  3.2          Certificate of Amendment to Certificate of  Incorporation  of the
               Company, which is hereby incorporated by reference to Exhibit 3.2
               to the  Company's  Quarterly  Report on Form 10-Q for the quarter
               ended June 30, 2006
  3.3          Bylaws  of  Affinity  Technology  Group,  Inc.,  which is  hereby
               incorporated  by  reference  to Exhibit  3.2 to the  Registration
               Statement on Form S-1 of Affinity  Technology  Group,  Inc. (File
               No. 333-1170).
  4.1          Specimen   Certificate   of   Common   Stock,   which  is  hereby
               incorporated  by  reference  to Exhibit  4.1 to the  Registration
               Statement on Form S-1 of Affinity  Technology  Group,  Inc. (File
               No. 333-1170).
  4.2          Sections  4,  7 and 8 of  the  Certificate  of  Incorporation  of
               Affinity  Technology  Group,  Inc.,  as amended,  and Article II,
               Sections 3, 9 and 10 of the Bylaws of Affinity  Technology Group,
               Inc., as amended, which are incorporated by reference to Exhibits
               3.1 and 3.2, respectively,  to the Registration Statement on Form
               S-1 of Affinity Technology Group, Inc. (File No. 333- 1170).
  4.3          Convertible Note Purchase Agreement,  dated June 3, 2002, between
               Affinity Technology Group, Inc., and certain investors,  which is
               incorporated  by  reference  to  Exhibit  4.1  to  the  Company's
               Quarterly  Report on Form  10-Q for the  Quarter  ended  June 30,
               2002.
  4.4          Amended and Restated  Convertible Note Purchase Agreement,  dated
               August  9,  2006,  among  the  Company  and the  investors  named
               therein, which is hereby incorporated by reference to Exhibit 4.1
               to the  Company's  Quarterly  Report on Form 10-Q for the quarter
               ended June 30, 2006.
  4.5          Form of 8% Convertible Secured Note, which is hereby incorporated
               by reference to Exhibit 4.2 to the Company's  Quarterly Report on
               Form 10-Q for the quarter ended June 30, 2006.
  4.6          Amended and Restated  Security  Agreement,  dated August 9, 2006,
               among the  Company  and the  investors  named  therein,  which is
               hereby  incorporated by reference to Exhibit 4.3 to the Company's
               Quarterly  Report on Form  10-Q for the  quarter  ended  June 30,
               2006.

                                       43
<PAGE>


  4.7          Letter Agreement,  dated as of September 12, 2006, among Affinity
               Technology  Group,  Inc. and certain  purchasers  of  convertible
               notes under the Amended and Restated  Convertible  Note  Purchase
               Agreement,  dated as of August 9, 2006, among the Company and the
               investors  named  therein,   which  is  hereby   incorporated  by
               reference to Exhibit 4.1 to the Company's  Current Report on Form
               8-K filed on September 20, 2006.
 10.1*         Form of Stock Option Agreement (1995 Stock Option Plan), which is
               hereby   incorporated   by  reference  to  Exhibit  10.7  to  the
               Registration  Statement on Form S-1 of Affinity Technology Group,
               Inc. (File No. 333-1170).
 10.2*         Form of Stock Option Agreement (1996 Stock Option Plan), which is
               hereby   incorporated   by  reference  to  Exhibit  10.8  to  the
               Registration  Statement on Form S-1 of Affinity Technology Group,
               Inc. (File No. 333- 1170).
 10.3*         Form of Stock Option  Agreement  (Directors'  Stock Option Plan),
               which is hereby  incorporated by reference to Exhibit 10.9 to the
               Registration  Statement on Form S-1 of Affinity Technology Group,
               Inc. (File No. 333-1170).
 10.4*         1995 Stock Option Plan of Affinity  Technology Group, Inc., which
               is hereby  incorporated  by  reference  to  Exhibit  10.10 to the
               Registration  Statement on Form S-1 of Affinity Technology Group,
               Inc. (File No. 333-1170).
 10.5*         Amended  and   Restated   1996  Stock  Option  Plan  of  Affinity
               Technology Group, Inc., which is hereby incorporated by reference
               to Exhibit 10 to the Company's  Quarterly Report on Form 10-Q for
               the quarter ended September 30, 1999.
 10.6*         Non-Employee  Directors' Stock Option Plan of Affinity Technology
               Group, Inc., which is hereby incorporated by reference to Exhibit
               10.12  to the  Registration  Statement  on Form  S-1 of  Affinity
               Technology Group, Inc. (File No. 333-1170).
 10.7          Stock Rights Agreement,  dated October 20, 1995, between Affinity
               Technology Group,  Inc., and certain  investors,  which is hereby
               incorporated  by reference to Exhibit  10.15 to the  Registration
               Statement on Form S-1 of Affinity  Technology  Group,  Inc. (File
               No. 333-1170).
 10.8*         Declaration  of First  Amendment  to 1996  Stock  Option  Plan of
               Affinity  Technology  Group,  Inc., and 1995 Stock Option Plan of
               Affinity   Technology  Group,  Inc.,  which  is  incorporated  by
               reference to Exhibit 10.10 to the Company's Annual Report on Form
               10-K for the year ended December 31, 1998.
 10.9*         Restricted  Stock Agreement  between Affinity  Technology  Group,
               Inc., and Joseph A. Boyle,  which is incorporated by reference to
               Exhibit 10.1 of the Company's  Quarterly  Report on Form 10-Q for
               the quarter ended June 30, 2002.
10.10*         Stock Agreement between Affinity Technology Group, Inc., and Wade
               H. Britt, III, which is incorporated by reference to Exhibit 10.2
               of the  Company's  Quarterly  Report on Form 10-Q for the quarter
               ended June 30, 2002.
10.13          Legal  Representation  Agreement,  dated  May 27,  2003,  between
               decisioning.com,  Inc., and Withrow & Terranova,  PLLC,  which is
               incorporated by reference to Exhibit 10.1 of the Quarterly Report
               on Form 10-Q for the quarter ended June 30, 2003.
10.14          Letter  Agreement,  effective  as  of  April  17,  2006,  between
               Affinity  Technology  Group, Inc. (the "Company") and the holders
               of the 8% convertible  secured notes issued under the Convertible
               Note  Purchase  Agreement,  dated as of June 3,  2002,  among the
               Company and the investors  named there in, which is  incorporated
               by reference to Exhibit 10.1 to the Company's  Current  Report on
               Form 8-K filed on April 17, 2006.
10.15          Letter  Agreement,  dated July 10, 2006,  between the Company and
               Morgan  Keegan  &  Company,   which  is  hereby  incorporated  by
               reference to Exhibit 10.1 to the Company's Current Report on Form
               8-K filed on July 14, 2006.
10.16          Amended and Restated Legal Representation  Agreement,  dated July
               10, 2006, among the Company, decisioning.com,  Inc. and Withrow &
               Terranova,  PLLC,  which is hereby  incorporated  by reference to
               Exhibit 10.2 to the Company's Current Report on Form 8-K filed on
               July 14, 2006.
10.17          Engagement  Agreement,  dated July 10,  2006,  among the Company,
               decisioning.com,  Inc.  and  McBride  Law,  PC,  which is  hereby
               incorporated  by  reference  to  Exhibit  10.3  to the  Company's
               Current Report on Form 8-K filed on July 14, 2006.

                                       44
<PAGE>

   14          Code of Ethics,  which is incorporated by reference to Exhibit 14
               of the  Company's  Annual  Report on Form 10-K for the year ended
               December 31, 2003.
   21          Subsidiaries of Affinity Technology Group, Inc.
 23.1          Consent of Scott McElveen, L.L.P.
   31          Rule 13a-14(a)/15d-14(a) Certification.
   32          Section 1350 Certification.

*     Denotes a management contract or compensatory plan or arrangement.

(b)   Exhibits

      The exhibits required by Item 601 of Regulation S-K are filed herewith and
incorporated  by  reference  herein.  The response to this portion of Item 15 is
submitted under Item 15(a) (2).


                                       45
<PAGE>


                                   Signatures

      Pursuant  to the  requirements  of Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                    Affinity Technology Group, Inc.

Date: March 31, 2008               By:   /s/  Joseph A. Boyle
                                         ---------------------------------------
                                         Joseph A. Boyle
                                         President and Chief Executive Officer

      Pursuant to the requirements of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
Registrant and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
<S>                         <C>                                        <C>
Signatures                  Title                                      Date
--------------------------- ------------------------------------------ -----------------


/s/ Joseph A. Boyle                                                    March 31, 2008
---------------------------
Joseph A. Boyle             Chairman, President, Chief Executive
                             Officer and Chief Financial Officer and
                             Director
                            (principal executive and financial
                             officer)

/s/ Robert M. Price, Jr.                                               March 31, 2008
---------------------------
Robert M. Price, Jr.        Director


/s/ Peter R. Wilson, Ph.D.                                             March 31, 2008
---------------------------
Peter R. Wilson, Ph.D.      Director


/s/ S. Sean Douglas                                                    March 31, 2008
---------------------------
S. Sean Douglas             Executive Vice President and Chief
                             Operating Officer
                            (principal accounting officer)
</TABLE>


                                       46
<PAGE>


Exhibit Index

Exhibit Number   Description
--------------- ----------------------------------------------------------------
21               Subsidiaries of Affinity Technology Group, Inc.
23.1             Consent of Independent Registered Public Accounting Firm
31               Rule 13a-14(a)/15d-14(a) Certifications
32               Section 1350 Certifications


                                       47