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, 2003

[   ] 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.)

                       1053-B Sparkleberry Lane Extension
                               Columbia, SC 29223
                    (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 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 [ ]


                                       1

<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 an accelerated filer.
[ ]

         The aggregate market value of the Registrant's Common Stock held by
non-affiliates of the Registrant was approximately $5,660,000 as of June 30,
2003. 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 41,864,485 shares of the Registrant's Common Stock
outstanding as of March 15, 2004.

                       DOCUMENTS INCORPORATED BY REFERENCE

         Certain portions of the Registrant's proxy statement with respect to
the 2004 Annual Meeting of Stockholders of the Registrant have been incorporated
by reference herein.


                                       2

<PAGE>


         Item 1 of this Form 10-K entitled "Business" and Item 7 of this Form
10-K entitled "Management's Discussion and Analysis of Financial Condition and
Results of Operations" contain forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Forward-looking statements are inherently uncertain and
actual results could differ materially from those expressed or implied by the
forward-looking statements. These forward-looking statements should be
considered in the context of the business risks set forth below in Item 1 of
this report under the caption "Business Risks."


                                       3

<PAGE>



Part I

Item 1.  Business

         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(R) loan processing system, which automated the processing and
consummation of consumer financial services transactions; the Affinity Automated
Loan Machine (the ALM(R)), 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(R), 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 license 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.

         In conjunction with its product development activities, the Company
applied for and obtained three patents. The Company has been granted two patents
covering its fully-automated loan processing systems (U. S. Patents No.
5,870,721 and 5,940,811). In August 2000, the U.S. Patent and Trademark Office
issued to the Company a patent covering the fully-automated establishment of a
financial account, including credit accounts (U.S. Patent No. 6,105,007). In
addition, in 1997 the Company acquired a patent that covers the automated
processing of an insurance binder through a kiosk (U. S. Patent No. 5,537,315).

         Both of the Company's patents covering fully automated loan processing
systems have been subject to reexamination by the U.S. Patent and Trademark
Office (the "PTO") due to challenges to such patents by third parties. On
January 28, 2003, the Company 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. The reexamination of the Company's other loan
processing patent (U. S. Patent No. 5,940,811) is still ongoing. In March 2004,
the Company received notification from the PTO that it had rejected the claims
of U.S. Patent No. 5,940,811. The Company intends to contest the PTO's rejection
and to continue to prosecute the reexamination of this patent.

         On March 26, 2004, the Company was notified by Federated Department
Stores, Inc. ("Federated") and Ameritrade Holding Corporation ("Ameritrade")
that they had jointly filed a request with the PTO to reexamine U. S. Patent No.
6,105,007. The Company has lawsuits pending against Federated and Ameritrade in
the Columbia Division of the United States District Court for the State of South
Carolina (the "Court") in which it claims that both Federated and Ameritrade
infringe U. S. Patent No. 6,105,007. The Company has jointly, with Federated and
Ameritrade, requested the Court to stay the lawsuits against Federated and
Ameritrade pending the PTO's determination as to whether it will grant the
reexamination request. The procedural rules of the PTO require the PTO to make a
determination as to whether it will initiate a reexamination within three months
from the date it receives the request. If the PTO grants the reexamination
request, it is likely that it will take an extended period of time to complete
the reexamination proceedings and the related litigation with Federated and
Ameritrade. Moreover, if the PTO grants the reexamination request, it is likely
such decision will have a material adverse effect on the Company's patent
licensing program and its ability to attract additional capital resources in
order to continue its operations.

         It is possible that third parties may bring additional actions to
contest all or some of the Company's patents. The Company can make no assurances
that it will not lose all or some of the claims covered by its existing 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, 2003, the Company had cash and cash equivalents of
$578,398. The Company believes that its existing cash resources are sufficient
to fund its ordinary course operating expenses through the remainder of 2004.
However, the Company's ability to continue its operations for the remainder of
2004 is contingent upon the final outcome of the Company's litigation with
Temple Ligon, which is discussed below, and the ability of the Company to extend
the maturity date of all or substantially all of its convertible notes that are
due in June 2004. If the Company becomes obligated to pay more than an amount of
damages in connection with the Temple Ligon litigation or is unable to extend
the maturity date of all or substantially all of the convertible notes that are
due in June 2004, the Company will be forced to consider alternatives for
winding down its business, which may include filing for bankruptcy protection.


                                       4

<PAGE>

         To remain viable, the Company must generate working capital through the
sale of patent licenses or by raising additional capital. To date, the Company
generally has been unable to enter into licensing agreements with potential
licensees upon terms that are acceptable to the Company. As a result, the
Company has been forced to become involved in litigation with alleged
infringers. Currently, the Company is involved in three patent litigation
actions. The Company believes that these lawsuits may take an extended period of
time to complete, and no assurance can be given that the Company will have the
resources necessary to complete these lawsuits or that it will be successful in
obtaining a favorable outcome. As discussed previously, two of the alleged
infringers (Federated and Ameritrade) have notified the Company that they have
filed a request with the PTO to reexamine the Company's patent covering the
fully automated establishment of a financial account (U. S. Patent No.
6,105,007). If the PTO grants the reexamination request, it is likely that it
will take an extended period of time to complete the reexamination proceeding
and the related litigation with Federated and Ameritrade. Moreover, the
uncertainties of these litigation matters and other factors affecting the
Company's short and long-term liquidity discussed in the preceding paragraph
will likely impede the Company's ability to raise additional capital. To
maintain the minimal resources necessary to support its current operations and
execute a patent licensing strategy, the Company does not believe that
substantial additional reductions in its operating expenses are feasible. No
assurances can be given that the Company will be able to raise additional
capital or generate working capital from its patent licensing business.

         The Company is a defendant in a lawsuit brought by Temple Ligon, who
claims that the Company breached an agreement to give him a 1% equity interest
in the Company in consideration of services he claims to have performed in 1993
and 1994 in conjunction with the formation of the Company. In January 2004, this
litigation resulted in a jury verdict against the Company of $386,148. The
Company is seeking to have the verdict overturned by the trial judge. If it is
unsuccessful in doing so, the Company intends to appeal any adverse decision. No
assurances can be given that the Company will be successful in overturning the
verdict or, if it appeals the decision, in obtaining a favorable outcome on
appeal. If the Company becomes obligated to pay more than an insignificant
amount of damages in connection with this litigation, it will be forced to
consider alternatives for winding down its business, which may include filing
for bankruptcy protection.

         As of March 30, 2004, the Company had outstanding $1,206,336 in
aggregate principal amount of convertible secured notes (the "notes"). Under the
terms of these notes, principal and accrued interest is due and payable on the
second anniversary of the date on which the notes were issued. The maturity
dates for the notes outstanding as of March 30, 2004 is as follows:


<TABLE>
<CAPTION>

                                                     Accrued Interest           Total Principal and
         Maturity Date              Principal             at Maturity             Accrued Interest

         <S>                        <C>                    <C>                        <C>
         June 2, 2004               $756,336               $121,014                   $877,350
         March 13, 2005              200,000                 32,000                    232,000
         August 28, 2005              25,000                  4,000                     29,000
         November 3, 2005            100,000                 16,000                    116,000
         November 12, 2005            50,000                  8,000                     58,000
         December 18, 2005            50,000                  8,000                     58,000
         January 8, 2006              25,000                  4,000                     29,000

</TABLE>

                                       5

<PAGE>


         The notes bear interest at 8% and are collateralized by the stock of
the Company's wholly owned subsidiary, decisioning.com, Inc. decisioning.com is
the Company's patent licensing subsidiary and owns the Company's patent
portfolio. The notes are convertible into the Company's common stock at a
conversion rate of $.20 per share. The outstanding notes include a note in the
current principal amount of $131,336 issued to AMRO International, S.A.
("AMRO"). In June 2002, the Company issued to AMRO a convertible note in the
principal amount of $205,336 in satisfaction of the principal and accrued
interest outstanding under a convertible debenture previously issued by the
Company to AMRO. In October 2003, AMRO converted $74,000 of principal and $7,959
of accrued interest related to its convertible note into 409,796 shares of the
Company's common stock. The outstanding notes also include a note in the
principal amount of $100,000 note acquired on November 5, 2003 by a subsidiary
of The South Financial Group, which owns approximately 12% of the Company's
outstanding capital stock. The Company's ability to continue operations for the
remainder of 2004 is subject to its ability to extend the maturity date of all
or substantially all of the notes that are due in June 2004. The Company intends
to initiate discussions with certain holders of the notes that are due in June
2004 to extend the maturity date of these notes. However, no assurances can be
given that the Company will be able to extend the maturity date of these notes.
Under the terms of the notes, principal and accrued interest under all of the
notes will become 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. If the Company is not able to extend the maturity date of substantially
all of these notes that are due in June 2004, it will be forced to consider
alternatives for winding down its business, which may include filing for
bankruptcy protection.

         The Company formerly deployed its Mortgage ALM through a wholly owned
subsidiary, Surety Mortgage, Inc., ("Surety"). Surety deployed Mortgage ALMs,
processed mortgage loan applications obtained through its Mortgage ALM network,
and processed mortgage loan applications under contracts with third parties. In
the second quarter of 2001, the Company issued a $1 million note to HomeGold
Financial, Inc., which was secured by the stock of Surety. The note matured on
December 31, 2001, at which time the Company tendered the stock of Surety in
full satisfaction of outstanding principal and accrued interest under the note
in accordance with the terms of the note. The Company had previously entered
into a contract with HomeGold under which it processed certain mortgage loan
applications originated by HomeGold. Such contract expired on December 31, 2001.

         The Company maintains an Internet site at http://www.affi.net, although
the contents of such web site are not incorporated into this report. In August
2003, the Company began making 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.

         The Company was incorporated as a Delaware corporation in 1994. Its
principal executive offices are located at 1053-B Sparkleberry Lane Extension,
Columbia, South Carolina 29223, and its telephone number is (803) 758-2511.

         Patent Licensing Agent

         On May 27, 2003, decisioning.com entered into a legal representation
agreement with Withrow & Terranova, PLLC, pursuant to which decisioning.com
appointed Withrow & Terranova, PLLC as its exclusive representative for the
solicitation and negotiation of agreements to license decisioning.com's 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, Withrow & Terranova, PLCC
has agreed to promote, market, solicit, and negotiate the licensing of patents
with third parties and to represent decisioning.com as legal counsel in
connection with any patent litigation associated with the enforcement of the
patents. As compensation for its services under the agreement, Withrow &
Terranova will 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 the Company. 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,
Withrow & Terranova, PLLC 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.

         Competition

         The market for technologies that enable electronic commerce is highly
competitive and is subject to rapid innovation and technological change,
shifting consumer preferences, frequent 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 the Company's patents will be competitive technologically or
otherwise.

                                       6

<PAGE>


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

         Intellectual Property

         The Company was 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 the Company's patents covering fully automated loan
processing systems expire in 2013 and have been subject to reexamination by the
PTO due to requests by third parties who have challenged the validity of the
patents. On January 28, 2003, the Company received a Reexamination Certificate
relating to the completion of the PTO's reexamination of U. S. Patent No.
5,870,721. The reexamination of the Company's other loan processing patent (U.S.
Patent No. 5,940,811) is still ongoing. In March 2004 the Company received
notification from the PTO that it had rejected the claims of U.S. Patent No.
5,940,811. The Company intends to contest the PTO's rejection and to continue to
prosecute the reexamination of this patent. It is possible that third parties
may bring additional actions to contest all or some of the Company's patents.
The Company can make no assurances that it will not lose all or some of the
claims covered by its existing patents.

         In August 2000, the Company was 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). The patent
expires in 2013. On March 26, 2004, the Company was notified by Federated
Department Stores, Inc. ("Federated") and Ameritrade Holding Corporation
("Ameritrade") that they had jointly filed a request with the PTO to reexamine
U. S. Patent No. 6,105,007. The Company has lawsuits pending against Federated
and Ameritrade in the Columbia Division of the United States District Court for
the State of South Carolina (the "Court") in which it claims that both Federated
and Ameritrade infringe U. S. Patent No. 6,105,007. The Company has jointly,
with Federated and Ameritrade, requested the Court to stay the lawsuits against
Federated and Ameritrade pending the PTO's determination as to whether it will
grant the reexamination request. The procedural rules of the PTO require the PTO
to make a determination as to whether it will initiate a reexamination within
three months from the date it receives the request. If the PTO grants the
reexamination request, it is likely that it will take an extended period of time
to complete the reexamination proceedings and the related litigation with
Federated and Ameritrade. Moreover, if the PTO grants the reexamination request,
it is likely such decision will have a material adverse effect on the Company's
patent licensing program and its ability to attract additional capital resources
in order to continue its operations.

         The Company also holds a patent, which expires in 2014, covering the
issuance of insurance products automatically through a kiosk ("Method and
Apparatus for Issuing Insurance from a Kiosk", U.S. Patent No. 5,537,315).

         "Affinity", "ALM" "DeciSys/RT", and "e-xpertLender" are registered
trademarks of the Company and "Affinity Technologies," "iDEAL," "rtDS," and
"Affinity enabled" are registered service marks of the Company.

         The Company's success is completely dependent upon its ability to
defend and license its patents. There can be no assurance that the Company will
be able to protect its intellectual property. 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 the Company believes it has proprietary intellectual property
rights.


                                       7

<PAGE>


         Research and Development

         During 2001, the Company spent approximately $496,000 on research and
development activities, which represented approximately 38.6% of 2001 revenues
from continuing operations. The Company has eliminated its research and
development staff due to capital constraints.

         Employees

         At December 31, 2003, the Company employed 2 full-time employees and 2
part-time employees, compared to 3 full-time employees and 1 part-time employee
at December 31, 2002. Effective April 1, 2003, Joseph A. Boyle, President and
Chief Executive Officer of the Company, became employed by the Company on a
part-time basis. The Company has no collective bargaining agreements.

         Business Risks

         In addition to the other information in this report, readers should
carefully consider the following important factors, among others, that in some
cases have affected, and in the future could affect, the Company's actual
results and could cause the Company's future results to differ materially from
those expressed in any forward looking statements made by, or on behalf of, the
Company.

         Limited Capital Resources; Operating Losses

         The Company has generated net losses of $68,460,905 since its inception
and has financed its operations primarily through net proceeds from its initial
public offering in May 1996 and cash generated from operations and other
financing transactions. Net proceeds from the Company's initial public offering
were $60,088,516.

         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, 2003, the Company had cash and cash equivalents of
$578,398. The Company believes that its existing cash resources are sufficient
to fund its ordinary course operating expenses through the remainder of 2004.
However, the Company's ability to continue its operations for the remainder of
2004 is contingent upon the final outcome of the Company's litigation with
Temple Ligon, which is discussed below, and the ability of the Company to extend
the maturity date of all or substantially all of its convertible notes that are
due in June 2004. If the Company becomes obligated to pay more than an
insignificant amount of damages in connection with the Temple Ligon litigation
or is unable to extend the maturity date of all or substantially all of the
convertible notes that are due in June 2004, the Company will be forced to
consider alternatives for winding down its business, which may include filing
for bankruptcy protection.

         To remain viable, the Company must generate working capital through the
sale of patent licenses or by raising additional capital. To date, the Company
generally has been unable to enter into licensing agreements with potential
licensees upon terms that are acceptable to the Company. As a result, the
Company has been forced to become involved in litigation with alleged
infringers. Currently, the Company is involved in three patent litigation
actions. The Company believes that these lawsuits may take an extended period of
time to complete, and no assurance can be given that the Company will have the
resources necessary to complete these lawsuits or that it will be successful in
obtaining a favorable outcome. As discussed previously, two of the alleged
infringers (Federated and Ameritrade) have notified the Company that they have
filed a request with the PTO to reexamine the Company's patent covering the
fully automated establishment of a financial account (U. S. Patent No.
6,105,007). If the PTO grants the reexamination request, it is likely that it
will take an extended period of time to complete the reexamination proceeding
and the related litigation with Federated and Ameritrade. Moreover, the
uncertainties of these litigation matters and other factors affecting the
Company's short and long-term liquidity discussed in the preceding paragraph
will likely impede the Company's ability to raise additional capital. To
maintain the minimal resources necessary to support its current operations and
execute a patent licensing strategy, the Company does not believe that
substantial additional reductions in its operating expenses are feasible. No
assurances can be given that the Company will be able to raise additional
capital or generate working capital from its patent licensing business.

                                       8

<PAGE>


         The Company is a defendant in a lawsuit brought by Temple Ligon, who
claims that the Company breached an agreement to give him a 1% equity interest
in the Company in consideration of services he claims to have performed in 1993
and 1994 in conjunction with the formation of the Company. In January 2004, this
litigation resulted in a jury verdict against the Company of $386,148. The
Company is seeking to have the verdict overturned by the trial judge. If it is
unsuccessful in doing so, the Company intends to appeal any adverse decision. No
assurances can be given that the Company will be successful in overturning the
verdict or, if it appeals the decision, in obtaining a favorable outcome on
appeal. If the Company becomes obligated to pay more than an insignificant
amount of damages in connection with this litigation, it will be forced to
consider alternatives for winding down its business, which may include filing
for bankruptcy protection.

         As of March 30, 2004, the Company had outstanding $1,206,336 in
aggregate principal amount of convertible secured notes (the "notes"). Under the
terms of these notes, principal and accrued interest is due and payable on the
second anniversary of the date on which the notes were issued. The maturity
dates for the notes outstanding as of March 30, 2004 is as follows:


<TABLE>
<CAPTION>

                                                     Accrued Interest           Total Principal and
         Maturity Date              Principal             at Maturity             Accrued Interest

         <S>                        <C>                    <C>                        <C>
         June 2, 2004               $756,336               $121,014                   $877,350
         March 13, 2005              200,000                 32,000                    232,000
         August 28, 2005              25,000                  4,000                     29,000
         November 3, 2005            100,000                 16,000                    116,000
         November 12, 2005            50,000                  8,000                     58,000
         December 18, 2005            50,000                  8,000                     58,000
         January 8, 2006              25,000                  4,000                     29,000

</TABLE>


         The notes bear interest at 8% and are collateralized by the stock of
the Company's wholly owned subsidiary, decisioning.com, Inc. decisioning.com is
the Company's patent licensing subsidiary and owns the Company's patent
portfolio. The notes are convertible into the Company's common stock at a
conversion rate of $.20 per share. The outstanding notes include a note in the
current principal amount of $131,336 issued to AMRO International, S.A.
("AMRO"). In June 2002, the Company issued to AMRO a convertible note in the
principal amount of $205,336 in satisfaction of the principal and accrued
interest outstanding under a convertible debenture previously issued by the
Company to AMRO. In October 2003, AMRO converted $74,000 of principal and $7,959
of accrued interest related to its convertible note into 409,796 shares of the
Company's common stock. The outstanding notes also include a note in the
principal amount of $100,000 note acquired November 5, 2003, by a subsidiary of
The South Financial Group, which owns approximately 12% of the Company's
outstanding capital stock. The Company's ability to continue operations for the
remainder of 2004 is subject to its ability to extend the maturity date of all
or substantially all of the notes that are due in June 2004. The Company intends
to initiate discussions with certain holders of the notes that are due in June
2004 to extend the maturity date of these notes. However, no assurances can be
given that the Company will be able to extend the maturity date of these notes.
Under the terms of the convertible notes, principal and accrued interest under
all of the notes will become 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. If the Company is not able to extend the maturity date of
substantially all of these notes, it will be forced to consider alternatives for
winding down its business, which may include filing for bankruptcy protection.

         In order to fund its operations, the Company may need to raise
additional funds through the issuance of additional equity securities, in which
case the percentage ownership of the stockholders of the Company will be
reduced, stockholders may experience additional dilution, or such equity
securities may have rights, preferences or privileges senior to common stock.
There can be no assurance that additional financing will be available on terms
acceptable to the Company or at all. If adequate funds are not available or not
available on acceptable terms, the Company may be unable to continue operations.

                                       9

<PAGE>

         Dependence on Patent Licensing Program

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

         The Company is further subject to the risk that negotiations to license
its patents may be lengthy and that it may be necessary for the Company to
become involved in litigation to assert and protect its intellectual property
rights. To date, the Company generally has been unable to enter into licensing
agreements with alleged licensees upon terms that are acceptable to the Company.
As a result, the Company has been forced to become involved in litigation with
alleged infringers. Currently, the Company is involved in three patent
litigation actions. The Company believes that these lawsuits may take an
extended period of time to complete. Moreover, two of the alleged infringers
(Federated and Ameritrade) have notified the Company that they have filed a
request to reexamine the Company's patent covering the fully automated
establishment of a financial account (U.S. Patent No. 6,105,007). If the PTO
grants the reexamination request, it is likely that it will take an extended
period of time to complete the reexamination proceeding and the related
litigation with Federated and Ameritrade. No assurance can be given that the
Company will have the resources necessary to complete these lawsuits or that it
will be successful in obtaining a favorable outcome. Prolonged patent litigation
or reexaminations conducted by the PTO could have a material adverse effect on
the Company's business, operating results and financial position.

         Challenges to Patents

         Both of the Company's patents covering fully-automated loan processing
systems have been subject to reexamination by the PTO due to requests by third
parties who have challenged the validity of the patents. On January 28, 2003,
the Company received a Reexamination Certificate relating to the completion of
the PTO's reexamination of U. S. Patent No. 5,870,721. The reexamination of the
Company's other loan processing patent (U.S. Patent No. 5,940,811) is still
ongoing. In March 2004 the Company received notification from the PTO that it
had rejected the claims of U.S. Patent No. 5,940,811. The Company intends to
contest the PTO's rejection and to continue to prosecute the reexamination of
this patent.

         On March 26, 2004, the Company was notified by Federated and Ameritrade
that they had jointly filed a request with the PTO to reexamine U. S. Patent No.
6,105,007. The Company has lawsuits pending against Federated and Ameritrade in
the Columbia Division of the United States District Court for the State of South
Carolina (the "Court") in which it claims that both Federated and Ameritrade
infringe U. S. Patent No. 6,105,007. The Company has jointly, with Federated and
Ameritrade, requested the Court to stay the lawsuits against Federated and
Ameritrade pending the PTO's determination as to whether it will grant the
reexamination request. The procedural rules of the PTO require the PTO to make a
determination as to whether it will initiate a reexamination within three months
from the date it receives the request. If the PTO grants the reexamination
request, it is likely that it will take an extended period of time to complete
the reexamination proceedings and the related litigation with Federated and
Ameritrade. Moreover, if the PTO grants the reexamination request, it is likely
such decision will have a material adverse effect on the Company's patent
licensing program and its ability to attract additional capital resources in
order to continue its operations.

         It is possible that third parties may bring additional actions to
contest all or some of the Company's patents. The Company can make no assurances
that it will not lose all or some of the claims covered by its existing patents.
The loss of all or some of its claims or a significant limitation of such claims
could have a material adverse effect on the Company's ability to execute a
successful patent licensing program. Moreover, if other parties request
reexaminations of or otherwise challenge the Company's patents in the future,
the Company is subject to the risk that such proceeding may not be resolved to
the Company's satisfaction on a timely basis, if at all. Any such proceeding may
have a material adverse effect on the Company's business, operating results and
financial position. Moreover, in the event a challenge to the Company's patents
results in a significant loss of all or some of its claims, the Company's only
remedy may be to contest the decision, which would likely be a lengthy process.
Due to the Company's limited capital resources, it is unlikely that the Company
could successfully contest the decision without additional cash resources.
Accordingly, a decision by the PTO to limit all or some of the Company's patent
claims could have a material adverse effect on the Company's business, operating
results and financial position.

                                       10

<PAGE>

         Dependence on E-Commerce Technologies

         The Company's 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
the Company believes it has 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 the Company's business,
operating results and financial position.

         Dependence on Third Parties

         Patent licensing is a highly technical and specialized business which
requires the Company to rely on the services of third parties. In May 2003, the
Company appointed Withrow & Terranova, PLLC as its exclusive patent licensing
agent. Under the terms of the agreement, Withrow & Terranova, PLLC 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 the Company as legal counsel in connection with the enforcement of
its patents. Accordingly, the Company is dependent on Withrow & Terranova, PLLC
to successfully execute its patent licensing program. Additionally, the
agreement requires Withrow & Terranova, PLLC to coordinate the engagement of
experts, on terms satisfactory to the Company, if litigation becomes necessary
to enforce the Company's patent rights. The success of the Company's patent
licensing program and enforcement of its patents may depend on the satisfactory
retention of and efforts of experts. Moreover, experts frequently request and
charge significant fees.

         Potential for Fluctuation in Quarterly Results

         Since its inception, the Company's quarterly results have fluctuated
and have not been susceptible to meaningful period-to-period comparisons. The
Company believes that it may continue to experience significant fluctuations in
its quarterly operating results in the foreseeable future. The Company
anticipates that its period-to-period revenue and operating results will depend
on numerous factors including the ability of the Company to successfully
negotiate and enter into patent licensing agreements and the timing, terms and
the pricing attributes of any such agreements.

         The Company believes that period-to-period comparisons of its 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 revenues
coupled with the risk of substantial fluctuations in its quarterly operating
results may have a material adverse effect on the price of the Company's Common
Stock in the future.

         Dependence on Key Employees

         The Company is highly dependent on the services of its Chairman,
President and Chief Executive Officer, Joseph A. Boyle, notwithstanding the fact
that he has significantly reduced his time commitment to the Company effective
April 1, 2003. The Company does 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 upon the Company's business,
operating results and financial condition. In addition, the Company's financial
condition would likely adversely affect the Company's ability to retain or
recruit employees and executives.

                                       11

<PAGE>

         Risk of Substantial Dilution

         The Company has issued convertible notes that are convertible into
common stock at $0.20 per share, which 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 the Company's common stock. In addition,
the Company has issued options and warrants to acquire shares of its common
stock, and the Company may issue additional warrants in connection with
financing arrangements and may grant additional stock options under its stock
option plan that may further dilute the Company's common stock. The exercise of
such warrants and options would have a dilutive effect on the Company's common
stock. Also, to the extent that persons who acquire shares under all the
foregoing agreements sell those shares in the market, the price of the Company's
shares may decrease due to additional shares in the market.

         Volatility of Stock Price and Risk of Litigation

         The Company's 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 high
technology industry, 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 the Company's
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. Such litigation could result in substantial
costs and a diversion of management's attention and resources, which would have
a material adverse effect on the Company's business, operating results and
financial condition.

         Anti-Takeover Provisions

         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 the
Company's common stock. These provisions of Delaware law and the Company's
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 the Company's stockholders the opportunity
to sell their stock at a price above the prevailing market price. Certain of
these provisions allow the Company 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 the
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.

Item 2.  Properties

         The Company's principal executive offices are located at 1053 B
Sparkleberry Lane Extension in Columbia, South Carolina. Such office space
encompasses approximately 1200 square feet and is currently under a
month-to-month lease. The Company also leases warehouse space located in
Columbia, South Carolina, which encompasses approximately 4000 square feet. Such
space is under a month-to-month lease.

                                       12

<PAGE>

Item 3.  Legal Proceedings

         The Company and its founder, Jeff Norris, are 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 claims, among other
things, that the Company and Mr. Norris breached an agreement to give him a 1%
equity interest in the Company in consideration of services Mr. Ligon claims to
have performed in 1993 and 1994 in conjunction with the formation of the
Company, and seeks monetary damages of $5,463,000. This lawsuit initially
resulted in a jury verdict against the Company 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 the Company of $386,148. The
Company has filed a motion to have the verdict overturned by the trial judge. If
it is unsuccessful in doing so, the Company intends to appeal any adverse
decision. The Company believes that it has meritorious defenses to the claims
made by Mr. Ligon and intends to vigorously defend itself. However, no
assurances can be given that the Company will be successful in overturning the
verdict or, if it appeals the decision, in obtaining a favorable outcome on
appeal. If the Company becomes obligated to pay more than an insignificant
amount of damages in connection with this litigation, it will be forced to
consider alternatives for winding down its business, which may include filing
for bankruptcy protection.

         In June 2003, the Company filed a lawsuit against Federated Department
Stores, Inc., and certain of its subsidiaries alleging that Federated has
infringed one of the Company's patents (U. S. Patent No. 6,105,007). In
September 2003, the Company filed a similar lawsuit against Ameritrade Holding
Corporation and its subsidiary, Ameritrade, Inc., alleging infringement of the
same patent. Both lawsuits were filed in the United States District Court in
Columbia, South Carolina, and both seek unspecified damages. On March 26, 2004,
the Company was notified by Federated and Ameritrade that they had jointly filed
a request with the PTO to reexamine U. S. Patent No. 6,105,007. The Company has
jointly, with Federated and Ameritrade, requested the Court to stay the lawsuits
against Federated and Ameritrade pending the PTO's determination as to whether
it will grant the reexamination request. The procedural rules of the PTO require
the PTO to make a determination as to whether it will initiate a reexamination
within three months from the date it receives the request. If the PTO grants the
reexamination request, it is likely that it will take an extended period of time
to complete the reexamination proceedings, and it is likely that the pending
lawsuits against Federated and Ameritrade will be stayed until the reexamination
proceedings are completed.

         In November 2003, Household International, Inc. filed a declaratory
judgment action against the Company in United States District Court in
Wilmington, Delaware. In its complaint Household requested the court to rule
that Household was not infringing any of the claims of the Company's 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. The company filed counterclaims against Household
claiming that Household infringes U.S. Patent Nos. 5,870,721 C1, 5,940,811 and
6,105,007.

         On December 13, 2003, The Company resolved its pending litigation
against Citibank, N.A. The lawsuit arose out of a contract between Affinity and
Citibank with regard to the development of an automobile loan processing system.

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

         Not applicable.

                      Executive Officers of the Registrant

  Name                Age      Position with the Company
  Joseph A. Boyle     50       Chairman, President, Chief Executive Officer,
                                and Chief Financial Officer
  S. Sean Douglas     35       Executive Vice President and Chief Operating
                                Officer


                                       13

<PAGE>


         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. Effective
April 1, 2003, Mr. Boyle significantly reduced his time commitment to the
Company and was admitted as a partner with 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.

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.

Part II

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

     (a)  Since February 12, 2001, the Company's common stock has traded on the
          OTC Bulletin Board under the symbol "AFFI." The Company's 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 the Company's Common Stock for the
          periods indicated during 2003 and 2002 as reported by the OTC Bulletin
          Board. As of March 10, 2004, there were 435 stockholders of record of
          the Common Stock.


                                               Sales Price Per Share
                                                High            Low
                   2003
                   First Quarter                0.27           0.09
                   Second Quarter               0.23           0.15
                   Third Quarter                0.19           0.12
                   Fourth Quarter               0.17           0.09
                   2002
                   First Quarter                0.13           0.06
                   Second Quarter               0.11           0.06
                   Third Quarter                0.10           0.06
                   Fourth Quarter               0.23           0.05


          The Company has never paid dividends on its capital stock. The Company
          intends to retain earnings, if any, for use in its business and does
          not anticipate paying any cash dividends in the foreseeable future.

     (b)  On October 7, 2003, AMRO International, S.A. converted $74,000
          principal amount and $7,959 of accrued interest under an 8%
          convertible note issued by the Company to AMRO into an aggregate of
          409,796 shares of the Company's common stock. Under the terms of the
          note, principal and interest converted into shares of common stock at
          $.20 per share. Such shares were issued by the Company in reliance on
          an exemption from registration set forth in Section 3(a)(9)of the
          Securities Act of 1933.


                                       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," the Company's
Consolidated Financial Statements and Notes thereto and other information
included elsewhere in this report.


<TABLE>
<CAPTION>

                                                     Year Ended December 31,
                                     2003         2002        2001        2000         1999
                              ----------------------------------------------------------------
<S>                              <C>          <C>        <C>         <C>          <C>
Statement of Operations Data:
Revenues                         $517,647     $185,960   $1,285,944   $1,723,075   $2,477,877
Cost and expenses:
    Cost of revenues                1,765       16,846       63,751      344,931    2,068,229
    Research and development            -            -      496,441      683,600    1,870,509
    Impairment loss                     -            -      448,945    2,608,773            -
    Selling, general and
      administrative expenses     996,711    1,406,841    3,847,807    6,791,767   10,548,539
                              ----------------------------------------------------------------
Total costs and expenses          998,476    1,423,687    4,856,944   10,429,071   14,487,277
                              ----------------------------------------------------------------
Operating loss                   (480,829)  (1,237,727)  (3,571,000)  (8,705,996) (12,009,400)
Interest income                       694        1,643       10,101       64,155      305,362
Interest expense                  (80,373)     (70,334)    (115,557)     (26,277)           -
                              ----------------------------------------------------------------
Loss from continuing
 operations                      (560,508)  (1,306,418)  (3,676,456)  (8,668,118) (11,704,038)
Income (loss) from operations
 of discontinued subsidiary             -            -      467,188     (534,978)    (390,598)
Gain on disposal of subsidiary          -            -      891,569            -            -
                              ----------------------------------------------------------------
Net loss                        $(560,508) $(1,306,418) $(2,317,699) $(9,203,096)$(12,094,636)
                              ================================================================
Loss per share - basic and
 diluted
    Continuing operations          $(0.01)      $(0.03)      $(0.10)      $(0.29)      $(0.39)
                              ================================================================
    Net loss per share             $(0.01)      $(0.03)      $(0.06)      $(0.30)      $(0.41)
                              ================================================================
Shares used in computing
    net loss per share         41,512,897   40,707,108   38,004,089   30,242,054   29,738,459
                              ================================================================

</TABLE>

                                       15

<PAGE>


<TABLE>
<CAPTION>

                                                           December 31,
                                  2003          2002           2001          2000          1999
                            --------------------------------------------------------------------
<S>                           <C>           <C>             <C>          <C>         <C>
Balance Sheet Data:
Cash and cash equivalents     $578,398      $156,780        $27,720      $646,198    $2,116,016
Short-term investments               -             -              -             -     1,474,949
Working capital               (909,356)      (82,512)       117,477     2,216,854     4,637,238
Net investment in sales-type
 leases, less current portion        -             -              -             -       249,830
Total assets                   618,002       234,848        927,657     5,638,453    13,129,528
Convertible debenture                -             -        225,090 (1)   951,456       951,456
Convertible notes            1,181,336 (2)   830,336              -             -             -
Capital stock of subsidiary
 held by minority investor           -             -              -        22,668             -
Stockholder's equity
 (deficiency)               (1,329,579)     (908,230)       343,438     2,326,314    10,670,980

</TABLE>


----------------------------
(1)  Amounts outstanding under the convertible debeture as of December 31, 2001
     were classified as a current liability and, accordingly are included in the
     working capital of the Company at December 31, 2001, set forth above.

(2)  $756,336 of the amount outstanding under the convertible notes as of
     December 31, 2003 was classified as a current liability and, accordingly
     is included in the working capital of the Company at December 31, 2003,
     set forth above.





                                       16

<PAGE>


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

Overview

         The Company 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, the Company has suspended efforts to deploy products and services
that use its loan processing system, DeciSys/RT, in order to focus its efforts
exclusively on licensing certain of its patents.

           In conjunction with its product development activities, the Company
applied for and obtained three patents. The Company has been granted two patents
covering its fully-automated loan processing systems (U. S. Patents No.
5,870,721 and 5,940,811). In August 2000, the U.S. Patent and Trademark Office
issued to the Company a patent covering the fully-automated establishment of a
financial account, including credit accounts (U.S. Patent No. 6,105,007). In
addition, in 1997 the Company acquired a patent that covers the automated
processing of an insurance binder through a kiosk (U. S. Patent No. 5,537,315).

           Both of the Company's patents covering fully automated loan
processing systems have been subject to reexamination by the U.S. Patent and
Trademark Office (the "PTO") due to challenges to such patents by third parties.
On January 28, 2003, the Company 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. The reexamination of the Company's other loan
processing patent (U. S. Patent No. 5,940,811) is still ongoing. In March 2004
the Company received notification from the PTO that it had rejected the claims
of U.S. Patent No. 5,940,811. The Company intends to contest the PTO's rejection
and to continue to prosecute the reexamination of this patent.

         On March 26, 2004, the Company was notified by Federated Department
Stores, Inc. ("Federated") and Ameritrade Holding Corporation ("Ameritrade")
that they had jointly filed a request with the PTO to reexamine U. S. Patent No.
6,105,007. The Company has lawsuits pending against Federated and Ameritrade in
the Columbia Division of the United States District Court for the State of South
Carolina (the "Court") in which it claims that both Federated and Ameritrade
infringe U. S. Patent No. 6,105,007. The Company has jointly, with Federated and
Ameritrade, requested the Court to stay the lawsuits against Federated and
Ameritrade pending the PTO's determination as to whether it will grant the
reexamination request. The procedural rules of the PTO require the PTO to make a
determination as to whether it will initiate a reexamination within three months
from the date it receives the request. If the PTO grants the reexamination
request, it is likely that it will take an extended period of time to complete
the reexamination proceedings and the related litigation with Federated and
Ameritrade. Moreover, if the PTO grants the reexamination request, it is likely
such decision will have a material adverse effect on the Company's patent
licensing program and its ability to attract additional capital resources in
order to continue its operations.

         It is possible that third parties may bring additional actions to
contest all or some of the Company's patents. The Company can make no assurances
that it will not lose all or some of the claims covered by its existing 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, 2003, the Company had cash and cash equivalents of
$578,398. The Company believes that its existing cash resources are sufficient
to fund its ordinary course operating expenses through the remainder of 2004.
However, the Company's ability to continue its operations for the remainder of
2004 is contingent upon the final outcome of the Company's litigation with
Temple Ligon, which is discussed below, and the ability of the Company to extend
the maturity date of all or substantially all of its convertible notes that are
due in June 2004. If the Company becomes obligated to pay more than an
insignificant amount of damages in connection with the Temple Ligon litigation
or is unable to extend the maturity date of all or substantially all of the
convertible notes that are due in June 2004, the Company will be forced to
consider alternatives for winding down its business, which may include filing
for bankruptcy protection.

         To remain viable, the Company must generate working capital through the
sale of patent licenses or by raising additional capital. To date, the Company
generally has been unable to enter into licensing agreements with potential
licensees upon terms that are acceptable to the Company. As a result, the
Company has been forced to become involved in litigation with alleged
infringers. Currently, the Company is involved in three patent litigation
actions. The Company believes that these lawsuits may take an extended period of
time to complete, and no assurance can be given that the Company will have the
resources necessary to complete these lawsuits or that it will be successful in
obtaining a favorable outcome. As discussed previously, two of the alleged
infringers (Federated and Ameritrade) have notified the Company that they have
filed a request with the PTO to reexamine the Company's patent covering the
fully automated establishment of a financial account (U. S. Patent No.
6,105,007). If the PTO grants the reexamination request, it is likely that it
will take an extended period of time to complete the reexamination proceedings
and the related litigation with Federated and Ameritrade. Moreover, the
uncertainties of these litigation matters and other factors affecting the
Company's short and long-term liquidity discussed in the preceding paragraph
will likely impede the Company's ability to raise additional capital. To
maintain the minimal resources necessary to support its current operations and
execute a patent licensing strategy, the Company does not believe that
substantial additional reductions in its operating expenses are feasible. No
assurances can be given that the Company will be able to raise additional
capital or generate working capital from its patent licensing business.

                                       17

<PAGE>

         The Company is a defendant in a lawsuit brought by Temple Ligon, who
claims that the Company breached an agreement to give him a 1% equity interest
in the Company in consideration of services he claims to have performed in 1993
and 1994 in conjunction with the formation of the Company. In January 2004, this
litigation resulted in a jury verdict against the Company of $386,148. The
Company is seeking to have the verdict overturned by the trial judge. If it is
unsuccessful in doing so, the Company intends to appeal any adverse decision. No
assurances can be given that the Company will be successful in overturning the
verdict or, if it appeals the decision, in obtaining a favorable outcome on
appeal. If the Company becomes obligated to pay more than an insignificant
amount of damages in connection with this litigation, it will be forced to
consider alternatives for winding down its business, which may include filing
for bankruptcy protection.

         As of March 30, 2004, the Company had outstanding $1,206,336 in
aggregate principal amount of convertible secured notes (the "notes"). Under the
terms of these notes, principal and accrued interest is due and payable on the
second anniversary of the date on which the notes were issued. The maturity
dates for the notes outstanding as of March 30, 2004 is as follows:

<TABLE>
<CAPTION>

                                                     Accrued Interest           Total Principal and
         Maturity Date              Principal             at Maturity             Accrued Interest

         <S>                        <C>                    <C>                        <C>
         June 2, 2004               $756,336               $121,014                   $877,350
         March 13, 2005              200,000                 32,000                    232,000
         August 28, 2005              25,000                  4,000                     29,000
         November 3, 2005            100,000                 16,000                    116,000
         November 12, 2005            50,000                  8,000                     58,000
         December 18, 2005            50,000                  8,000                     58,000
         January 8, 2006              25,000                  4,000                     29,000

</TABLE>


         The notes bear interest at 8% and are collateralized by the stock of
the Company's wholly owned subsidiary, decisioning.com, Inc. decisioning.com is
the Company's patent licensing subsidiary and owns the Company's patent
portfolio. The notes are convertible into the Company's common stock at a
conversion rate of $.20 per share. The outstanding notes include a note in the
current principal amount of $131,336 issued to AMRO International, S.A.
("AMRO"). In June 2002, the Company issued to AMRO a convertible note in the
principal amount of $205,336 in satisfaction of the principal and accrued
interest outstanding under a convertible debenture previously issued by the
Company to AMRO. In October 2003, AMRO converted $74,000 of principal and $7,959
in accrued interest related to its convertible note into 409,796 shares of the
Company's common stock. The outstanding notes also include a note in the
principal amount of $100,000 note acquired on November 5, 2003 by a subsidiary
of The South Financial Group, which owns approximately 12% of the Company's
outstanding capital stock. The Company's ability to continue operations for the
remainder of 2004 is subject to its ability to extend the maturity date of all
or substantially all of the notes that are due in June 2004. The Company intends
to initiate discussions with certain holders of the notes that are due in June
2004 to extend the maturity date of these notes. However, no assurances can be
given that the Company will be able to extend the maturity date of these notes.
Under the terms of the notes, principal and accrued interest under
all of the notes will become 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. If the Company is not able to extend the maturity date of
substantially all of these notes, it will be forced to consider alternatives for
winding down its business which may include filing for bankruptcy protection.

                                       18

<PAGE>


         Critical Accounting Policies

         The Company applies certain accounting policies which are critical in
understanding the Company's 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 following: (1)
valuation of long-lived assets; and, (2) valuation reserve on net deferred tax
assets.

         Valuation of Long-Lived Assets

         The Company annually evaluates the carrying value of long-lived assets,
including property and equipment and goodwill. Goodwill results from business
acquisitions and is initially recorded at the excess of the purchase price over
the fair value of net identifiable assets acquired. Prior to 2001, the Company
amortized goodwill over ten years. Management must make certain judgments when
estimating and recording impairment charges. Such judgments are typically based
on their plans to utilize or sell long-lived assets, the current market value of
such assets, and in the case of goodwill, management's plans and strategies to
continue business lines the Company previously acquired. To the extent that the
carrying value of long-lived assets is greater than the Company's estimates of
the undiscounted cash flows associated with the asset, the Company records an
impairment charge equal to the excess of carrying value over the asset's fair
value. The Company recognized an impairment loss of $448,945 in 2001 associated
with the remaining balance of goodwill previously recorded by the Company and
certain other long-lived assets.

         Valuation Reserve on Net Deferred Tax Assets

         The Company records a valuation allowance to reduce its deferred tax
assets to the amount that it estimates is more likely than not to be realized.
As of December 31, 2003, the Company recorded a valuation allowance that reduced
its deferred tax assets to equal its deferred tax liability.

Results of Operations

         Revenues. The Company's revenues from continuing operations were
$517,647, $185,960, and $1,285,944 for the years ended December 31, 2003, 2002,
and 2001, respectively. The types of revenue recognized by the Company in the
years ended December 31, 2003, 2002, and 2001, are as follows:


<TABLE>
<CAPTION>

                                                              Years ended December 31,
                                           2003                           2002                          2001
                               ----------------------------    ---------------------------    ---------------------------
                                                    % of                           % of                           % of
                                   Amount           Total         Amount           Total          Amount          Total
                               ---------------     --------    --------------     --------    ---------------    --------
<S>                            <C>                 <C>         <C>                <C>         <C>                <C>
Transaction fees                     $      -            -         $ 104,878         56.4          $ 265,666        20.7
Professional services fees                  -            -                 -            -            249,871        19.4
Patent license revenue                 17,647          3.4            25,000         13.4             20,000         1.6
Other income                          500,000         96.6            56,082         30.2            750,407        58.3
                               ---------------     --------    --------------     --------    ---------------    --------
                                    $ 517,647        100.0         $ 185,960        100.0        $ 1,285,944       100.0
                               ===============     ========    ==============     ========    ===============    ========

</TABLE>


         Transaction fees. The Company recognized no transaction fee revenue in
2003. During 2002 and 2001 the Company provided transaction processing services
to one customer that used the Company's e-xpertLender system. The contract with
the customer terminated in October 2002. The decrease in transaction fees in
2002 compared to 2001 is attributable to the customer's migration to another
system during 2002 and the termination of the contract in October 2002.

                                       19

<PAGE>


         Professional services fees. Previously, when the Company agreed to
provide professional services to customize its core technology to conform to a
specific customer request, the Company generally entered into a contract with
the customer for the performance of these services which typically defined
deliverables, specific delivery and acceptance dates and specified fees for such
services. Upon completion and acceptance of the specific deliverables by the
customer, the Company recognized the corresponding revenue as professional
services revenue. Because the Company has suspended efforts to deploy its loan
processing systems, it performed no professional services in 2003 or 2002, and
accordingly, recognized no revenue associated with such activities. Moreover, it
does not anticipate that it will earn professional service fees in the future.
In 2001, the Company recognized $249,871 of professional services fees, which
were primarily associated with services rendered under one contract. Most of the
services were performed during 2000 and the associated revenue was deferred
until 2001 and recognized upon termination of the contract.

         Patent license revenue. In 2003, 2002 and 2001, the Company recognized
patent licensing revenue associated with the annual fee from one patent license
agreement executed in 1999.

         Other income. In 2003, other income related exclusively to amounts
received by the Company as a result of the settlement of a lawsuit. In 2002 and
2001, other income consisted primarily of non-recurring miscellaneous income
items and certain insignificant recurring income items such as fees charged for
the routine maintenance of products in service. In 2001, other income also
included $640,000 related to the settlement of a lawsuit. The decrease in other
income in 2002 compared to 2001 is primarily attributable to an overall
reduction in the Company's business activities in 2002 compared with 2001 and
the settlement of a lawsuit in 2001.

Costs and Expenses

         Costs of Revenues. Costs of revenues from continuing operations for the
years ended December 31, 2003, 2002, and 2001 were $1,765, $16,846, and $63,751,
respectively. Cost of revenues includes the direct costs associated with the
generation of specific types of revenue and the allocation of certain indirect
costs when such costs are specifically identifiable and allocable to revenue
producing activities. During the three years ended December 31, 2003, the nature
and amounts of costs, as well as gross profit margins, associated with certain
revenue producing activities varied significantly due to changes in the nature
of the services offered by the Company and due to different pricing structures
offered to certain customers.

         Costs of revenues and the percentage of the costs of revenues to total
costs of revenues for the years ended December 31, 2003, 2002, and 2001 are as
follows:


<TABLE>
<CAPTION>

                                                       Year ended December 31,

                                             2003                          2002                            2001
                                  ---------------------------    --------------------------     --------------------------------
                                                      % of                           % of                              % of
                                      Amount          Total         Amount          Total          Amount             Total
                                  ---------------    --------    --------------     -------     --------------     -------------
<S>                               <C>                <C>         <C>                <C>         <C>                <C>
Transaction fees                         $     -           -          $ 14,346        85.2           $ 46,347              72.7
Professional services fees                     -           -                 -           -             15,404              24.2
Patent license revenue                     1,765       100.0             2,500        14.8              2,000               3.1
                                  ---------------    --------    --------------     -------     --------------     -------------
                                        $  1,765       100.0          $ 16,846       100.0           $ 63,751             100.0
                                  ===============    ========    ==============     =======     ==============     =============

</TABLE>


         Costs of transaction fees. The Company had no cost of transaction fees
in 2003. In 2002 and 2001, the cost of transaction fees consisted primarily of
the direct costs incurred by the Company to process loan applications through
its systems. Such direct costs were associated with services provided by third
parties and included the cost of credit reports, fraud reports and
communications networks used by the Company. During 2002 and 2001, the Company
provided transaction processing services to one customer that used the Company's
e-xpertLender system. The contract with the customer terminated in October 2002.
The decrease in the cost of transaction fees in 2002 compared to 2001 is
attributable to the customer's migration to another system during 2002 and the
termination of the contract in October 2002.

                                       20

<PAGE>


         Costs of professional services fees. The Company had no cost of
professional services fees in 2003 or 2002. In 2001, the costs of professional
services fees consisted of the costs of the direct labor and the allocation of
certain indirect costs associated with performing software and system
customization services under one contract. In 2003 and 2002, the Company
provided no professional services.

         Costs of patent license revenue. Costs of patent license revenue
recognized in 2003, 2002, and 2001 consist of the patent licensing agent's
commissions.

         Research and Development. The Company accounts for research and
development costs as operating costs and expenses such costs in the period
incurred. In accordance with Statement of Financial Accounting Standards No. 86
("SFAS 86"), "Computer Software to be Sold, Leased or Otherwise Marketed," the
Company capitalizes software costs incurred in the development of a software
application after the technological feasibility of the application has been
established. Technological feasibility is established when an application design
and a working model of the application have been completed and the completeness
of the working model and its consistency with the application design have been
confirmed by testing. From the time technological feasibility is established
until the time the relevant application is available for general release to
customers, software development costs incurred are capitalized at the lower of
cost or net realizable value. Thereafter, costs related to the application are
again expensed as incurred. Capitalized software development costs are amortized
using the greater of the revenue curve or straight-line method over the
estimated economic life of the application. Software costs capitalized include
direct labor, other costs directly associated with the development of the
related application and an allocation of indirect costs, primarily facility
costs and other costs associated with the Company's software development staff.
The Company bases such allocation on the percentage of the Company's total labor
costs represented by the software development labor costs.

         In conjunction with the Company's suspension of its efforts to further
develop and market its software products and services, the Company suspended all
research and development activities. Accordingly, the Company recognized no
expenses associated with research and development activities in 2003 and 2002.
Research and development expenses for the year ended December 31, 2001, were
$496,441. The Company capitalized no costs associated with software development
in 2003, 2002, and 2001.

         Selling, General and Administrative Expenses. Selling, general and
administrative ("SG&A") expenses related to continuing operations for the year
ended December 31, 2003, were $996,711, compared to $1,406,841 and $3,847,807
for the years ended December 31, 2002 and 2001, respectively.

         SG&A expenses during 2003 consisted primarily of personnel expense of
approximately $266,000; professional fees of approximately $269,000;
depreciation and amortization expense of approximately $15,000; rent expense of
approximately $54,000; insurance and taxes of approximately $72,000; and
litigation accruals of approximately $318,000.

         SG&A expenses during 2002 consisted primarily of personnel expense of
approximately $434,000; professional fees of approximately $303,000;
depreciation and amortization expense of approximately $138,000; rent expense of
approximately $101,000; and insurance and taxes of approximately $159,000.

         SG&A expenses during 2001 consisted primarily of personnel expense of
approximately $787,000; professional fees of approximately $470,000;
depreciation and amortization expense of approximately $570,000; and rent
expense of approximately $312,000.

         The decrease in SG&A in 2003 compared to 2002 and 2002 compared to 2001
is due the continued reduction of the Company's workforce over the past three
years and curtailment of other expenses. SG&A expenses were lower in all
material categories in 2003 compared to 2002, except for litigation accruals,
and in 2002 compared to 2001.

         Impairment Loss. The Company periodically evaluates the carrying value
of long-lived assets to be held and used, including property and equipment and
goodwill. In accordance with its evaluation, the Company recorded an impairment
loss of $448,945 in 2001. In 2001, the impairment loss was primarily associated
with goodwill the Company had previously recorded in conjunction with the
acquisition of an insurance-related business which included rights to a patent.
In 2001, the Company was unsuccessful in obtaining expanded rights associated
with its insurance patent and accordingly wrote off all amounts previously
recorded as goodwill. Impairment losses included charges taken by the Company to
reduce the carrying value of property and equipment and goodwill. The Company
did not record any impairment losses in 2002 or 2003.

                                       21

<PAGE>

Interest Income

         Interest income associated with continuing operations was $694, $1,643,
and $10,101 during 2003, 2002, and 2001, respectively, and primarily reflects
interest income attributable to short-term investments. The decrease in interest
income in 2003 compared to 2002 and in 2002 compared to 2001 is primarily
attributed to the decrease in average cash balances maintained during the year.

Interest Expense

         Interest expense associated with continuing operations was $80,373,
$70,334, and $115,557 in 2003, 2002, and 2001, respectively. Interest expense is
primarily associated with the issuance of a $1 million convertible debenture in
November 2000 that was satisfied on June 3, 2002, the issuance of a $1 million
note in July 2001 that was satisfied in December 2001, and the issuance of
$1,255,336 aggregate principal amount of convertible notes in installments in
June 2002 ($830,336), March 2003 ($200,000), August 2003 ($25,000), November
2003 ($150,000), and December 2003 ($50,000), which notes are currently
outstanding. The increase in interest expense in 2003 compared to 2002 is
attributable to the recognition of a full year of interest on the convertible
notes issued in June 2002 and interest associated with the issuance of
additional convertible notes in 2003 in the aggregate principal amount of
$425,000. The decrease in interest expense in 2002 compared with 2001 is
attributable to the liquidation in December 2001 of the $1 million note issued
in July 2001 and a reduction of amounts outstanding under the $1 million
convertible debenture. The decrease was offset by interest expense associated
with the issuance of $830,336 principal amount of convertible notes in June
2002.

Income (Loss) from Operations of Discontinued Subsidiary and Gain on Disposal of
Subsidiary

         In July 2001, the Company issued a $1 million note to HomeGold
Financial, Inc., which note was collateralized by the stock of Surety Mortgage,
Inc., the Company's wholly-owned mortgage banking subsidiary. On December 31,
2001, in accordance with the terms of the note, the Company tendered the stock
of Surety to HomeGold in full satisfaction of the $1 million note and accrued
interest of $25,511. The Company accounted for the transaction as the disposal
of a segment of a business and has reported the operations of Surety as a
separate component of loss for 2001. Similarly, the gain of $891,569 which the
Company recognized is also reported as a separate component of net loss in 2001.

         The components of Surety's operations for 2001 are as follows:

                                            Year Ended December 31,
                                                      2001
                                            ------------------------

                    Mortgage revenue                     $2,851,720
                    Cost of revenue                      (1,008,266)
                    S G & A                              (1,378,366)
                                            ------------------------
                    Total cost and expenses              (2,386,632)
                                            ------------------------
                                                            465,088
                    Net interest income                       2,100
                                            ------------------------
                    Net income                             $467,188
                                            ========================

                                       22

<PAGE>


Surety was formed to deploy and test the Company's automated mortgage loan
application system ("Mortgage ALM"), and engaged in mortgage brokerage
activities which involved originating, processing and selling mortgage loans to
outside investors. Surety originated and processed mortgage loans directly with
consumers or on behalf of correspondents, and immediately sold such loans to
institutions that sponsor the loan programs offered by Surety. Surety only
offered loans that would be acquired by such institutions under such programs.
Upon making the loan commitment to the borrower, Surety immediately received a
commitment from an institution to acquire the loan upon closing. Mortgage
revenue included gains on sales of mortgage loans to institutions, loan fees
received for originating and processing the loan and fees charged to third
parties for processing services pursuant to certain contracts Surety entered
into during 2000 and 2001. Loan origination fees and all other direct costs
associated with originating loans were recognized at the time the loans were
sold.


Income Taxes

         The Company has recorded a valuation allowance for the full amount of
its net deferred income tax assets as of December 31, 2003, 2002, and 2001,
based on management's evaluation of the recognition criteria as set forth in
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes."

Liquidity and Capital Resources

         The Company has generated net losses of $68,460,905 since its inception
and has financed its operations primarily through net proceeds from its initial
public offering in May 1996 and cash generated from operations and other
financing transactions. Net proceeds from the Company's initial public offering
were $60,088,516.

         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, 2003, the Company had cash and cash equivalents of
$578,398. The Company believes that its existing cash resources are sufficient
to fund its ordinary course operating expenses through the remainder of 2004.
However, the Company's ability to continue its operations for the remainder of
2004 is contingent upon the final outcome of the Company's litigation with
Temple Ligon, which is discussed below, and the ability of the Company to extend
the maturity date of all or substantially all of its convertible notes that are
due in June 2004. If the Company becomes obligated to pay more than an
insignificant amount of damages in connection with the Temple Ligon litigation
or is unable to extend the maturity date of all or substantially all of the
convertible notes that are due in June 2004, the Company will be forced to
consider alternatives for winding down its business, which may include filing
for bankruptcy protection.

         To remain viable, the Company must generate working capital through the
sale of patent licenses or by raising additional capital. To date, the Company
generally has been unable to enter into licensing agreements with potential
licensees upon terms that are acceptable to the Company. As a result, the
Company has been forced to become involved in litigation with alleged
infringers. Currently, the Company is involved in three patent litigation
actions. The Company believes that these lawsuits may take an extended period of
time to complete, and no assurance can be given that the Company will have the
resources necessary to complete these lawsuits or that it will be successful in
obtaining a favorable outcome. As discussed previously, two of the alleged
infringers (Federated and Ameritrade) have notified the Company that they have
filed a request with the PTO to reexamine the Company's patent covering the
fully automated establishment of a financial account (U. S. Patent No.
6,105,007). If the PTO grants the reexamination request, it is likely that it
will take an extended period of time to complete the reexamination proceeding
and the related litigation with Federated and Ameritrade. Moreover, the
uncertainties of these litigation matters and other factors affecting the
Company's short and long-term liquidity discussed in the preceding paragraph
will likely impede the Company's ability to raise additional capital. To
maintain the minimal resources necessary to support its current operations and
execute a patent licensing strategy, the Company does not believe that
substantial additional reductions in its operating expenses are feasible. No
assurances can be given that the Company will be able to raise additional
capital or generate working capital from its patent licensing business.

         The Company is a defendant in a lawsuit brought by Temple Ligon, who
claims that the Company breached an agreement to give him a 1% equity interest
in the Company in consideration of services he claims to have performed in 1993
and 1994 in conjunction with the formation of the Company. In January 2004, this
litigation resulted in a jury verdict against the Company of $386,148. The
Company is seeking to have the verdict overturned by the trial judge. If it is
unsuccessful in doing so, the Company intends to appeal any adverse decision. No
assurances can be given that the Company will be successful in overturning the
verdict or, if it appeals the decision, in obtaining a favorable outcome on
appeal. If the Company becomes obligated to pay more than an insignificant
amount of damages in connection with this litigation, it will be forced to
consider alternatives for winding down its business which may include filing for
bankruptcy protection.

                                       23

<PAGE>


         As of March 30, 2004, the Company had outstanding $1,206,336 in
aggregate principal amount of convertible secured notes (the "notes"). Under the
terms of these notes, principal and accrued interest is due and payable on the
second anniversary of the date on which the notes were issued. The maturity
dates for the notes outstanding as of March 30, 2004 is as follows:


<TABLE>
<CAPTION>

                                                     Accrued Interest           Total Principal and
         Maturity Date              Principal             at Maturity             Accrued Interest

         <S>                        <C>                    <C>                        <C>
         June 2, 2004               $756,336               $121,014                   $877,350
         March 13, 2005              200,000                 32,000                    232,000
         August 28, 2005              25,000                  4,000                     29,000
         November 3, 2005            100,000                 16,000                    116,000
         November 12, 2005            50,000                  8,000                     58,000
         December 18, 2005            50,000                  8,000                     58,000
         January 8, 2006              25,000                  4,000                     29,000


</TABLE>


         The notes bear interest at 8% and are collateralized by the stock of
the Company's wholly owned subsidiary, decisioning.com, Inc. decisioning.com is
the Company's patent licensing subsidiary and owns the Company's patent
portfolio. The notes are convertible into the Company's common stock at a
conversion rate of $.20 per share. The outstanding notes include a note in the
current principal amount of $131,336 issued to AMRO International, S.A.
("AMRO"). In June 2002, the Company issued to AMRO a convertible note in the
principal amount of $205,336 in satisfaction of the principal and accrued
interest outstanding under a convertible debenture previously issued by the
Company to AMRO. In October 2003, AMRO converted $74,000 of principal and $7,959
of accrued interest related to its convertible note into 409,796 shares of the
Company's common stock. The outstanding notes also include a note in the
principal amount of $100,000 note acquired on November 5, 2003 by a subsidiary
of The South Financial Group, which owns approximately 12% of the Company's
outstanding capital stock. The Company's ability to continue operations for the
remainder of 2004 is subject to its ability to extend the maturity date of all
or substantially all of the notes that are due in June 2004. The Company intends
to initiate discussions with certain holders of the notes that are due in June
2004 to extend the maturity date of these notes. However, no assurances can be
given that the Company will be able to extend the maturity date of these notes.
Under the terms of the notes, principal and accrued interest will become
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. If the Company
is not able to extend the maturity date of substantially all of these notes, it
will be forced to consider alternatives for winding down its business, which may
include filing for bankruptcy protection.

         In the second quarter of 2001, the Company issued a $1 million note to
HomeGold Financial, Inc., which was secured by the stock of its wholly owned
mortgage subsidiary, Surety Mortgage, Inc. The note matured on December 31,
2001, at which time the Company tendered the stock of Surety in full
satisfaction of outstanding principal and accrued interest under the note in
accordance with the terms of the note. The Company had previously entered into a
contract with HomeGold under which it processed certain mortgage loan
applications originated by HomeGold. Such contract expired on December 31, 2001.

         On September 22, 2000, the Company entered into a convertible debenture
and warrants purchase agreement with AMRO International, S.A. ("AMRO"). Under
the agreement on November 22, 2000, the Company issued to AMRO an 8% convertible
debenture in the principal amount of $1,000,000. The debenture was convertible,
at the option of AMRO, into shares of the Company's common stock at a price
equal to the lesser of $1.00 per share or 65% of the average of the three lowest
closing prices of the Company's stock during the month prior to conversion. AMRO
exercised a portion of the debenture into an aggregate of 6,214,665 shares of
the Company's stock. In June 2002, the Company issued to AMRO an 8% convertible
secured note in the principal amount of $205,336 in full satisfaction of amounts
outstanding under its convertible debenture. The terms of the 8% convertible
secured notes are discussed above.

                                       24

<PAGE>

         Net cash used during the year ended December 31, 2003, to fund
operations was approximately $44,000, which included non-recurring cash receipts
of $500,000 related to the settlement of a lawsuit, compared to approximately
$457,000 and $2,062,000 for 2002 and 2001, respectively. At December 31, 2003,
2002, and 2001, cash and liquid investments were $578,000, $156,780, and
$27,720, respectively, and working capital was ($909,356), ($82,512), and
$117,477, respectively. For purposes of determining working capital at December
31, 2003, $765,336 of principal and accrued interest under the Company's
convertible notes that mature in June 2004 are included as current liabilities.

Contractual Obligations

         The following table sets forth the Company's long-term debt and other
obligations at December 31, 2003.

<TABLE>
<CAPTION>


                                                         Payment Due By Period
                                             ----------------------------------------------
                                     Total    Less than 1    1-3 years  3-5 years More than
                                                  year                            5 years
                              -------------------------------------------------------------
<S>                               <C>            <C>          <C>            <C>      <C>
Long-Term Debt Obligations (1)    $1,399,350     $877,350     $522,000       $-       $-
Operating Lease Obligations           14,880       11,624        3,256        -        -
Purchase Obligations                  11,700        7,440        4,260        -        -
                              -------------------------------------------------------------
Total                             $1,425,930     $896,414     $529,516       $-       $-
                              =============================================================

</TABLE>


(1)  Long-term debt obligations consist of the Company's convertible notes,
     including accrued interest, which become immediately due and payable in
     certain events such as the filing of bankruptcy proceedings and similar
     events involving the Company, a payment default under any of the
     outstanding notes, or a change in control of the Company.

         Item 7(a).  Quantitative and Qualitative Disclosures about Market Risk

Not applicable.

         Item 8.  Financial Statements and Supplemental Data

         The report of independent auditors and consolidated financial
statements are set forth below (see item 15(a) for list of financial statements
and financial statement schedules):



                                       25

<PAGE>



REPORT OF INDEPENDENT AUDITORS

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, 2003 and 2002, 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, 2003. The
Company's audit also included the financial statement schedule listed in the
Index at Item 15(a)(2). These financial statements and schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and schedule based on our audits.

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

         In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
the Company as of December 31, 2003 and 2002, and the consolidated results of
its operations and its cash flows for each of the years in the three-year period
ended December 31, 2003, in conformity with accounting principles generally
accepted in the United States of America. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.

         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 incurred recurring operating losses, has
an accumulated deficit, has certain convertible notes maturing in June 2004 and
is a defendant to a lawsuit in which an unfavorable jury verdict was rendered in
January 2004. 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 LLP


Columbia, South Carolina
March 15, 2004, except for Note 1
  which is as of March 29, 2004


                                       26

<PAGE>


                Affinity Technology Group, Inc. and Subsidiaries

                          Consolidated Balance Sheets


<TABLE>
<CAPTION>

                                                                December 31,
                                                           2003              2002
                                                      -------------------------------
<S>                                                       <C>               <C>
Assets
Current assets:
  Cash and cash equivalents                               $578,398          $156,780
  Receivables                                                    -             5,666
  Prepaid expenses                                          20,121            42,784
                                                      -------------------------------
Total current assets                                       598,519           205,230
Property and equipment, net                                 18,336            27,600
Other assets                                                 1,147             2,018
                                                      -------------------------------
Total assets                                              $618,002          $234,848
                                                      ===============================


Liabilities and stockholders' deficiency
Current liabilities:
  Accounts payable                                         $76,056           $20,741
  Accrued expenses                                         565,136           194,631
  Accrued compensation and related benefits                 92,700            47,370
  Convertible notes                                        756,336                 -
  Current portion of deferred revenue                       17,647            25,000
                                                      -------------------------------
Total current liabilities                                1,507,875           287,742
Convertible notes                                          425,000           830,336
Deferred revenue                                            14,706            25,000

Commitments and contingent liabilities

Stockholders' deficiency:
  Common stock, par value $0.0001; authorized
   60,000,000 shares, issued 44,032,493 shares
   in 2003 and 43,049,363 shares in 2002                     4,403             4,305
  Additional paid-in capital                            70,632,210        70,441,149
  Common stock warrants                                          -            52,000
  Treasury stock, at cost (2,168,008 shares at
   December 31, 2003 and 2002)                          (3,505,287)       (3,505,287)
  Accumulated deficit                                  (68,460,905)      (67,900,397)
                                                      -------------------------------
Total stockholders' deficiency                          (1,329,579)         (908,230)
                                                      -------------------------------
Total liabilities and stockholders' deficiency            $618,002          $234,848
                                                      ===============================

</TABLE>


See accompanying notes.

                                       27

<PAGE>



                Affinity Technology Group, Inc. and Subsidiaries

                     Consolidated Statements of Operations


<TABLE>
<CAPTION>

                                                          Years ended December 31,
                                                    2003              2002              2001
                                                -----------------------------------------------
<S>                                              <C>                <C>               <C>
Revenues:
   Transactions                                    $     -          $104,878          $265,666
   Professional services                                 -                 -           249,871
   Patent license revenue                           17,647            25,000            20,000
   Other income                                    500,000            56,082           750,407
                                                -----------------------------------------------
                                                   517,647           185,960         1,285,944
                                                -----------------------------------------------
Costs and expenses:
   Cost of revenues                                  1,765            16,846            63,751
   Research and development                              -                 -           496,441
   Selling, general and administrative
    expenses                                       996,711         1,406,841         3,847,807
   Impairment loss                                       -                 -           448,945
                                                -----------------------------------------------
                                                   998,476         1,423,687         4,856,944
                                                -----------------------------------------------
Operating loss from continuing operations         (480,829)       (1,237,727)       (3,571,000)

Interest income                                        694             1,643            10,101
Interest expense                                   (80,373)          (70,334)         (115,557)
                                                -----------------------------------------------
Loss from continuing operations                  $(560,508)      $(1,306,418)      $(3,676,456)
Income from operations of discontinued
 subsidiary                                              -                 -           467,188
Gain on disposal of subsidiary                           -                 -           891,569
                                                -----------------------------------------------
Net loss                                         $ 560,508)      $(1,306,418)      $(2,317,699)
                                                ===============================================
Loss per share - basic and diluted:
Continuing operations                               $(0.01)           $(0.03)           $(0.10)
                                                ===============================================
Net loss per share                                  $(0.01)           $(0.03)           $(0.06)
                                                ===============================================
Shares used in computing net loss per
 share                                          41,512,897        40,707,108        38,004,089
                                                ===============================================

</TABLE>

See accompanying notes.

                                       28

<PAGE>


                Affinity Technology Group, Inc. and Subsidiaries

          Consolidated Statements of Stockholders' Equity (Deficiency)

<TABLE>
<CAPTION>

                            Common Stock
                        --------------------                                                               Total
                          Shares    Amount   Additional   Common    Deferred    Treasury   Accumulated  Stockholder's
                                              Paid-in     Stock   Compensation    Stock      Deficit      Equity
                                               Capital   Warrants                                       (Deficiency)
                        ---------------------------------------------------------------------------------------------
<S>                     <C>          <C>    <C>          <C>         <C>      <C>         <C>             <C>
Balance at
 December 31, 2000      32,713,368   $3,271 $70,084,414  $52,000     $(31,804)$(3,505,287)$(64,276,280)   $2,326,314
Exercise of warrant      3,471,340      347           -        -            -           -            -           347
Debenture conversion to
 common stock            6,214,655      622     302,050        -            -           -            -       302,672
Amortization of deferred
 compensation                    -        -           -        -       31,804           -            -        31,804
Net loss                         -        -           -        -            -           -   (2,317,699)   (2,317,699)
                        ---------------------------------------------------------------------------------------------
Balance at
 December 31, 2001      42,399,363    4,240  70,386,464   52,000            -  (3,505,287) (66,593,979)      343,438
Issuance of common
 stock as executive
 compensaton               500,000       50      44,950        -            -           -            -        45,000
Issuance of common
 stock as finder's
 fees                      150,000       15       9,735        -            -           -            -         9,750
Net loss                         -        -           -        -            -           -   (1,306,418)   (1,306,418)
                        ---------------------------------------------------------------------------------------------
Balance at
 December 31, 2002      43,049,363    4,305  70,441,149   52,000            -  (3,505,287) (67,900,397)     (908,230)
Expiration of warrants           -        -      52,000  (52,000)           -           -            -             -
Note payable conversion
 to common stock           409,796       41      81,918        -            -           -            -        81,959
Issuance of common stock
 as board service
 compensation              283,334       28      25,472        -            -           -            -        25,500
Issuance of common stock
 for consulting services   250,000       25      22,475        -            -           -            -        22,500
Issuance of common stock
 as finder's fees           40,000        4       9,196        -            -           -            -         9,200
Net loss                         -        -           -        -            -           -     (560,508)     (560,508)
                        ---------------------------------------------------------------------------------------------
Balance at
 December 31, 2003      44,032,493   $4,403 $70,632,210   $    -       $    - $(3,505,287)$(68,460,905)  $(1,329,579)
                        =============================================================================================

</TABLE>

See accompanying notes.

                                       29

<PAGE>


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


<TABLE>
<CAPTION>

                                                                Years ended December 31,
                                                        2003              2002              2001
                                                ---------------------------------------------------
<S>                                                 <C>             <C>               <C>
Operating activities
Net loss                                            $(560,508)      $(1,306,418)      $(2,317,699)
Adjustments to reconcile net loss to net
 cash used in operating activities:
    Depreciation and amortization                      14,859           137,557           841,258
    Amortization of deferred compensation                   -                 -            31,804
    Gain on disposal of subsidiary                          -                 -          (891,569)
    Impairment loss                                         -                 -           448,945
    Writedown of software development costs                 -               656                 -
    Provision for doubtful accounts                         -             7,519            22,909
    Inventory valuation allowance                           -           100,379           865,000
    Deferred revenue                                  (17,647)           50,000          (568,942)
    Other                                              12,311           127,830           114,254
    Changes in current assets and
     liabilities:
       Accounts receivable                              5,666           445,921          (668,569)
       Net investment in sales-type leases                  -                 -           157,139
       Inventories                                          -                 -            11,895
       Other assets                                    22,663            71,707           179,429
       Accounts payable                                55,315          (119,017)          (16,898)
       Accrued expenses                               378,463            72,867          (248,184)
       Accrued compensation and related
        benefits                                       45,331           (45,730)          (22,705)
                                                ---------------------------------------------------
Net cash used in operating activities                 (43,547)         (456,729)       (2,061,933)

Investing activities
Purchases of property and equipment                    (4,724)           (9,284)         (129,351)
Proceeds from sale of property and equipment           44,889             8,810            14,781
                                                ---------------------------------------------------
Net cash provided by (used in) investing
 activities                                            40,165              (474)         (114,570)

Financing activities
Proceeds from convertible notes                       425,000           625,000                 -
Proceeds from notes payable to third parties                -                 -        28,241,861
Payments on notes payable to third parties                  -           (38,737)      (26,684,183)
Exercise of warrants                                        -                 -               347
                                                ---------------------------------------------------
Net cash provided by financing activities             425,000           586,263         1,558,025
                                                ---------------------------------------------------
Net increase (decrease) in cash                       421,618           129,060          (618,478)
Cash and cash equivalents at beginning of
 year                                                 156,780            27,720           646,198
                                                ---------------------------------------------------
Cash and cash equivalents at end of year             $578,398          $156,780           $27,720
                                                ===================================================

   Supplemental cash flow information:
   Income taxes paid                                      $ -               $ -               $ -
                                                ===================================================
   Interest paid                                          $ -           $14,630           $49,042
                                                ===================================================

</TABLE>


See accompanying notes.


                                       30

<PAGE>


                Affinity Technology Group, Inc. and Subsidiaries

                   Notes to Consolidated Financial Statements


1.       The Company - Going Concern

         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(R) loan
processing system, which automated the processing and consummation of consumer
financial services transactions; the Affinity Automated Loan Machine (the
ALM(R)), 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(R), 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
to engage in further sales or other activities related to its products or
services, other than to license 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.

           In conjunction with its product development activities, the Company
applied for and obtained three patents. The Company has been granted two patents
covering its fully-automated loan processing systems (U. S. Patents No.
5,870,721 and 5,940,811). In August 2000, the U.S. Patent and Trademark Office
issued to the Company a patent covering the fully-automated establishment of a
financial account, including credit accounts (U.S. Patent No. 6,105,007). In
addition, in 1997 the Company acquired a patent that covers the automated
processing of an insurance binder through a kiosk (U. S. Patent No. 5,537,315).

           Both of the Company's patents covering fully automated loan
processing systems have been subject to reexamination by the U.S. Patent and
Trademark Office (the "PTO") due to challenges to such patents by third parties.
On January 28, 2003, the Company 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. The reexamination of the Company's other loan
processing patent (U. S. Patent No. 5,940,811) is still ongoing. In March 2004,
the Company received notification from the PTO that it had rejected the claims
of U.S. Patent No. 5,940,811. The Company intends to contest the PTO's rejection
and to continue to prosecute the reexamination of this patent.

         On March 26, 2004, the Company was notified by Federated Department
Stores, Inc. ("Federated") and Ameritrade Holding Corporation ("Ameritrade")
that they had jointly filed a request with the PTO to reexamine U. S. Patent No.
6,105,007. The Company has lawsuits pending against Federated and Ameritrade in
the Columbia Division of the United States District Court for the State of South
Carolina (the "Court") in which it claims that both Federated and Ameritrade
infringe U. S. Patent No. 6,105,007. The Company has jointly, with Federated and
Ameritrade, requested the Court to stay the lawsuits against Federated and
Ameritrade pending the PTO's determination as to whether it will grant the
reexamination request. The procedural rules of the PTO require the PTO to make a
determination as to whether it will initiate a reexamination within 90 days from
the date it receives the request. If the PTO grants the reexamination request,
it is likely that it will take an extended period of time to complete the
reexamination proceedings and the related litigation with Federated and
Ameritrade. Moreover, if the PTO grants the reexamination request, it is likely
such decision will have a material adverse effect on the Company's patent
licensing program, and its ability to attract additional capital resources in
order to continue its operations.

         It is possible that third parties may bring additional actions to
contest all or some of the Company's patents. The Company can make no assurances
that it will not lose all or some of the claims covered by its existing 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, 2003, the Company had cash and cash equivalents of
$578,398. The Company believes that its existing cash resources are sufficient
to fund its ordinary course operating expenses through the remainder of 2004.
However, the Company's ability to continue its operations for the remainder of
2004 is contingent upon the final outcome of the Company's litigation with
Temple Ligon, which is discussed below, and the ability of the Company to extend
the maturity date of all or substantially all of its convertible notes that are
due in June 2004. If the Company becomes obligated to pay more than an
insignificant amount of damages in connection with the Temple Ligon litigation
or is unable to extend the maturity date of all or substantially all of the
convertible notes that are due in June 2004, the Company will be forced to
consider alternatives for winding down its business, which may include filing
for bankruptcy protection.

                                       31

<PAGE>


         To remain viable, the Company must generate working capital through the
sale of patent licenses or by raising additional capital. To date, the Company
generally has been unable to enter into licensing agreements with potential
licensees upon terms that are acceptable to the Company. As a result, the
Company has been forced to become involved in litigation with alleged
infringers. Currently, the Company is involved in three patent litigation
actions. The Company believes that these lawsuits may take an extended period of
time to complete, and no assurance can be given that the Company will have the
resources necessary to complete these lawsuits or that it will be successful in
obtaining a favorable outcome. As discussed previously, two of the alleged
infringers (Federated and Ameritrade) have notified the Company that they have
filed a request with the PTO to reexamine the Company's patent covering the
fully automated establishment of a financial account (U. S. Patent No.
6,105,007). If the PTO grants the reexamination request, it is likely that it
will take an extended period of time to complete the reexamination proceeding
and the related litigation with Federated and Ameritrade. Moreover, the
uncertainties of these litigation matters and other factors affecting the
Company's short and long-term liquidity discussed in the preceding paragraph
will likely impede the Company's ability to raise additional capital. To
maintain the minimal resources necessary to support its current operations and
execute a patent licensing strategy, the Company does not believe that
substantial additional reductions in its operating expenses are feasible. No
assurances can be given that the Company will be able to raise additional
capital or generate working capital from its patent licensing business.

         The Company is a defendant in a lawsuit brought by Temple Ligon, who
claims that the Company breached an agreement to give him a 1% equity interest
in the Company in consideration of services he claims to have performed in 1993
and 1994 in conjunction with the formation of the Company. In January 2004, this
litigation resulted in a jury verdict against the Company of $386,148. The
Company is seeking to have the verdict overturned by the trial judge. If it is
unsuccessful in doing so, the Company intends to appeal any adverse decision. No
assurances can be given that the Company will be successful in overturning the
verdict or, if it appeals the decision, in obtaining a favorable outcome on
appeal. If the Company becomes obligated to pay more than an insignificant
amount of damages in connection with this litigation, it will be forced to
consider alternatives for winding down its business, which may include filing
for bankruptcy protection.

         As of December 31, 2003, the Company had outstanding $1,181,336 in
aggregate principal amount of convertible secured notes (the "notes"). Under the
terms of these notes, principal and accrued interest is due and payable on the
second anniversary of the date on which the notes were issued. Note 4 sets forth
the maturities of the Company's convertible notes. The Company's ability to
continue operations for the remainder of 2004 is subject to its ability to
extend the maturity date of all or substantially all of the notes that are due
in June 2004. The Company intends to initiate discussions with certain holders
of the notes that are due in June 2004 to extend the maturity date of these
notes. However, no assurances can be given that the Company will be able to
extend the maturity date of these notes. Under the terms of the convertible
notes, principal and accrued interest will become 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. If the Company is not able to extend the
maturity date of substantially all of these notes, it will be forced to consider
alternatives for winding down its business, which may include filing for
bankruptcy protection.

         In order to fund its operations, the Company may need to raise
additional funds through the issuance of additional equity securities, in which
case the percentage ownership of the stockholders of the Company will be
reduced, stockholders may experience additional dilution, or such equity
securities may have rights, preferences or privileges senior to common stock.
There can be no assurance that additional financing will be available on terms
acceptable to the Company or at all. If adequate funds are not available or not
available on acceptable terms, the Company may be unable to continue operations.
The Company is evaluating alternatives to continue its business activities
through 2004 and beyond.

                                       32

<PAGE>


         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. (the "Company" or "ATG") and its subsidiaries, Affinity
Bank Technology Corporation, Affinity Clearinghouse Corporation, Affinity Credit
Corporation, Affinity Processing Corporation ("APC"), 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, investments, accounts receivable, net investment in sales-type
leases, accounts payable and notes payable approximate their fair values. Fair
values of investments are based on quoted market prices.

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 $13,000, $97,000, and
$417,000 during 2003, 2002, and 2001, respectively.


Software Development Costs

         Costs incurred in the development of software, which formerly was
incorporated as part of the Company's products or sold separately, are
capitalized after a product's technological feasibility has been established.
Capitalization of such costs is discontinued when a product is available for
general release to customers. Software development costs are capitalized at the
lower of cost or net realizable value and amortized using the greater of the
revenue curve method or the straight-line method over the estimated economic
life of the related product. Amortization begins when a product is ready for
general release to customers. The net realizable value of unamortized
capitalized costs is periodically evaluated and, to the extent such costs exceed
the net realizable value, unamortized amounts are reduced to net realizable
value. In 2002, the Company recorded charges of approximately $1,000 to reduce
recorded balances of unamortized capitalized software costs to their net
realizable value.

         Amortization of capitalized software development was approximately $0,
$41,000 and $259,000, and during 2003, 2002 and 2001, respectively.

                                       33

<PAGE>


Valuation of Long-Lived Assets

         The Company periodically evaluates the carrying value of long-lived
assets to be held and used, including property and equipment and goodwill, when
events and circumstances warrant such a review. The carrying value of a
long-lived asset is considered impaired when the anticipated undiscounted cash
flow from such asset is separately identifiable and is less than its carrying
value. In the event of such, a loss is recognized based on the amount by which
the carrying value exceeds the fair market value of the long-lived asset. Fair
market value is determined primarily using the anticipated cash flows discounted
at a rate commensurate with the risk involved. In 2001, the Company recorded
impairment charges related to certain of its long-lived assets of approximately
$449,000, $399,000 of which is related to goodwill.

Intangible Assets

         Intangible assets arising from the excess of cost over acquired assets
are amortized by the straight-line method over their estimated useful life of
ten years. In 1997, the Company recorded intangible assets, primarily goodwill,
of approximately $1,470,000 related to the acquisition of Buy America, Inc. and
Project Freedom, Inc. In accordance with its evaluation of its long-lived
assets, the Company recorded an impairment charge related to goodwill in the
amount of $399,000 in 2001. Such charges eliminated, in 2001, the remaining
unamortized balance of goodwill associated with the acquisition of Buy America
and Project Freedom.

Revenue Recognition

Transaction fees - Transaction fee revenue formerly was recognized as the
related transactions were processed. Transaction processing fees represented
approximately 56.4% and 20.7% of total revenue from continuing operations during
2002 and 2001, respectively.

Mortgage processing services - Surety Mortgage, Inc., engaged in mortgage
brokerage activities, which generally involved originating, processing, and
selling mortgage loan products to outside investors. Surety originated and/or
processed mortgage loans directly with consumers or on behalf of correspondents
and immediately sold such loans to investors that sponsored the loan programs
offered by Surety. Surety only offered loans that would be acquired by the
investors under such programs. Upon making the loan commitment to the borrower,
Surety immediately received a commitment from an investor to acquire the loan
upon closing. Loan origination fees included gains on sales of mortgage loans to
investors and loan origination fees received for originating and processing the
loan. Loan origination fees and all direct costs associated with originating
loans were recognized at the time the loans were sold. On December 31, 2001, the
Company tendered the stock of Surety in full satisfaction of a $1 million note
and accrued interest (see Note 9).

Professional services - In conjunction with the installation of the Company's
technology, periodically additional customer specific technology development was
performed by the Company in the form of professional services. The Company
generally entered into a contract with the customer for the performance of these
services. Upon completion and acceptance of professional services by the
customer, the Company recognized the corresponding revenue.

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.

                                       34

<PAGE>


Cost of Revenues

         Cost of revenues consists of costs associated with transaction fees,
professional services and patent licensing agent's commissions. Costs associated
with transaction fees include the direct costs incurred by the Company related
to transactions it processes for its customers. Costs of transaction fees
approximated $14,000 and $46,000 in 2002 and 2001, respectively. Costs
associated with professional services include labor, other direct costs and an
allocation of related indirect costs. Labor and other direct costs and
allocation of indirect costs associated with professional services totaled
approximately $15,000 for the year ended December 31, 2001. Costs of patent
license revenues consist of patent licensing agent commissions paid or accrued
by the Company and totaled $1,765, $2,500, and $2,000 for the years ended
December 31, 2003, 2002, and 2001, respectively.

Stock Based Compensation

         The Company accounts for stock options in accordance with APB Opinion
No.25, "Accounting for Stock Issued to Employees" ("APB 25"). Under APB 25, no
compensation expense is recognized for stock or stock options issued to
employees at fair value. For stock options granted at exercise prices below the
estimated fair value, the Company records deferred compensation expense for the
difference between the exercise price of the shares and the estimated fair
value. The deferred compensation expense is amortized ratably over the vesting
period of the individual options.

         Statement of Financial Accounting Standards No. 123, "Accounting for
Stock Based Compensation" ("SFAS 123") as amended by FASB Statement No. 148,
"Accounting for Stock-Based Compensation-Transition and Disclosure" ("SFAS
148"), provides an alternative to APB 25 in accounting for stock based
compensation issued to employees. SFAS 123 provides for a fair value based
method of accounting for employee stock options and similar equity instruments.
However, for companies that continue to account for stock based compensation
arrangements under APB 25, SFAS 123 requires disclosure of the pro forma effect
on net income and earnings per share as if the fair value based method
prescribed by SFAS 123 had been applied. The Company intends to continue to
account for stock based compensation arrangements under APB No. 25 and has
adopted the pro forma disclosure requirements of SFAS 123. Equity instruments
issued to consultants, directors and employees in lieu of cash payments for
services are recorded at the fair value of the equity instrument on the date the
equity instrument is granted and the related expense is recognized over the
period the services are performed. In 2003 and 2002, the Company recognized
$57,143 and $54,735, respectively, of stock based compensation related to the
issuance of equity instruments.

         Had compensation cost for options granted under the Company's
stock-based compensation plans been determined based on the fair value at the
grant dates consistent with SFAS 123, the Company's net income and earnings per
share would have changed to the pro forma amounts listed below:

<TABLE>
<CAPTION>


                                                2003            2002              2001
                                         ------------------------------------------------
<S>                                          <C>           <C>               <C>
Net loss:
As reported                                  $(560,508)    $(1,306,418)      $(2,317,699)
Add:  stock-based compensation
 expense included in reported net
 income                                              -               -            31,804
Deduct: stock-based compensation
 expense determined under the fair
 value based method for all awards             (47,941)       (113,180)         (233,749)
                                         ------------------------------------------------
Pro forma net loss                           $(608,449)    $(1,419,598)      $(2,519,644)
                                         ================================================

Net loss per common share:
  As reported:
    Basic and diluted                           $(0.01)         $(0.03)           $(0.06)
  Pro forma:
    Basic and diluted                           $(0.01)         $(0.03)           $(0.07)

</TABLE>


         See Note 6 for more information regarding the Company's stock
compensation plans and the assumptions used to prepare the pro forma information
presented above.

                                       35

<PAGE>


Advertising Expense

         The cost of advertising is expensed as incurred. Advertising and
marketing expense was approximately $8,000 in 2001.

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

            In December 2003, The FASB revised Interpretation No. 46,
"Consolidation of Variable Interest Entities, an interpretation of ARB No. 51."
This interpretation addresses the consolidation by business enterprises of
variable interest entities as defined in the Interpretation. The Interpretation
applies as of March 31, 2004. The application of this Interpretation is not
expected to have a material effect on the Company's financial statements. The
Interpretation requires certain disclosures in financial statements issued after
January 31, 2003 if it is reasonably possible that the Company will consolidate
or disclose information about variable interest entities when the Interpretation
becomes effective.

            In April 2003, the FASB issued Statement No. 149, "Amendment of
Statement No. 133 on Derivative Instruments and Hedging Activities." Statement
No. 149 amends and clarifies accounting and reporting for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities under Statement No. 133, "Accounting for
Derivative Instruments and Hedging Activities." Statement No. 149 is effective
for contracts entered into or modified, and for hedging relationships
designated, after June 30, 2003. The Company has applied the provisions of
Statement No. 149, which has not had a material impact on its earnings or
financial position.

            In May 2003, the FASB issued Statement No. 150, "Accounting for
Certain Financial Instruments with Characteristics of both Liabilities and
Equity." Statement No. 150 establishes standards for how an issuer classifies
and measures certain financial instruments with characteristics of both
liabilities and equity. It requires that an issuer classify a financial
instrument that is within its scope as a liability (or an asset in some
circumstances). The guidance in Statement No. 150 is generally effective for all
financial instruments entered into or modified after May 31, 2003. Otherwise, it
is effective at the beginning of the first interim period beginning after June
15, 2003. The Company has applied the provisions of Statement No. 150, which has
not had a material impact on its earnings or financial position.

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.

                                       36

<PAGE>

Reclassification

         Certain amounts in 2001 and 2002 have been reclassified to conform to
2003 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:

                                                      December 31,
                                               2003                  2002
                                      -----------------------------------------
Data processing equipment             $        384,870      $        381,812
Office furniture and fixtures                   44,136                44,136
Automobiles                                     30,333                72,003
Purchased software                               3,770                 3,770
                                      -----------------------------------------
                                               463,109               501,721
Less accumulated depreciation
 and amortization                             (444,773)             (474,121)
                                      -----------------------------------------
                                      $         18,336      $         27,600
                                      =========================================

4.       Convertible Debenture and Notes

         In June 2002, the Company issued convertible secured notes (the
"notes") to certain investors as part of its capital raising initiatives. The
principal amount of notes issued totaled $830,336 and included the issuance of a
note in the principal amount of $205,336 to AMRO International, S.A. ("AMRO") in
satisfaction of the principal and accrued interest outstanding under AMRO's
convertible debenture previously acquired by AMRO. The notes bear interest at 8%
and principal and accrued interest are due in June 2004. In 2003, the Company
issued additional convertible notes in the aggregate amount of $425,000. Such
notes also bear interest at 8% and mature at various dates in 2005. Included in
the aggregate $425,000 of convertible notes issued by the Company is a $100,000
convertible note issued to a subsidiary of The South Financial Group, which owns
approximately 12% of the Company's outstanding common stock. All notes are
collateralized by the stock of the Company's wholly-owned subsidiary,
decisioning.com. decisioning.com is the Company's patent licensing subsidiary
and owns the Company's patent portfolio. The notes are convertible into the
Company's common stock at a conversion rate of $.20 per share. The Company may
prepay the notes subject to a prepayment penalty of 8% and 4% if the prepayment
occurs within the first twelve months or thereafter, respectively.

         In October 2003, AMRO converted $74,000 principal and $7,959 accrued
interest related to its $205,336 convertible note into 409,796 shares of the
Company's common stock.

         The maturities of the Company's 8% convertible notes are as follows:

                                              December 31,
              Maturity Date                2003         2002
              ---------------------    ------------------------
              June 2004                  $756,336     $830,336
              March 2005                  200,000            -
              August 2005                  25,000            -
              November 2005               150,000            -
              December 2005                50,000            -
                                       -----------  -----------
                                        1,181,336      830,336
              Less: current portion      (756,336)           -
                                       -----------  -----------
              Long-term portion          $425,000     $830,336
                                       ===========  ===========



                                       37

<PAGE>


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, 2003 and 2002 there are no
shares of preferred stock issued or outstanding.

Stock Option Plans

         During 1995, the Company adopted the 1995 Option Plan under which
incentive stock options and nonqualified stock options may be granted to
employees, directors, consultants or independent contractors. At December 31,
2003, approximately 18,000 options were outstanding, all of which are
exercisable under the 1995 Option Plan. At December 31, 2003, the weighted
average exercise price was $0.44 and the weighted average remaining contractual
life was 1.4 years. This plan closed during April 1996.

         In April 1996, the Company adopted the 1996 Incentive Stock Option
Plan. Under the terms of the plan, incentive options may be 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.

         In addition, 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 vest 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. Any new non-employee directors
appointed to the Board will be granted options to purchase 100,000 shares at the
time of his or her election to the Board.


                                       38

<PAGE>


A summary of activity under the 1995 and 1996 Option Plans is as follows:

                                                    Options Outstanding
                                              -------------------------------
                                   Shares                        Weighted
                                  Available        Number      Average Price
                                  for Grant      of Shares       Per Share
                               ----------------------------------------------
1995 Stock Option Plan
Balance at December 31, 2000                -         183,380          $0.44
Options canceled/forfeited                  -         (22,260)         $0.44
                               ----------------------------------------------
Balance at December 31, 2001                -         161,120          $0.44
Options canceled/forfeited                  -        (143,100)         $0.44
                               ----------------------------------------------
Balance at December 31, 2002                -          18,020          $0.44
Options canceled/forfeited                  -               -          $0.44
                               ----------------------------------------------
Balance at December 31, 2003                -          18,020          $0.44
                               ==============================================

1996 Incentive Stock Option
 Plan
Balance at December 31, 2000          983,930       1,744,140          $1.59
Options granted                      (300,000)        300,000          $0.09
Options canceled/forfeited            925,470        (925,470)         $1.66
                               ----------------------------------------------
Balance at December 31, 2001        1,609,400       1,118,670          $1.13
Options granted                    (1,250,000)      1,250,000          $0.09
Options cancelled/forfeited           324,665        (324,665)         $0.93
                               ----------------------------------------------
Balance at December 31, 2002          684,065       2,044,005          $0.53
Options granted                      (125,000)        125,000          $0.19
Options cancelled/forfeited            18,185         (18,185)         $1.12
                               ----------------------------------------------
Balance at December 31, 2003          577,250       2,150,820          $0.50
                               ==============================================


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

<TABLE>
<CAPTION>

                                1996 Incentive Stock Option Plan
-------------------------------------------------------------------------------------------------
                     Options Exercisable                      Options Outstanding
                    at December 31, 2003                      At December 31, 2003
              -----------------------------------------------------------------------------------
                                                                                   Weighted
                                  Weighted                        Weighted          Average
   Range of                        Average                        Average          Remaining
   Exercise        Number           Price          Number          Price          Contractual
    Prices      Exercisable       Per Share      Outstanding     Per Share       Life (years)
-------------------------------------------------------------------------------------------------

<S>             <C>               <C>            <C>             <C>             <C>
$0.09 - $0.94       1,304,875            $0.21      1,737,500           $0.19                7.8
$1.06 - $3.75         276,560            $2.01        413,120           $1.82                5.7
$6.75 - $7.38             200            $6.75            200           $6.75                3.0
              -----------------------------------------------------------------------------------
$0.09 - $7.38       1,581,635            $0.53      2,150,820           $0.50                7.4
              ===================================================================================

</TABLE>

                                       39

<PAGE>


         The Company recorded in 1996 and 1995 deferred compensation expense
totaling approximately $5,492,000 for the difference between the grant price and
the deemed fair value of certain of the Company's common stock options granted
under the 1995 Plan. The Company amortized the deferred compensation associated
with individuals employed by the Company over the vesting period of the
individual's options. Amounts recorded as deferred compensation were fully
amortized in 2001. The vesting period for other options is generally 60 months.
Amortization of deferred compensation in 2001 totaled approximately $32,000.

         The pro forma disclosures required by SFAS 123 regarding net loss and
net loss per share are stated as if the Company had accounted for stock options
using fair values. Using the Black-Scholes option-pricing model the fair value
at the date of grant for these options was estimated using the following
assumptions:


                                         2003         2002             2001
                                     ------------------------------------------
      Dividend yield                       -            -                -
      Expected volatility                132%         136%             142%
      Risk-free rate of return          1.99%     2.39% - 4.32%   4.43% - 4.53%
      Expected option life, years         3             3               3


         The weighted average fair value for options granted under the Option
Plans during 2003, 2002 and 2001 was $0.14, $0.07 and $0.07, respectively.

         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. Accordingly, in management's opinion, these existing models
may not necessarily provide a reliable single measure of the fair value of
employee stock options.

         Stock Warrants

         In 1995, the Company formalized an agreement with a related party,
resulting from certain financing arrangements preceding the Initial Public
Offering, for the issuance of a stock warrant under which the party had the
right to purchase up to an aggregate of 6,666,340 shares of common stock at a
purchase price of approximately $.0001 per share. The agreement also specified
that the warrant could be exercised in whole or in part at any time prior to
December 31, 2015 only if, absent prior written regulatory approval, after
giving effect of such exercise, the party beneficially owned less than five
percent of the outstanding shares of the Company's common stock. During 1997 the
party obtained written regulatory approval to exercise the warrant in its
entirety. On December 31, 1997 and December 28, 1995, the party exercised
portions of the warrant and acquired 2,400,000 and 795,000 shares of Common
Stock, respectively. In March 2001, the party exercised the remainder of the
warrant and acquired 3,471,340 shares of the Company's common stock.

         In November 2000, the Company issued three-year warrants to acquire
920,000 shares of the Company's common stock at a weighted average price of
$.7464 per share. The warrants were issued in conjunction with the issuance of a
$1,000,000 convertible debenture and the arrangement of an equity line
agreement. In 2002, the weighted average conversion price was reduced to $.05
per share in conjunction with the restructuring of the remaining balance of the
convertible debenture. All the warrants expired unexercised in 2003.


                                       40

<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 non-cancelable operating leases for the rental of its
offices and warehouse. Future minimum lease payments under these leases at
December 31, 2003 are approximately $2,700, all of which is payable in 2004.

         In 2003, 2002, and 2001 the Company incurred rent expense, including
rent associated with cancelable rental agreements, of approximately $47,000,
$92,000, and $372,000, respectively.

8.       Income Taxes

         As of December 31, 2003, the Company had federal and state tax net
operating loss carryforwards of approximately $66,580,000. 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,
                                                2003             2002
                                          -------------------------------
        Deferred tax assets:
           Net operating loss
            carryforwards                  $24,811,000      $24,580,000
           Accrued expenses                     18,000           15,000
           Depreciation                              -            9,000
           Other                                 6,000            6,000
                                          -------------------------------
        Total deferred tax assets           24,835,000       24,610,000
                                          -------------------------------
        Deferred tax liabilities:
           Other                                (1,000)          (1,000)
                                          -------------------------------
        Total deferred tax liabilities          (1,000)          (1,000)
                                          -------------------------------
        Less:  Valuation allowance         (24,834,000)     (24,609,000)
                                          -------------------------------
        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, 2003 and 2002, 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 2003, 2002, and 2001.

                                       41

<PAGE>


9.       Income (Loss) from Operations of Discontinued Subsidiary and Gain on
         Disposal of Subsidiary

         Through a previously owned wholly owned subsidiary, Surety Mortgage,
Inc. ("Surety"), the Company formerly deployed its Mortgage ALM product in
locations where consumers are likely to apply for a mortgage loan. Surety
deployed Mortgage ALMs, processed mortgage loan applications obtained through
its Mortgage ALM network and processed mortgage loan applications under
contracts with third parties. The Company disposed of Surety on December 31,
2001.

         In July 2001 the Company issued a $1 million note to HomeGold
Financial, Inc. ("HomeGold"), which note was collateralized by the stock of
Surety, the Company's wholly owned mortgage banking subsidiary. On December 31,
2001, the Company tendered the stock of Surety to HomeGold in full satisfaction
of the $1 million note and accrued interest of $25,511. The Company accounted
for the transaction as the disposal of a segment of a business and has reported
the operations of Surety as a separate component of loss for 2001. Similarly,
the gain of $891,569 which the Company recognized is also reported as a separate
component of results of operations in 2001 and the effect on the Company's net
loss per share of $0.06 was $0.023.

The components of Surety's operations for 2001 are as follows:

                               Year Ended December 31,
                                         2001
                             ----------------------------

     Mortgage revenue                         $2,851,720

     Cost of revenue                          (1,008,266)
     S G & A                                  (1,378,366)
                             ----------------------------
     Total cost and expenses                  (2,386,632)
                             ----------------------------
     Net income before
      interest                                   465,088
     Net interest income                           2,100
                             ----------------------------
     Net income                                 $467,188
                             ============================


Surety's operating results are included in the determination of the Company's
net loss for the years ended December 31, 2001, and are reported as "Income
(loss) from operations of discontinued subsidiary." The effect of Surety's
operating results on net loss per share is $0.012 in the year ended December 31,
2001.

10.      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 97%,
87%, and 76% of revenues in 2003, 2002, and 2001, respectively. All other
segment disclosures required by SFAS 131 are included in the consolidated
financial statements or in the notes to the consolidated financial statements.

11.      Related Party Transactions

         In December 2003, the Company issued a convertible note in the
principle amount of $100,000 to a subsidiary of The South Financial Group, which
owns approximately 12% of the Company's outstanding common stock.

         In June 2002, the Company issued a convertible secured note to its
Chairman, President and Chief Executive Officer in the principal amount of
$125,000. The note bears interest at 8%, and principal and accrued interest are
due in June 2004.

                                       42

<PAGE>


         In June 2002, the Company issued 50,000 shares of Company stock to a
member of its Board of Directors as a finder's fee for capital raising services.

         In July 2003, the Company relocated and executed a month-to-month lease
with a holder of one of its convertible notes. The rent expense for the office
for the period ended December 31, 2003, was approximately $7,500.

         In January, 2003, the Company issued 283,334 shares of common stock to
two board members in lieu of cash compensation.

12.      Commitments and Contingent Liabilities

         The Company and its founder, Jeff Norris, are 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 claims, among other
things, that the Company and Mr. Norris breached an agreement to give him a 1%
equity interest in the Company in consideration of services Mr. Ligon claims to
have performed in 1993 and 1994 in conjunction with the formation of the
Company, and seeks monetary damages of $5,463,000. This lawsuit initially
resulted in a jury verdict against the Company 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 the Company of $386,148. The
Company has filed a motion to have the verdict overturned by the trial judge. If
it is unsuccessful in doing so, the Company intends to appeal any adverse
decision. The Company believes that it has meritorious defenses to the claims
made by Mr. Ligon and intends to vigorously defend itself. However, no
assurances can be given that the Company will be successful in overturning the
verdict or, if it appeals the decision, in obtaining a favorable outcome on
appeal. If the Company becomes obligated to pay more than an insignificant
amount of damages in connection with this litigation, it will be forced to
consider alternatives for winding down its business, which may include filing
for bankruptcy protection.

         In November 2003, Household International, Inc. filed a declaratory
judgment action against the Company in United States District Court in
Wilmington, Delaware. In its complaint Household requested the court to rule
that Household was not infringing any of the claims of the Company's 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. The Company filed counterclaims against Household
claiming that Household infringes U.S. Patent Nos. 5,870,721 C1, 5,940,811 and
6,105,007.

                                       43

<PAGE>


14.       Quarterly Results of Operations (Unaudited)

                       First         Second          Third          Fourth
                      Quarter       Quarter         Quarter         Quarter
                    -----------------------------------------------------------
Year ended
 December 31, 2003
Revenue                  $4,412          $4,412          $4,411       $504,412
Gross profit              3,970           3,972           3,969        503,971
Net (loss) income      (235,709)       (197,486)       (156,787)        29,474
Net loss per share -
 basic and diluted        (0.01)          (0.00)          (0.00)          0.00

Year ended
 December 31, 2002
Revenue                 $69,261         $39,292         $47,407        $30,000
Gross profit             61,299          34,642          45,700         27,473
Net (loss)             (401,579)       (367,637)       (234,606)      (302,596)
Net loss per share -
  basic and diluted       (0.01)          (0.01)          (0.01)         (0.01)

         The sum of certain net loss per share amounts differs from the annual
reported total due to rounding.


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

         Not applicable.

Item 9A.  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, 2003, 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 controls 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 controls over financial reporting.

Part III

Item 10.   Directors and Executive Officers of the Registrant

         Information required by this Item will be contained in the Registrant's
definitive proxy statement relating to its Annual Meeting of Stockholders to be
held on May 27, 2004 under the captions "Board of Directors - Code of Ethics,"
"Board of Directors - Audit Committee Financial Expert," "Board of
Directors--Nominees for Director," and "Section 16(a) Beneficial Ownership
Reporting Compliance," which are incorporated by reference herein.

Item 11.  Executive Compensation

         Information required by this Item will be contained in the Registrant's
definitive proxy statement relating to its Annual Meeting of Stockholders to be
held on May 27, 2004 under the captions "Executive Compensation" and "Board of
Directors--Compensation of Directors", which are incorporated by reference
herein.

                                       44

<PAGE>



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 Annual Meeting of
Stockholders to be held on May 27, 2004 under the caption "Security Ownership of
Management and Certain Beneficial Owners," which is incorporated by reference
herein.


                         Equity Compensation Plan Information

<TABLE>
<CAPTION>

                                                               Number of securities
                                                                remaining available
                     Number of securities   Weighted-average    for future issuance
                       to be issued upon    exercise price of      under equity
                          exercise of      outstanding options, compensation plans
    Plan Category     outstanding options, warrants and rights      (excluding
                      warrants and rights                       securities reflected
                                                                   in column (a))
------------------------------------------------------------------------------------
<S>                    <C>                  <C>                <C>
                              (a)                  (b)                  (c)
------------------------------------------------------------------------------------
Equity compensation
  plans approved by
   security holders             2,198,840                $0.51              577,250
------------------------------------------------------------------------------------
Equity compensation
 plans not approved
 by security holders               35,000                $0.47                    -
------------------------------------------------------------------------------------

        Total                   2,233,840                $0.51              577,250
------------------------------------------------------------------------------------


</TABLE>

         Information reflected in "Equity compensation plans not approved by
security holders" relates to a warrant issued in connection with a financing
arrangement. In September 2000, the Company entered into a convertible debenture
and warrants purchase agreement with an investor and, in connection therewith,
issued to the broker representing the investor in this transaction a five-year
warrant to acquire 35,000 shares of the Company's common stock at $0.47 per
share.

         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, 2003, there was
$1,291,841 of principal and accrued interest outstanding under these notes,
which could be converted into an aggregate of 6,459,205 shares of the Company's
common stock at a conversion price of $0.20 per share. In January 2004, the
Company issued an additional $25,000 principal amount of its convertible notes
that are convertible into an additional 125,000 shares of the Company's common
stock at a conversion price of $0.20 per share.

Item 13.   Certain Relationships and Related Transactions

         If applicable, information required by this Item will be contained in
the Registrant's definitive proxy statement relating to its Annual Meeting of
Stockholders to be held on May 27, 2004 under the caption "Certain
Transactions," which is incorporated by reference herein.

Item 14.  Principal Accountant Fees and Services

         Information required by this item will be contained in the Registrant's
definitive proxy statement relating to its Annual Meeting of Stockholders to be
held on May 27, 2004, under the caption "Accounting Fees."

                                       45

<PAGE>



Item 15.  Exhibits, Financial Statement Schedules and Reports on Form 8-K

(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, 2003 and 2002.
          ii.  Consolidated Statement of Operations for the years ended December
               31, 2003, 2002, and 2001.
          iii. Consolidated Statements of Stockholders' Equity (Deficiency) for
               the years ended December 31, 2003, 2002, and 2001.
          iv.  Consolidated Statements of Cash Flows for the years ended
               December 31, 2003, 2002, and 2001.
          v.   Notes to the Consolidated Financial Statements for the years
               ended December 31, 2003, 2002, and 2001.

          (2)  Schedule II - Valuation and Qualifying Accounts
               No other financial statement schedules are to be filed with
          this Annual Report on Form 10-K due to the absence of the conditions
          under which they are required or because the required information is
          included within the consolidated financial statements or the notes
          thereto included herein.

          (3) 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 450 Fifth Street, N.W., 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         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.
       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 Quarterly Report on Form 10-Q
                    for the quarter ended September 30, 1999.

                                       46

<PAGE>
       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 1998 Annual
                    Report on Form 10-K which was filed on March 31, 1999.
       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 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 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 From 10-Q for the quarter ended June 30,
                    2003.
         14         Code of Ethics.
         21         Subsidiaries of Affinity Technology Group, Inc.
        23.1        Consent of Scott McElveen, LLP.
         31         Rule 13a-14(a)/15d-14(a) Certification.
         32         Section 1350 Certification.

* Denotes a management contract or compensatory plan or arrangement.

(b)      Reports on Form 8-K filed in the 4th quarter of 2003:

         On December 15, 2003, the Company filed a current report on Form 8-K to
disclose a settlement agreement between the Company and Citibank, N.A.

(c)      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) (3).

(d)      Financial Statement Schedules.

         The response to this portion of Item 15 is submitted under Item
15(a)(2).


                                       47

<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 30, 2004            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.


    Signatures                  Title                             Date
    ----------------------------------------------------------------------------


    /s/ Joseph A. Boyle                                           March 30, 2004
    ---------------------------
    Joseph A. Boyle             Chairman, President, Chief
                                 Executive Officer and Chief
                                 Financial Officer and Director
                                 (principal executive and
                                 financial officer)


    /s/ Wade H. Britt, III                                        March 30, 2004
    ---------------------------
    Wade H. Britt, III          Director


    /s/  Robert M. Price, Jr.                                     March 30, 2004
    ---------------------------
    Robert M. Price, Jr.        Director


    /s/  Peter R. Wilson, Ph.D.                                   March 30, 2004
    ---------------------------
    Peter R. Wilson, Ph.D.      Director


    /s/  S. Sean Douglas                                          March 30, 2004
    ---------------------------
    S. Sean Douglas             Executive Vice President
                                and Chief Operating Officer
                                (principal accounting officer)


                                       48

<PAGE>

         1.  Schedule II - Valuation and Qualifying Accounts

<TABLE>
<CAPTION>


            COL. A                COL. B.               COL. C               COL. D         COL. E
-------------------------------------------------------------------------------------------------------
                                                      Additions
                                             ----------------------------
                                Balance at    Charged to    Charged to
                                Beginning of   Costs and   Other Accounts  Deductions-   Balance at End
          Description              Period       Expenses     - Describe      Describe       of Period
-------------------------------------------------------------------------------------------------------
<S>                             <C>           <C>           <C>            <C>           <C>
YEAR ENDED DECEMBER 31, 2002
Reserves and allowances
 deducted from asset accounts:
Allowance for doubtful
 accounts                        $ 10,601       $7,519           $-          $18,120 (1)          $-
Reserve for inventory
 obsolescence                     984,893      100,379            -        1,085,272 (2)           -

YEAR ENDED DECEMBER 31, 2001
Reserves and allowances
 deducted from asset
 accounts:
Allowance for doubtful
 accounts                          $9,467      $22,909           $-          $21,775 (1)     $10,601
Reserve for inventory
 obsolescence                   1,227,928      865,000            -        1,108,035 (2)     984,893

</TABLE>


(1)  Uncollectible accounts written off, net of recoveries.
(2)  Obsolete parts written off.

                                       49

<PAGE>

Exhibit Index

Exhibit Number   Description
--------------------------------------------------------------------------------
    4.3          Convertible Note Purchase Agreement, dated June 3, 2002,
                  between Affinity Technology Group, Inc., and certain investors
    14           Code of Ethics
    21           Subsidiaries of Affinity Technology Group, Inc.
    23.1         Consent of Scott McElveen LLP
    31           Rule 13a-14(a)/15d-14(a) Certifications
    32           Section 1350 Certifications



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