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                                 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, 2001

[   ] 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.)

                          1122 LADY STREET, SUITE 1145
                               COLUMBIA, SC 29201
                    (Address of principal executive offices)
                                   (Zip code)

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


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

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

         Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [ X ] No [ ]


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         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. [ X ]

         The aggregate market value of the Registrant's Common Stock held by
non-affiliates of the Registrant was approximately $2,941,000 as of March 14,
2002. For purposes of such calculation, shares of Common Stock held by persons
who hold more than 10% of the outstanding shares of Common Stock and shares
held by directors and officers of the Registrant and certain of their immediate
family members have been included because such persons may be deemed to be
affiliates. This determination is not necessarily conclusive.

         There were 40,231,355 shares of the Registrant's Common Stock
outstanding as of March 14, 2002.

                      DOCUMENTS INCORPORATED BY REFERENCE

         Certain portions of the Registrant's proxy statement with respect to
the 2002 Annual Meeting of Stockholders of the Registrant have been
incorporated by reference herein.


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         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."

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. The Company's DeciSys/RT(R) loan processing system automates the
processing and consummation of consumer financial services transactions.
DeciSys/RT can simultaneously accept and capture consumer information through
remote input devices, such as touch-screen terminals or terminals used by loan
officers, and automatically interact with credit bureaus and other third
parties that supply information necessary to process a consumer financial
transaction.

         Due to capital constraints, the Company has suspended efforts to
deploy its products and services that utilize DeciSys/RT(R), including the
Affinity Automated Loan Machine (the ALM(R)), the Mortgage ALM, the e-xpert(R)
Lender system, iDEAL and rtDS. With the exception of one loan processing
contract that will expire in September 2002, the Company has suspended all of
its loan processing operations. Currently, the Company is exploring ways to
license certain of its patents.

         To date, the Company has generated substantial operating losses, has
experienced an extremely lengthy sales cycle for its products and services and
has been required to use a substantial amount of cash resources to fund its
operations. The Company does not believe that existing cash and internally
generated funds will be sufficient to fund its operations through the second
quarter of 2002. Accordingly, to remain viable the Company must raise
additional capital immediately. If the Company is unable to raise additional
capital soon, it will be forced to consider alternatives for winding down its
business, which may include filing for bankruptcy protection. 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 in a manner
that would allow it to continue its operations.

         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
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).
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).

         Both of the Company's patents covering fully automated loan processing
systems are being reexamined by the U.S. Patent and Trademark Office (the
"PTO") due to challenges to such patents by third parties. In March 2000,
August 2000 and January 2001, the PTO issued preliminary office actions
rejecting all previously issued claims under the Company's first patent
covering fully-automated loan processing systems. 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 the second quarter of 2001 the Company issued a $1 million note to
HomeGold Financial, Inc. ("HomeGold"), which was secured by the stock of its
wholly-owned mortgage subsidiary, Surety Mortgage, Inc. ("Surety"). The note
matured on December 31, 2001, at which time the Company tendered the stock of
Surety in


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full satisfaction of the note and accrued interest. 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 has suspended its mortgage loan processing operations.

         In June 2000, the Company entered into an agreement with Redmond Fund,
Inc. ("Redmond"), under which Redmond acquired, for $500,000, 484,848 shares of
the Company's common stock and a warrant to acquire an additional 484,848
shares for $1.37 per share.

         On September 22, 2000, the Company entered into a convertible
debenture and warrants purchase agreement with AMRO International, S.A.
("AMRO"). The agreement was amended in August 2001 as described below. Under
the original 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. Under the original agreement, the debenture matured on May 22,
2002, subject to earlier conversion and certain provisions regarding
acceleration upon default and prepayment. Under the original agreement, on
November 22, 2000 the Company also issued to AMRO a three-year warrant to
acquire 200,000 shares of the Company's common stock. The warrant exercise
price was $0.3542 per share. As of December 31, 2001, AMRO had exercised a
portion of the debenture into an aggregate of 6,214,655 shares of the Company's
stock.

         In August 2001, the Company and AMRO amended the convertible debenture
and warrants purchase agreement. Under the terms of the amendment, the Company
agreed to repay the debenture in full in a series of monthly payments through
June 2002, and AMRO agreed not to convert the debenture into any additional
shares of the Company's common stock. In addition, the Company agreed to reduce
the exercise price of the warrant issued to AMRO from $0.3542 per share to
$0.05 per share. AMRO's agreement to refrain from converting the debenture into
additional shares of the Company's common stock is subject to the Company's
timely payment of amounts under the debenture in accordance with the amendment.
The amendment requires the Company to use 25% of the net proceeds of any debt
or equity financing to repay amounts outstanding under the debenture, and to
repay the debenture in full if the Company enters into a merger, consolidation
or sale of all or substantially all of its assets. The outstanding principal
and interest under the debenture as of the date it was amended was $703,435.

         On September 26, 2000, the Company entered into a common stock
purchase agreement with another accredited investor. Under the agreement, the
Company may sell, periodically in monthly installments during a period of 18
months, up to 6,000,000 shares of the Company's common stock at a price equal
to 85% of the volume adjusted average market price of the Company's stock at
the time of issuance. The Company would not be permitted to sell any shares
until it has registered such shares for sale by the investor under the
Securities Act of 1933. Under the agreement, the Company issued to the investor
a three-year warrant to acquire 720,000 shares of the Company's common stock at
$0.8554 per share, which exercise price was reduced to $0.05 per share in
connection with the August 2001 amendment to the AMRO debenture. In addition,
any time the Company sells any shares of stock under the agreement, it would be
required to issue to the investor a 35-day warrant to acquire 25% of the number
of shares sold. The warrant would be exercisable at the average purchase price
paid by the investor for such shares. The amount of capital the Company may
raise under the common stock purchase agreement during any month may not be
less than $50,000 or more than the lesser of $1,000,000 or 4.5% of the product
of the daily volume-weighted average stock price during the three-month period
prior to a drawdown request and the total trading volume in the Company's stock
during the same three-month period. Based on these limitations, the Company
would not be able to sell any shares of its stock under the equity line
agreement as of March 31, 2002.

         On February 12, 2001, the Company's stock was delisted from the Nasdaq
SmallCap Market. On February 13, 2001, shares of the Company's common stock
began trading on the OTC Bulletin Board under the symbol "AFFI."

SALES AND MARKETING


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         The Company does not maintain a dedicated sales staff and, due to
capital constraints, believes that it is unlikely that it will implement an
aggressive software sales program in the foreseeable future. To date, the
Company has offered most of its loan processing products and services on the
basis of an Application Service Provider ("ASP") model. Under this model the
Company would license its software products and services to customers and
process their transactions through the Company's operations center. The Company
has suspended the sales and marketing of its products under the ASP model due
to working capital and other resource constraints. The Company is considering
alternative means to sell and market its software products, including the sale
of software licenses.

         The Company has elected to pursue a strategy involving the licensing
of certain of its patents. To date, the Company has been unable to formulate or
sustain a substantive licensing program due to its limited financial resources
and the adverse effect of the PTO's reexamination of two of its patents.
Accordingly, the Company's patent licensing efforts will be dependent on its
ability to raise additional capital and the outcome of the PTO's reexamination
process.

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 or gauge their relative competitive position.
There can be no assurance that the Company's technologies will be competitive
technologically or otherwise.

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

TECHNOLOGY

         The Company's loan processing system (DeciSys/RT) employs a
multi-tiered client/server architecture that integrates the consumer interface,
application analysis function and multiple data sources together in a seamless
operating environment. The DeciSys/RT architecture enables true multi-tasking,
which permits an expedited loan decision. DeciSys/RT uses standard C++ code and
object-oriented programming which permits the decoupling of functional
development from system deployment, greatly reducing the time and cost of
maintenance.

         As discussed above, due to capital constraints, the Company has
suspended efforts to deploy its loan-processing products and services that use
the ASP model.

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. The Company is in a reexamination proceeding with the PTO on both
of these loan processing patents ("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). On three occasions (in March
2000, August 2000 and January 2001), the PTO has issued a preliminary office
action rejecting the claims covered by one of these patents (U.S. Patent No.
5,870,721). The reexamination could result in a loss or limitation of all or
some of the previously issued claims under both 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.


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6,105,007). The Company also holds a patent 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) and has engaged in a
reissue proceeding with the PTO to expand the scope of such patent. The reissue
proceeding could result in a loss or limitation of all or some of the claims of
the issued patent.

         "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 and ability to compete is heavily dependent upon
its ability to secure, protect and license its patents. The Company also relies
on trade secret, copyright law and employee, customer and business partner
confidentiality agreements to protect its intellectual property. 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.

RESEARCH AND DEVELOPMENT

         During 2001, 2000, and 1999, the Company spent approximately $496,000,
$684,000, and $1,871,000, respectively, on research and development activities,
which represented approximately 38.6%, 39.7%, and 75.5%, respectively, of 2001,
2000, and 1999 revenues from continuing operations. During 2001, the Company
capitalized no software development costs. The Company has eliminated its
research and development staff due to capital constraints.

EMPLOYEES

         At December 31, 2001, the Company employed approximately 7 full-time
employees and 2 part-time employees, compared to 36 full-time and 1 part-time
employee at December 31, 2000. In conjunction with the suspension of its
mortgage processing operations, the Company reduced its workforce by 19
employees on December 31, 2001. 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 actual consolidated results of operations
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 $66,593,979 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. At December 31, 2001, cash and liquid investments
were $27,720.

         To date, the Company has generated substantial operating losses, has
experienced an extremely lengthy sales cycle for its products and services and
has been required to use a substantial amount of cash resources to fund its
operations. The Company does not believe that existing cash and internally
generated funds will be sufficient to fund its operations through the second
quarter of 2002. Accordingly, to remain viable the Company must raise
additional capital immediately. If the Company is unable to raise additional
capital soon, it will be forced to consider alternatives for winding down its
business, which may include filing for bankruptcy protection. 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 in a manner
that would allow it to continue its operations.


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         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.

         SIGNIFICANT LOSSES; ACCUMULATED DEFICIT; FUTURE LOSSES

         To date, the Company has incurred significant losses and has
experienced substantial negative cash flow from operations. The Company had an
accumulated deficit as of December 31, 2001 of approximately $66,594,000 with
net losses of approximately $15,399,000, $14,873,000, $12,095,000, $9,203,000
and $2,318,000 for the years ended December 31, 1997, 1998, 1999, 2000, and
2001, respectively. The Company's prospects must be considered in light of the
risks, expenses, and difficulties frequently encountered by companies in their
early stage of development, particularly companies operating in unproven
markets with unproven products and companies whose prospects are heavily
dependent upon the attempt to exploit intellectual property rights. There can
be no assurance that the Company will ever achieve profitability or, if
achieved, sustain such profitability.

         DEPENDENCE ON PATENT LICENSING PROGRAM

         Due to capital constraints, the Company has suspended efforts to
deploy its loan processing products and services that utilize the ASP model.
The Company's business activities currently consist almost exclusively of
developing a patent licensing program to license certain of its patents. The
Company's prospects are heavily dependent on its ability to develop, 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 market in general
or such companies in particular will accept, on a wide scale, the Company's
intellectual property rights. Moreover, initiating a substantive patent
licensing program represents a new strategy for the Company, and the Company
may not have the resources to plan, finance or execute a substantive patent
licensing program, enforce its patent rights, 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 commence litigation to assert and protect its intellectual property rights.
Such litigation would be costly and may not be possible unless the Company
raises additional capital. Sustained patent litigation could have a material
adverse effect on the Company's business, operating results and financial
position.

         CHALLENGES TO PATENTS

         Two of the Company's patents (No. 5,870,721 and No. 5,940,811) have
been challenged by third parties and are being reexamined by the PTO. The
reexamination process has been lengthy. The Company's Patent No. 5,870,721 has
been in the reexamination process for approximately three years. On three
separate occasions (in March 2000, August 2000 and January 2001), the PTO has
issued preliminary office actions rejecting all previously issued claims for
Patent No. 5,870,721. The Company is subject to the risk that it could lose all
or some of its previously issued claims or that such claims could be
significantly limited as a result of the reexamination. 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 or
otherwise challenge the Company's patents in the future, the Company is subject
to the risk that such reexamination or challenge may not be resolved to the
Company's satisfaction on a timely basis, if at all. An extended future
reexamination or other challenge to the Company's patents 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 some or all of its claims, the Company's only remedy
may be to initiate an appeal, which would likely be a lengthy process. Due to
the Company's limited capital resources, it is unlikely that the Company could
successfully sustain such appeal unless it is able to raise additional capital.


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Accordingly, a decision by the PTO to limit all or some of the Company's patent
claims would have a material adverse effect on the Company's business,
operating results and financial position.

         Despite the Company's efforts to protect its proprietary rights, third
parties may attempt to copy aspects of the Company's products and services or
to obtain and use information that the Company regards as proprietary. Policing
unauthorized use of the Company's products and services is difficult,
particularly in the environment in which the Company operates, and the laws of
other countries may afford the Company little or no effective protection of its
intellectual property. Additionally, policing the unauthorized use of the
Company's intellectual property rights may be very expensive, and the Company
may not have the resources to do so. The Company cannot be assured that the
steps it has taken will prevent others from misappropriating its technology.

         LENGTHY SALES AND LICENSING CYCLE

         The Company believes that it may experience a lengthy sales and
licensing cycle in conjunction with its patent licensing program. Even though
limited, the Company's experience is that the time between initial contact with
a potential licensee and the execution of a final license agreement could take
in excess of six months.

         RAPID TECHNOLOGICAL CHANGES

         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 highly competitive, rapidly developing and subject to
rapid change and technological development, shifting consumer preferences,
frequent 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. Moreover, competitors in the e-commerce market have
frequently taken different strategic approaches and have launched substantially
different products and services to exploit the same perceived market
opportunities.

         The Company's patents cover specific systems, processes and methods to
establish certain accounts associated with the financial services industry.
There can be no assurance that new products will not be developed and widely
accepted by the e-commerce market that will 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
will require the Company to rely on the services of trained and specialized
professionals. Such professionals include licensing agents and attorneys.
Although the Company has had discussions with certain patent licensing agents
and attorneys, it currently does not have an agreement with any of such
professionals. The Company believes that the success of its patent licensing
program will depend on its ability to attract the services of and enter into
agreements with qualified patent professionals on acceptable terms. The
Company's ability to enter into such agreements will be highly dependent on the
outcome of the PTO's reexamination of the Company's loan processing patents.
Moreover, such professionals frequently request exclusive arrangements and
charge significant contingent fees and commissions, which would reduce the
revenues generated by the Company from its patent licensing program. Failure of
the Company to retain qualified patent professionals on terms acceptable to the
Company could have a material adverse effect on the Company's business,
operating results and financial position.


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         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 develop and
implement a patent licensing program, the ability of the Company to
successfully negotiate and enter into patent licensing agreements, and the
timing, terms and the pricing attributes of 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 have had a material adverse effect, and may
continue to have a material adverse effect, on the price of the Company's
Common Stock.

         DEPENDENCE ON KEY EMPLOYEES

         The Company is highly dependent on the services of its President and
Chief Executive Officer, Joseph A. Boyle. The loss of services of Mr. Boyle
could materially and adversely affect the Company's business, operating results
and financial condition. The Company does not have an employment agreement with
Mr. Boyle or "key man" insurance on his life. The 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 could adversely affect the Company's ability to retain or recruit
employees and executives.

         RISK OF SUBSTANTIAL DILUTION

         In November, 2000, the Company issued to AMRO International, S.A.
("AMRO") a debenture which was convertible into shares of the Company's stock
at a price equal to the lesser of $1.00 or 65% of the average of the three
lowest closing prices of the Company's stock during the month prior to
conversion. Since the issuance of the debenture, AMRO has converted outstanding
principal and accured interest under the debenture into an aggregate of
6,214,655 shares of common stock. Under an amendment to the debenture executed
in August 2001, the Company has agreed to repay the debenture in full in a
series of monthly payments through June 2002, and AMRO has agreed not to
convert the debenture into additional shares of the Company's common stock.
AMRO's agreement not to convert the debenture into additional shares of our
common stock is subject to timely payment of monthly installments under the
debenture. As of March 31, 2002, the outstanding amounts under the debenture
will be approximately $198,000.

         If AMRO became entitled to convert the debenture in the future, the
debenture would be convertible into shares of common stock at a price that will
be substantially less than the market price of the Company's stock at the time
of conversion. In addition, the lower the price of the Company's stock at the
time of conversion of the convertible debenture, the greater the number of
shares that the Company will be required to issue, and the greater the dilution
that the Company's existing shareholders will incur. Also, the perceived risk
of dilution may cause the Company's existing shareholders and other holders to
sell their shares of the Company's stock, which would contribute to a decrease
in the Company's stock price. In this regard, significant downward pressure on
the trading price of the Company's stock may also cause investors to engage in
short sales, which would further contribute to significant downward pressure on
the trading price of its stock.

         The Company also has entered into other agreements under which it may
sell stock at a price that may be substantially less than the market price of
the Company's stock at the time of sale. The sale of stock at a price that is
less than market value 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 its 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

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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 1122 Lady
Street in Columbia, South Carolina. Such office space encompasses approximately
2000 square feet and is currently under lease which expires in 2003. The
Company leases warehouse space located in Columbia, South Carolina, which
encompasses approximately 4000 square feet and which lease expires in 2002. The
Company also leases approximately 1800 square feet of space in which it
maintains its data processing center. Such space is under a month-to-month
lease and is located at 1201 Main Street in Columbia, South Carolina.

ITEM 3.  LEGAL PROCEEDINGS

         On March 29, 2001, Citibank, N.A. filed a lawsuit against the Company
in the New York Federal Court seeking a declaratory judgment releasing
Citibank, N.A. from any obligation to the Company for amounts the Company has
billed to Citibank, N.A. under the Company's contract to develop a system to
process automobile loans for Citibank, N.A. Citibank, N.A. ultimately
transferred this contract to The Dime Savings Bank of New York. Citibank,
N.A.'s lawsuit against the Company was dismissed on January 8, 2002. Citibank,
N.A. has appealed the Court's decision. On July 19, 2001, the Company filed a
lawsuit against Citibank, N.A. in the Federal Court in South Carolina seeking
to collect certain amounts it believes it is due under the terms of the
aforementioned contract. Citibank, N.A. has petitioned the court to dismiss the
Company's lawsuit.

         The Company is subject to a lawsuit related to a claim filed by a
plaintiff who has alleged certain rights, damages and interests incidental to
the Company's formation and development. The lawsuit initially resulted in a


                                      10
<PAGE>
jury verdict of $68,000 in favor of the plaintiff, and the plaintiff
subsequently requested, and was granted, a new trial. The Company is appealing
the grant of a new trial. The Company intends to vigorously contest such action
and, in the opinion of management, the Company has meritorious defenses.

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

         Not applicable.

                      EXECUTIVE OFFICERS OF THE REGISTRANT
<TABLE>
<CAPTION>
  NAME                       AGE              POSITION WITH THE COMPANY
<S>                          <C>              <C>
Joseph A. Boyle              48               Chairman, President, Chief Executive Officer, and Chief
                                              Financial Officer
</TABLE>

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 and
Treasurer from May 1997. From May 1997 to July 1998, Mr. Boyle also served as
Secretary of the Company. 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.


                                   11
<PAGE>
PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         (a)      Effective February 12, 2001, the Company's common stock was
                  delisted from the Nasdaq Smallcap Market and began trading on
                  the OTC Bulletin Board. 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 under the symbol
                  "AFFI." The following table presents the high and low sales
                  prices of the Company's Common Stock for the periods
                  indicated during 2001 and 2000. As of March 14, 2002, there
                  were 332 stockholders of record of the Common Stock.
<TABLE>
<CAPTION>
                                                                             SALES PRICE PER SHARE
                                                                             ---------------------
                                                                             HIGH              LOW
                                                                             ----              ---
                               <S>                                           <C>             <C>
                               2001
                               First Quarter                                   0.41           0.06
                               Second Quarter                                  0.10           0.05
                               Third Quarter                                   0.11           0.05
                               Fourth Quarter                                  0.10           0.05
                               2000
                               First Quarter                                   4.38           0.47
                               Second Quarter                                  2.16           0.75
                               Third Quarter                                   1.31           0.63
                               Fourth Quarter                                  0.66           0.09
</TABLE>

                  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)      Not applicable.


                                      12
<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,
                                         2001           2000           1999          1998           1997
                                     ------------   ------------   ------------   ------------   ------------
<S>                                  <C>            <C>            <C>            <C>            <C>
Statements of Operations Data:
Revenues                             $  1,285,944   $  1,723,075   $  2,477,877   $  2,202,602   $  4,146,899
Costs and expenses:
Cost of revenues                           63,751        344,931      2,068,229      1,451,927      2,125,646
Research and development                  496,441        683,600      1,870,509      2,559,600      3,526,257
Impairment loss                           448,945      2,608,773             --             --             --
Selling, general and
   administrative expenses              3,847,807      6,791,767     10,548,539     13,842,344     15,892,560
                                     ------------   ------------   ------------   ------------   ------------
Total costs and expenses                4,856,944     10,429,071     14,487,277     17,853,871     21,544,463
                                     ------------   ------------   ------------   ------------   ------------
Operating loss                         (3,571,000)    (8,705,996)   (12,009,400)   (15,651,269)   (17,397,564)
Interest income                            10,101         64,155        305,362      1,010,213      2,033,571
Interest expense                         (115,557)       (26,277)            --        (10,923)       (35,359)
                                     ------------   ------------   ------------   ------------   ------------
Loss from continuing
   operations                          (3,676,456)    (8,668,118)   (11,704,038)   (14,651,979)   (15,399,352)
Income (loss) from operations
   of discontinued subsidiary             467,188       (534,978)      (390,598)      (221,022)            --
Gain on disposal of subsidiary            891,569             --             --             --             --
                                     ------------   ------------   ------------   ------------   ------------
Net loss                             $ (2,317,699)  $ (9,203,096)  $(12,094,636)  $(14,873,001)  $(15,399,352)
                                     ============   ============   ============   ============   ============
Loss per share - basic and diluted:
   Continuing operations             $      (0.10)  $      (0.29)  $      (0.39)  $      (0.49)  $      (0.54)
                                     ============   ============   ============   ============   ============
   Net loss per share                $      (0.06)  $      (0.30)  $      (0.41)  $      (0.50)  $      (0.54)
                                     ============   ============   ============   ============   ============
Shares used in computing
   net loss per share                  38,004,089     30,242,054     29,738,459     29,755,034     28,477,880
                                     ============   ============   ============   ============   ============
</TABLE>


                                      13
<PAGE>

<TABLE>
<CAPTION>
                                                                           December 31,
                                                2001            2000           1999            1998               1997
                                             ---------        ---------     -----------      ---------------- ----------
<S>                                          <C>              <C>           <C>              <C>              <C>
BALANCE SHEET DATA:
Cash and cash equivalents                    $  27,720        $ 646,198     $ 2,116,016      $ 2,026,932      $4,470,185
Short-term investments                               -                -       1,474,949        8,068,310      19,135,415
Working capital                                117,477        2,216,854       4,637,238       13,543,782      28,599,560
Net investment in sales-type
   leases, less current portion                      -                -         249,830          574,347       1,328,741
Total assets                                   927,657        5,638,453      13,129,528       24,196,875      42,209,570
Convertible debenture                          225,090(1)       951,456               -                -               -
Capital stock of subsidiary held
   by minority investor                              -           22,668               -                -               -
Stockholders' equity                           343,438        2,326,314      10,670,980       22,556,201      39,230,570
</TABLE>

-----------------------------
(1)      Amounts outstanding under the convertible debenture 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.

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 its patents.

         To date, the Company has generated substantial operating losses, has
experienced an extremely lengthy sales cycle for its products and services and
has been required to use a substantial amount of cash resources to fund its
operations. The Company does not believe that existing cash and internally
generated funds will be sufficient to fund its operations through the second
quarter of 2002. Accordingly, to remain viable the Company must raise
additional capital immediately. If the Company is unable to raise additional
capital soon, it will be forced to consider alternatives for winding down its
business, which may include filing for bankruptcy protection. 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 in a manner
that would allow it to continue its operations.

RESULTS OF OPERATIONS

         REVENUES. The Company's revenues from continuing operations were
$1,285,944, $1,723,075, $2,477,877 for the years ended December 31, 2001, 2000,
and 1999, respectively. The types of revenue recognized by the Company in the
years ended December 31, 2001, 2000, and 1999 are as follows:


                                      14
<PAGE>
<TABLE>
<CAPTION>
                                                                 Years ended December 31,
                                           2001                             2000                        1999
                               ---------------------------     --------------------------    --------------------------
                                                    % of                           % of                          % of
                                   Amount           Total         Amount           Total         Amount          Total
                               --------------      -------     -------------     --------    --------------    --------
<S>                            <C>                 <C>         <C>               <C>         <C>               <C>
Transaction fees               $      265,666         20.7     $     544,168         31.6         $ 538,073        21.7
Sales and rental fees                       -            -             3,000          0.2            48,962         2.0
Professional services fees            249,871         19.4           319,503         18.5           850,497        34.3
Patent license revenue                 20,000          1.6           510,000         29.6           645,000        26.0
Other income                          750,407         58.3           346,404         20.1           395,345        16.0
                               --------------      -------     -------------     --------    --------------    --------
                               $    1,285,944        100.0     $   1,723,075        100.0       $ 2,477,877       100.0
                               ==============      =======     =============     ========    ==============    ========
</TABLE>

         Transaction fees. The decrease in transaction fees in 2001 compared to
2000 is attributable to the discontinuance of the use of the Company's indirect
automobile loan processing system ("iDEAL") by its only iDEAL customer in early
2001. Such customer significantly curtailed its operations in late 2000 and
completely exited the market in early 2001. During 2001, the Company provided
transaction processing services to one customer that uses the Company's
e-xpertLender system under a contract which will expire in September 2002. The
slight increase in transaction fees in 2000 compared to 1999 is attributable to
an increase in the volume of automobile loans processed through the Company's
iDEAL system in 2000 compared to 1999.

         Sales and rental fees. The Company recognized no revenues associated
with the sales and rentals of its Automated Loan Machines ("ALMs") in 2001.
During 2000, all remaining ALM operating leases expired, and the Company
recognized $3,000 of rental payments associated with its final lease. Sales and
rental revenue in 1999 consisted primarily of rental fees associated with
several ALMs which were deployed under operating lease agreements and
miscellaneous non-recurring sales of hardware to one customer to support the
Company's e-xpertLender system.

         Professional services fees. When the Company agrees to provide
professional services to customize its core technology to conform to a specific
customer request, the Company generally enters into a contract with the
customer for the performance of these services which typically defines
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 recognizes the corresponding revenue as professional
services revenue. Because the Company has suspended efforts to deploy its loan
processing systems, it does not anticipate that it will earn professional
service fees any time in the foreseeable 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. In 2000 the Company recognized $309,503 of
professional services revenue associated with final enhancements to its
e-xpertLender system for one customer. In 1999, the Company recognized $850,497
of professional services fees, and 64% and 36% of such professional services
fees were associated with the customization of the Company's e-xpertLender and
iDEAL systems, respectively. This customization was performed during the year
to meet the specific requirements of two of the Company's customers.

         Patent license revenue. The Company was granted two patents in 1999
covering automated loan processing and one patent in 2000 covering the
automated establishment of financial accounts. Both of the Company's loan
processing patents are being reexamined by the U. S. Patent and Trademark
Office ("PTO"). The PTO's reexamination and capital constraints have adversely
affected the Company's ability to sustain an effective patent licensing program
to date. In 2001 the Company recognized patent licensing revenue associated
with the annual fee from one patent license agreement entered in 1999. Patent
license revenue in 2000 related to the granting of five patent license
agreements, of which three licenses were granted under a sub-licensing
agreement with one customer. The sub-licensing agreement was terminated in
January 2001. In addition, 91% of the Company's 2000 patent license revenue was
associated with the sub-licensing arrangement. Patent license revenue in 1999
related to the granting of three patent license agreements, of which two,
representing 93% of the Company's 1999 patent license revenue, were associated
with one customer.


                                      15
<PAGE>
         Other income. Other income consists primarily of non-recurring
miscellaneous income items and certain insignificant recurring income items
such as fees charged for the routine maintenance of the systems the Company has
sold. The increase in other income in 2001 compared to 2000 is primarily
attributable to the settlement of a lawsuit in the first quarter of 2001. The
overall increase was offset by a reduction in other miscellaneous income items
due to the suspension of efforts to deploy the Company's loan processing
systems. Other income recognized in 2000 was comparable with 1999.

COSTS AND EXPENSES

         COSTS OF REVENUES. Costs of revenues from continuing operations for
the years ended December 31, 2001, 2000, and 1999 were $63,751, $344,931, and
$2,068,229, 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, 2001,
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, 2001, 2000, and 1999 are as
follows:

<TABLE>
<CAPTION>
                                                                  Year ended December 31,
                                             2001                          2000                            1999
                                  --------------------------    --------------------------     --------------------------------
                                                      % of                           % of                             % of
                                      Amount          Total         Amount          Total          Amount             Total
                                  --------------     -------    --------------     -------     --------------     -------------
<S>                               <C>                <C>        <C>                <C>         <C>                <C>
Transaction fees                  $       41,862        65.7    $      108,193        31.4     $      209,424              10.1
Sales and rental fees                      4,485         7.0            52,240        15.1            445,581              21.5
Professional services fees                15,404        24.2           133,498        38.7            573,381              27.7
Patent license revenue                     2,000         3.1            51,000        14.8             64,500               3.2
Contract loss provision                        -           -                 -           -            775,343              37.5
                                  --------------    --------    --------------     -------     --------------     -------------
                                  $       63,751       100.0    $      344,931       100.0     $    2,068,229             100.0
                                  ==============    ========    ==============     =======     ==============     =============
</TABLE>

         Costs of transaction fees. The cost of transaction fees consists
primarily of the direct costs incurred by the Company to process loan
applications through its systems. Such direct costs are associated with
services provided by third parties and includes the cost of credit reports,
fraud reports and communications networks used by the Company. The decrease in
the costs of transaction fees in 2001 compared to 2000 is due to the
termination of the Company's only iDEAL contract in early 2001. The decrease in
the costs of transaction fees in 2000 compared to 1999 is primarily due to the
implementation of contractual provisions whereby certain of the Company's
customers assumed the responsibility for paying the direct costs associated
with loan transactions processed on their behalf by the Company.

         Costs of sales and rental fees. Costs of sales and rental fees are
related to the cost of ALM hardware components associated with ALMs deployed
under sales-type leases, maintenance of installed ALMs, amortization associated
with capitalized ALMs and related systems development costs, and depreciation
associated with ALMs deployed under operating leases. The Company recognized no
sales and rental revenue in 2001; however, the Company recognized certain
costs, primarily maintenance, associated with certain ALMs deployed under
sales-type leases. All such ALM contracts expired in 2001. Costs of sales and
rental fees decreased in 2000 compared to 1999 as a result of the expiration of
the Company's last ALM operating lease. In 2000, costs of sales and rental fees
consisted of depreciation and other costs incidental to the removal of
remaining ALMs under operating leases and maintenance associated with remaining
ALMs originally deployed under sales-type lease arrangements


                                      16
<PAGE>
         Costs of professional services fees. The costs of professional
services fees consist of the costs of the direct labor and the allocation of
certain indirect costs associated with performing software and system
customization services for customers. The costs of providing professional
services will vary depending upon the nature of professional services rendered,
the level of developers assigned to specific projects and the duration of the
project. Accordingly, the margins recognized by the Company may vary
significantly depending upon the nature of the project. The costs of providing
professional services decreased in 2001 compared to 2000 and in 2000 compared
to 1999 as a result of the continued decrease in the level of projects
requiring professional services during the last three-year period.

         Costs of patent license revenue. Costs of patent license revenue
recognized in 2001, 2000 and 1999 consist of commissions paid to the Company's
patent licensing agent and are associated with such agent's commissions for
patent licenses granted by the Company. The Company commenced its patent
licensing program in 1999.

         Contract loss provision. The Company periodically enters into
long-term development contracts to design, develop and install loan processing
systems for its customers. In conjunction with such contracts the Company
periodically evaluates whether costs incurred and estimated future costs exceed
estimated revenues under the contract. To the extent such costs exceed
contracted revenues, the Company records a charge to costs of revenues. In
1999, the Company recorded contract loss provisions of $775,343.

         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.

         Research and development expenses for the year ended December 31,
2001, were $496,441, compared to $683,600 and $1,870,509 for 2000 and 1999,
respectively. The decrease in research and development expense in 2001 compared
to 2000 and in 2000 compared to 1999 is due to a decrease in the number of
employees involved in development activities due to the continued reduction in
the Company's research and development activities over the past three years.

         The Company capitalized no costs associated with software development
in 2001 and 2000. During 1999, the Company capitalized approximately $138,000
of software development costs related primarily to the development of certain
financial service applications processed using DeciSys/RT. When a product is
available for general release to customers, capitalization of such costs is
discontinued and amounts capitalized are generally amortized over a 48 month
period.

         SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative ("SG&A") expenses related to continuing operations for the year
ended December 31, 2001, were $3,847,807, compared to $6,791,767 and
$10,548,539 for the years ended December 31, 2000 and 1999, respectively.

         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.


                                      17
<PAGE>
         SG&A expenses during 2000 consisted primarily of personnel expense of
approximately $1,649,000; professional fees of approximately $754,000;
depreciation and amortization expense of approximately $1,621,000; rent expense
of approximately $476,000; and writedown of deferred software development costs
of approximately $518,000.

         SG&A expenses during 1999 consisted primarily of personnel expense of
approximately $3,932,000; professional fees of approximately $941,000;
depreciation and amortization expense of approximately $1,659,000; rent expense
of approximately $866,000; provision for excess rental capacity of
approximately $449,000; writedown of deferred software development costs of
approximately $370,000; and travel costs of approximately $237,000.

         The decrease in SG&A in 2001 compared to 2000 and 2000 compared to
1999 is due the continued reduction of the Company's workforce over the past
three years. SG&A expenses were lower in all material categories in 2001
compared to 2000 and in 2000 compared to 1999.

         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 and $2,608,773 in 2001 and 2000, respectively. In 2001, the
impairment loss was primarily associated with goodwill the Company had
previously recorded in conjunction with the acquisition of an insurance
business which included rights to a patent. In 2001 the Company was
unsuccessful in obtaining expanded rights associated with the insurance patent
and accordingly wrote off all amounts previously recorded as goodwill. The
impairment loss in 2000 was primarily attributable to certain assets used or
associated with its software and consumer loan processing business, which the
Company has significantly curtailed. 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 1999.

INTEREST INCOME

         Interest income associated with continuing operations was $10,101,
$64,155, and $305,362 during 2001, 2000, and 1999, respectively, and primarily
reflects interest income attributable to short-term investments and the
amortization of deferred interest income attributable to ALM sales-type leases.
The decrease in interest income in 2001 compared to 2000 and 2000 compared to
1999 is attributable to the continued decrease in average cash and cash
equivalents and investment balances and ALMs deployed under sales-type leases.

INTEREST EXPENSE

         Interest expense associated with continuing operations was $115,557 in
2001, compared to $26,277 in 2000. Interest expense is primarily associated
with the issuance of a $1 million convertible debenture in November 2000 and
the issuance of a $1 million note in July 2001. The Company incurred no
interest expense in 1999.

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, 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, 2000, and 1999. Similarly, the gain
of $891,569 which the Company recognized is also reported as a separate
component of loss in 2001.


                                      18
<PAGE>
         The components of Surety's operations for 2001, 2000 and 1999 are as
follows:

<TABLE>
<CAPTION>
                                                               Year ended December 31,
                                                     2001                 2000               1999
                                                  -----------         -----------         ----------
                  <S>                             <C>                 <C>                 <C>
                  Mortgage revenue                $ 2,851,720         $   432,438         $ 397,024

                  Costs of revenue                  1,008,266             212,397           194,239
                  S G & A                           1,378,366             812,711           659,771
                                                  -----------         -----------         ---------
                  Total costs and expenses          2,386,632           1,025,108           854,010
                                                  -----------         -----------         ---------
                                                      465,088            (592,670)         (456,986)
                  Net interest income                   2,100              57,692            66,388
                                                  -----------         -----------         ---------
                  Net income (loss)               $   467,188         $  (534,978)        $(390,598)
                                                  ===========         ===========         =========
</TABLE>

         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
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.

         Surety's mortgage revenues and costs and expenses increased in 2001
compared to 2000 as a result of a one-year processing contract that was entered
into in December 2000, which required the Company to expand Surety's employee
base. As a result of the processing contract, Surety recognized mortgage
revenues of approximately $1,842,000 in 2001. The contract expired on December
31, 2001. Surety's mortgage revenues and costs and expenses increased in 2000
compared to 1999 as a result of the deployment of additional Mortgage ALMs which
resulted in higher levels of mortgage loan applications processed.

INCOME TAXES

         The Company has recorded a valuation allowance for the full amount of
its net deferred income tax assets as of December 31, 2001, 2000, and 1999,
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 $66,593,979 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. Additionally, in 2000 the Company sold 484,848 shares of its
common stock for $500,000 and issued a $1 million convertible debenture. In 2001
the Company issued a $1 million note to HomeGold, and on December 31, 2001, the
Company tendered the stock of Surety in full satisfaction of outstanding
principal and accrued interest under the note.

         To date, the Company has generated substantial operating losses, has
experienced an extremely lengthy sales cycle for its products and services and
has been required to use a substantial amount of cash resources to fund its
operations. The Company does not believe that existing cash and internally
generated funds will be sufficient to fund its operations through the second
quarter of 2002. Accordingly, to remain viable the Company must raise


                                       19
<PAGE>

additional capital immediately. If the Company is unable to raise additional
capital soon, it will be forced to consider alternatives for winding down its
business, which may include filing for bankruptcy protection. To maintain the
minimal resources necessary to support its current operations, 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 in a manner that would allow it to continue its operations.

         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. 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.

         In June 2000, the Company entered into an agreement with Redmond Fund,
Inc. ("Redmond") under which Redmond acquired, for $500,000, 484,848 shares of
the Company's common stock and a warrant to acquire an additional 484,848 shares
for $1.37 per share.

         On September 22, 2000, the Company entered into a convertible debenture
and warrants purchase agreement with AMRO International, S.A. The agreement was
amended in August 2001 as described below. Under the original 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. Under the original
agreement, the debenture matured on May 22, 2002, subject to earlier conversion
and certain provisions regarding acceleration upon default and prepayment. Under
the original agreement, on November 22, 2000 the Company also issued to AMRO a
three-year warrant to acquire 200,000 shares of the Company's common stock. The
warrant exercise price was originally $0.3542 per share. As of December 31,
2001, AMRO had exercised a portion of the debenture into an aggregate of
6,214,655 shares of the Company's stock. The outstanding principal and interest
under the debenture as of December 31, 2001, was $240,365.

         In August 2001, the Company and AMRO amended the convertible debenture
and warrants purchase agreement. Under the terms of the amendment, the Company
agreed to repay the debenture in full in a series of monthly payments through
June 2002, and AMRO agreed not to convert the debenture into any additional
shares of the Company's common stock. In addition, the Company agreed to reduce
the exercise price of the warrant issued to AMRO from $0.3542 per share to $0.05
per share. AMRO's agreement to refrain from converting the debenture into
additional shares of the Company's common stock is subject to the Company's
timely payment of amounts under the debenture in accordance with the amendment.
The amendment requires the Company to use 25% of the net proceeds of any debt or
equity financing to repay amounts outstanding under the debenture, and to repay
the debenture in full if the Company enters into a merger, consolidation or sale
of all or substantially all of its assets.

         On September 26, 2000, the Company entered into a common stock purchase
agreement with another accredited investor. Under the agreement, the Company may
sell, periodically in monthly installments during a period of 18 months, up to
6,000,000 shares of the Company's common stock at a price equal to 85% of the
volume adjusted average market price of the Company's stock at the time of
issuance. The Company would not be permitted to sell any shares until it has
registered such shares for sale by the investor under the Securities Act of
1933. Under the agreement, the Company issued to the investor a three-year
warrant to acquire 720,000 shares of the Company's common stock at $0.8554 per
share, which exercise price was reduced to $0.05 per share in connection with
the August 2001 amendment to the AMRO debenture. In addition, any time the
Company sells any shares of stock under the agreement, it would be required to
issue to the investor a 35-day warrant to acquire 25% of the number of shares
sold. The warrant would be exercisable at the average purchase price paid by the
investor for such shares. The amount of capital the Company may raise under the
common stock purchase agreement during any month may not be less than $50,000 or
more than the lesser of $1,000,000 or 4.5% of the product of the daily
volume-weighted average stock price during the three-month period prior to a
drawdown request and the total


                                       20
<PAGE>

trading volume in the Company's stock during the same three-month period. Based
on these limitations, the Company would not be able to sell any shares of its
stock under the equity line agreement as of March 31, 2002.

         During June 1998, Surety entered into an agreement with a lender to
establish a credit facility with a maximum borrowing amount of $2,000,000.
Pursuant to the terms of the agreement, Surety obtained advances from the lender
for funding of mortgage loans made by Surety during the interim period between
the funding and sale of the loans to permanent investors. All advances made
pursuant to the agreement are secured by a security interest in the rights and
benefits due Surety in conjunction with the making of the underlying loan. The
interest rate of the credit facility was at the lender's prime rate plus 50
basis points. The credit facility was eliminated at the time the Company
tendered its stock in Surety to HomeGold to repay amounts outstanding under the
HomeGold note. Outstanding borrowings under the Loan Warehousing Agreement at
December 31, 2000 were $922,545 bearing an interest rate of 10%. There were no
outstanding borrowings under the Loan Warehousing Agreement as of December 31,
1999.

         Net cash used during the year ended December 31, 2001, to fund
operations was approximately $2,062,000, compared to approximately $5,291,000
and $6,101,000 for 2000 and 1999, respectively. During 2001, proceeds from the
offering and other sources of cash were used to fund current research and
development of approximately $496,000. During 2000, proceeds from the offering
and other sources of cash were used to fund current period operations, research
and development of approximately $684,000, and capital expenditures of
approximately $342,000. During 1999, proceeds from the offering and other
sources of cash were used to fund current period operations, research and
development of approximately $1,871,000, software development of approximately
$138,000 and capital expenditures of approximately $195,000. At December 31,
2001, 2000, and 1999, cash and liquid investments were $27,720, $646,198, and
$3,590,965, respectively, and working capital was $117,477, $2,216,854, and
$4,637,238, respectively.

         ITEM 7(A). QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         The Company's market risk exposure is the potential loss arising from
changes in interest rates and its impact on the Company's mortgage brokerage
business, which were suspended on December 31, 2001. The Company does not
believe that its mortgage brokerage business exposed it to significant market
risk for changes in interest rates.


                                       21
<PAGE>

         ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA

         The report of independent auditors and consolidated financial
statements are set forth below (see item 14(a) for list of financial statements
and financial statement schedules):

REPORT OF INDEPENDENT AUDITORS

Board of Directors and Shareholders
Affinity Technology Group, Inc.

         We have audited the accompanying consolidated balance sheet of Affinity
Technology Group, Inc. and subsidiaries (collectively, the "Company"), as of
December 31, 2001, and the related consolidated statement of operations, changes
in stockholders' equity, and cash flows for the year then ended. The Company's
audit also included the financial statement schedule listed in the Index at Item
14(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 based on our audit. The consolidated financial statements
of the Company as of December 31, 2000 and 1999, were audited by other auditors,
whose report dated March 30, 2001, on these statements included an explanatory
paragraph that described the Company's recurring losses and accumulated deficit,
which raised substantial doubt about the Company's ability to continue as a
going concern.

         We conducted our audit 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 audit provides a
reasonable basis for our opinion. 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.

         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, 2001, and the consolidated results of its
operations and its cash flows for the year then ended in conformity with
accounting principles generally accepted in the United States of America.

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



                                    /s/ SCOTT McELVEEN LLP

Columbia, South Carolina
March 27, 2002


                                       22
<PAGE>

REPORT OF INDEPENDENT AUDITORS

Board of Directors and Shareholders
Affinity Technology Group, Inc.

         We have audited the accompanying consolidated balance sheets of
Affinity Technology Group, Inc. and subsidiaries as of December 31, 2000 and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the two years in the period ended December 31, 2000. The
Company's audits also included the financial statement schedule listed in the
Index at Item 14(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. 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 financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Affinity Technology Group, Inc. and subsidiaries at December 31, 2000 and the
consolidated results of their operations and their cash flows for each of the
two years in the period ended December 31, 2000, in conformity with accounting
principles generally accepted in the United States. 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
Affinity Technology Group, Inc. will continue as a going concern. As more fully
described in Note 1, the Company has incurred recurring operating losses and has
an accumulated deficit. These conditions raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans in regard
to these matters are also described in Note 1. The financial statements do not
reflect any adjustments to reflect the possible future effects on the
recoverability and classification of assets or the amounts and classification of
liabilities that may result from the outcome of this uncertainty.



                                    /s/ ERNST & YOUNG LLP

Greenville, South Carolina
March 30, 2001


                                       23
<PAGE>

                AFFINITY TECHNOLOGY GROUP, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                        DECEMBER 31,
                                                                                   2001             2000
                                                                                 --------        ----------
         <S>                                                                        <C>             <C>
         ASSETS
         Current assets:
           Cash and cash equivalents                                             $ 27,720        $  646,198
           Receivables, less allowance for doubtful accounts of
             $10,601 and $9,467 at December 31, 2001 and 2000,
             respectively                                                         459,107         1,830,491
           Net investment in sales-type leases - current                               --           157,139
           Inventories                                                            100,379           977,274
           Other current assets                                                   114,490           388,961
                                                                                 --------        ----------
         Total current assets                                                     701,696         4,000,063
         Property and equipment, net                                              182,918           862,813
         Software development costs, less accumulated
           amortization of $670,858 and $411,793 at December
           31, 2001 and 2000, respectively                                         40,114           299,179
         Other assets                                                               2,929           476,398
                                                                                 --------        ----------
         Total assets                                                            $927,657        $5,638,453
                                                                                 ========        ==========
</TABLE>


                                       24
<PAGE>

<TABLE>
<CAPTION>
                                                                                       DECEMBER 31,
                                                                                  2001              2000
                                                                               ------------     ------------
         <S>                                                                   <C>              <C>
         LIABILITIES AND STOCKHOLDERS' EQUITY
         Current liabilities:
           Accounts payable                                                    $    139,758     $    252,040
           Accrued expenses                                                         126,272          414,717
           Accrued compensation and related benefits                                 93,099          151,800
           Notes payable                                                                 --          922,545
           Convertible debenture                                                    225,090               --
           Current portion of deferred revenue - third parties                           --           42,107
                                                                               ------------     ------------
         Total current liabilities                                                  584,219        1,783,209
         Convertible debenture                                                           --          951,456
         Deferred revenue                                                                --          554,806
         Capital stock of subsidiary held by minority investor                           --           22,668
         Commitments and contingent liabilities
         Stockholders' equity:
           Common stock, par value $0.0001; authorized 60,000,000
              shares, issued 42,399,363 shares in 2001 and 32,713,368
              shares in 2000                                                          4,240            3,271
           Additional paid-in capital                                            70,386,464       70,084,414
           Common stock warrants                                                     52,000           52,000
           Deferred compensation                                                         --          (31,804)
           Treasury stock, at cost (2,168,008 shares at
              December 31, 2001 and 2000)                                        (3,505,287)      (3,505,287)
           Accumulated deficit                                                  (66,593,979)     (64,276,280)
                                                                               ------------     ------------
         Total stockholders' equity                                                 343,438        2,326,314
                                                                               ------------     ------------
         Total liabilities and stockholders' equity                            $    927,657     $  5,638,453
                                                                               ============     ============
</TABLE>

See accompanying notes.


                                       25
<PAGE>

                AFFINITY TECHNOLOGY GROUP, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                   YEARS ENDED DECEMBER 31,
                                                            2001              2000              1999
                                                        ------------      ------------      ------------
<S>                                                     <C>               <C>               <C>
Revenues:
   Transactions                                         $    265,666      $    544,168      $    538,073
   Sales and rental                                               --             3,000            48,962
   Professional services                                     249,871           319,503           850,497
   Patent license revenue                                     20,000           510,000           645,000
   Other income                                              750,407           346,404           395,345
                                                        ------------      ------------      ------------
                                                           1,285,944         1,723,075         2,477,877
                                                        ------------      ------------      ------------
Costs and expenses:
   Cost of revenues                                           63,751           344,931         2,068,229
   Research and development                                  496,441           683,600         1,870,509
   Selling, general and administrative expenses            3,847,807         6,791,767        10,548,539
   Impairment loss                                           448,945         2,608,773                --
                                                        ------------      ------------      ------------
                                                           4,856,944        10,429,071        14,487,277
                                                        ------------      ------------      ------------
Operating loss from continuing operations                 (3,571,000)       (8,705,996)      (12,009,400)
Interest income                                               10,101            64,155           305,362
Interest expense                                            (115,557)          (26,277)               --
                                                        ------------      ------------      ------------
Loss from continuing operations                         $ (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                                                $ (2,317,699)     $ (9,203,096)     $(12,094,636)
                                                        ============      ============      ============
Loss per share - basic and diluted:
Continuing operations                                   $      (0.10)     $      (0.29)     $      (0.39)
                                                        ============      ============      ============
Net loss per share                                      $      (0.06)     $      (0.30)     $      (0.41)
                                                        ============      ============      ============
Shares used in computing net loss per share               38,004,089        30,242,054        29,738,459
                                                        ============      ============      ============
</TABLE>

See accompanying notes.


                                       26
<PAGE>

                AFFINITY TECHNOLOGY GROUP, INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                     ADDITIONAL  COMMON                                                  TOTAL
                                           COMMON     PAID-IN    STOCK       DEFERRED       TREASURY    ACCUMULATED   STOCKHOLDERS'
                                           STOCK      CAPITAL    WARRANTS  COMPENSATION      STOCK        DEFICIT        EQUITY
                                           -------  -----------  --------  ------------   -----------  -------------  -------------
<S>                                        <C>      <C>          <C>        <C>           <C>          <C>            <C>
Balance at December 31, 1998                $3,157  $69,392,545  $    --    $(489,656)    $(3,371,297)  $(42,978,548)  $22,556,201
Exercise of stock options                       39      173,209       --           --        (119,522)            --        53,726
Forfeiture of stock options                     --     (170,800)      --      170,800              --             --            --
Amortization of deferred
compensation                                    --           --       --      155,689              --             --       155,689
Net loss                                        --           --       --           --              --    (12,094,636)  (12,094,636)
                                            ------  -----------  -------    ---------     -----------   ------------   -----------

Balance at December 31, 1999                 3,196   69,394,954       --     (163,167)     (3,490,819)   (55,073,184)   10,670,980
Exercise of stock options                       23      189,733                    --         (14,468)            --       175,288
Forfeiture of stock options                     --      (28,980)      --       28,980              --             --            --
Amortization of deferred compensation           --           --       --      102,383              --             --       102,383
Issuance of common stock in private
placement                                       48      499,952       --           --              --             --       500,000
Issuance  of common  stock as finder's fee       4       28,755       --           --              --             --        28,759
Issuance of common stock warrants               --           --   52,000           --              --             --        52,000
Net loss                                        --           --                    --              --     (9,203,096)   (9,203,096)
                                            ------  -----------  -------    ---------     -----------   ------------   -----------

Balance at December 31, 2000                 3,271   70,084,414   52,000      (31,804)     (3,505,287)   (64,276,280)    2,326,314
Exercise of warrant                            347           --       --           --              --             --           347
Debenture conversion to common stock           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                $4,240  $70,386,464  $52,000    $      --     $(3,505,287)  $(66,593,979)  $   343,438
                                            ======  ===========  =======    =========     ===========   ============   ===========
</TABLE>


                                       27
<PAGE>

                AFFINITY TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                            YEARS ENDED DECEMBER 31,
                                                                   2001              2000              1999
                                                               ------------      ------------      ------------
<S>                                                            <C>               <C>               <C>
OPERATING ACTIVITIES
Net loss                                                       $ (2,317,699)     $ (9,203,096)     $(12,094,636)
Adjustments to reconcile net loss to net cash used in
  operating activities:
    Depreciation and amortization                                   841,258         1,921,528         2,449,521
    Amortization of deferred compensation                            31,804           102,383           155,689
    Gain on disposal of subsidiary                                 (891,569)               --                --
    Impairment loss                                                 448,945         2,608,773                --
    Writedown of software development costs                              --           517,903           369,787
    Provision for doubtful accounts                                  22,909            60,000            60,000
    Inventory valuation allowance                                   865,000           120,000           694,940
    Contract loss provision                                              --                --           775,343
    Deferred revenue                                               (568,942)          (97,603)          128,077
    Other                                                           114,254            21,926            24,837
    Changes in current assets and liabilities:
       Accounts receivable                                         (668,569)       (1,176,847)          (45,645)
       Net investment in sales-type leases                          157,139           417,176           534,425
       Inventories                                                   11,895           127,258            71,051
       Other assets                                                 179,429           234,981           (55,395)
       Accounts payable                                             (16,898)           36,143            31,278
       Accrued expenses                                            (248,184)         (338,050)          400,297
       Accrued compensation and related benefits                    (22,705)         (643,568)          399,702
                                                               ------------      ------------      ------------
Net cash used in operating activities                            (2,061,933)       (5,291,093)       (6,100,729)
INVESTING ACTIVITIES
Purchases of property and equipment                                (129,351)         (342,403)         (194,726)
Proceeds from sale of property and equipment                         14,781            65,895            16,872
Software development costs                                               --                --          (137,940)
Purchases of short-term investments                                      --                --        (2,474,949)
Sales of short-term investments                                          --         1,474,949         9,068,310
                                                               ------------      ------------      ------------
Net cash (used in) provided by investing activities                (114,570)        1,198,441         6,277,567
FINANCING ACTIVITIES
Proceeds from convertible debenture                                      --         1,000,000                --
Proceeds from notes payable to third parties                     28,241,861        11,531,712                --
Payments on notes payable to third parties                      (26,684,183)      (10,609,166)         (141,480)
Proceeds from sale of common stock                                       --           500,000                --
Proceeds from sale of minority interest in subsidiary                    --            25,000                --
Exercise of options                                                      --           175,288            53,726
Exercise of warrants                                                    347                --                --
                                                               ------------      ------------      ------------
Net cash provided by (used in) financing activities               1,558,025         2,622,834           (87,754)
                                                               ------------      ------------      ------------
Net (decrease) increase in cash                                    (618,478)       (1,469,818)           89,084
Cash and cash equivalents at beginning of year                      646,198         2,116,016         2,026,932
                                                               ------------      ------------      ------------
Cash and cash equivalents at end of year                       $     27,720      $    646,198      $  2,116,016
                                                               ============      ============      ============
</TABLE>

See accompanying notes.


                                       28
<PAGE>

                AFFINITY TECHNOLOGY GROUP, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                DECEMBER 31, 2001

1.       GOING CONCERN

         To date, the Company has generated substantial operating losses, has
experienced an extremely lengthy sales cycle for its products and services and
has been required to use a substantial amount of cash resources to fund its
operations. The Company does not believe that existing cash and internally
generated funds will be sufficient to fund its operations through the second
quarter of 2002. Accordingly, to remain viable the Company must raise additional
capital immediately. To maintain the minimal resources necessary to support its
current operations, 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 in a manner that would
allow it to continue its operations.

         The Company is evaluating alternatives to secure sufficient additional
working capital to continue its business activities through 2002 and beyond.
Such alternatives include the placement of additional debt and/or equity
securities and the possible sale of certain assets.

         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 be material to the Company's financial
position.

2.       THE COMPANY

         The Company was incorporated on January 12, 1994. Since its formation
the Company concentrated its product development efforts primarily on a "closed
loop" electronic commerce system that utilizes its proprietary Decisys/RT
technology and enables financial institutions to automate the processing and
consummation of consumer loans and other financial services at the point of
sale. This technology is designed to enable financial institutions to open new
distribution channels for their products and services, thereby increasing assets
and revenues and broadening customer relationships while reducing their
operating and infrastructure costs.

         Through its wholly owned subsidiary, Surety Mortgage, Inc., ("Surety")
the Company 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 owns certain patents generally covering the automated
establishment of loans and other financial accounts. The Company has suspended
its development and marketing efforts related to its "closed loop" electronic
commerce technologies and has suspended its mortgage banking business. The
principal future activities of the Company will involve the development of a
patent licensing program.

3.       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


                                       29
<PAGE>

Corporation, Affinity Credit Corporation, Affinity Processing Corporation
("APC"), Affinity Mortgage Technology, 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.

INVESTMENTS

         The Company classifies its investments as held to maturity or available
for sale. At December 31, 2001 and 2000 the Company had no investments. All
mortgage loans originated and processed by Surety were sold to permanent
investors. The Company had no unrealized holding gains or losses associated with
investments classified as available for sale during the years ended December 31,
2001, 2000, and 1999.

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.

INVENTORIES

         Inventories at December 31, 2001 and 2000 are stated at the lower of
cost or market. Cost is determined using the first-in, first-out ("FIFO") cost
flow assumption.

OTHER CURRENT ASSETS

         At December 31, 2001, other current assets consisted of prepaid
expenses of $114,490. Other current assets at December 31, 2000 consisted of
deferred contract costs of $176,083 and prepaid expenses of $212,878.


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 (including amortization of equipment
leased under capital leases) was approximately $676,000, $1,620,000, and
$1,807,000 during 2001, 2000, and 1999, respectively.

SOFTWARE DEVELOPMENT COSTS

         Costs incurred in the development of software, which is 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 2000 and
1999, the Company recorded charges of approximately $518,000 and $370,000,
respectively, to reduce recorded balances of unamortized capitalized software
costs to their net realizable value.


                                       30
<PAGE>

         Amortization of capitalized software development was approximately
$259,000, $382,000, and $342,000 during 2001, 2000, and 1999, respectively.

VALUATION OF LONG-LIVED ASSETS

         In accordance with Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of" ("SFAS 121"), 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 and 2000, the Company recorded certain impairment charges related to
certain of its long-lived assets. In 2001, the Company recorded impairment
charges of approximately $449,000, $399,000 of which is related to goodwill.
Impairment charges recorded by the Company in 2000 were approximately: property
and equipment, $1,103,000; goodwill, $1,453,000 (see "Intangible Assets" below);
and other non-current assets of $53,000.

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. Intangible assets, primarily goodwill, consisted of approximately
$1,470,000 which was recorded in conjunction with the acquisition of Buy
America, Inc. and Project Freedom, Inc. (see Note 10), and approximately
$1,400,000 which was recorded in conjunction with the exchange of APC common
stock for the Company's common stock. See "Minority Investor" below. Accumulated
amortization associated with these intangible assets approximated $528,000 and
$661,000 at December 31, 2000 and 1999, respectively. 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 and $1,453,000 in 2001 and 2000,
respectively. Such charges eliminated the recorded balance of goodwill
associated with the exchange of APC common stock for the Company's common stock
in 2000 and eliminated the unamortized balance of goodwill associated with the
acquisition of Buy America and Project Freedom in 2001.

MINORITY INVESTOR

         An unrelated third party exchanged 240,570 shares of APC common stock
for 666,667 shares of the Company's common stock on May 21, 1997. The exchange
was accounted for as a purchase of minority interest in a majority owned
subsidiary. The fair market value of the Company's common stock at the time of
the exchange was approximately $1,600,000. The unrelated third party had
previously acquired the shares of APC common stock for aggregate consideration
of $125,000, and 90,988 shares of APC convertible preferred stock, which was
acquired for aggregate consideration of $75,000. These holdings represented a
24.9% minority interest in APC at the date of exchange.

SOFTWARE REVENUE RECOGNITION

         The Company has adopted the American Institute of Certified Public
Accountants ("AICPA") Statement of Position 97-2 "Software Revenue Recognition"
("SOP 97-2"), as amended, effective for transactions entered into in fiscal
years beginning after December 15, 1997. SOP 97-2 provides guidance on software
revenue recognition associated with the licensing and selling of computer
software. The Company did not recognize any revenue during 2001, 2000 or 1999
associated with contracts subject to SOP 97-2 guidance.


                                       31
<PAGE>

REVENUE RECOGNITION

Transaction fees - Transaction fee revenue is recognized as the related
transactions are processed. Transaction processing fees revenue represented
approximately 20.7%, 31.6%, and 21.7% of total revenue from continuing
operations during 2001, 2000, and 1999, respectively.

Mortgage processing services - Surety engaged in mortgage brokerage activities,
which generally involves 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 sponsor 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 include 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 are recognized at the time
the loans are 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
13).

Sales and rental - Revenue and costs related to leases of ALM equipment are
recognized in accordance with Statement of Financial Accounting Standards No.
13, "Accounting for Leases" (see Note 4). Revenue from sales-type leases is
generally recognized when the equipment is installed and accepted by the
customer. Operating lease revenue is recognized ratably over the lease term.

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

Software licensing - The Company recognizes revenue from sales of software
licenses upon delivery of the software product to a customer, unless the Company
has significant related obligations remaining. When significant obligations
remain after the software product has been delivered, revenue is not recognized
until such obligations have been completed or are no longer significant. The
costs of any remaining insignificant obligations are accrued when the related
revenue is recognized.

Deferred revenues - Deferred revenues relate to unearned revenue on ALM leases
and certain other amounts billed to customers for which acceptance of the
underlying product or service is not fully complete.

COST OF REVENUES

         Cost of revenues consists of costs associated with initial set-up,
transaction fees, sales and rental revenues, professional services and mortgage
processing services. Additionally, contract loss provisions are charged to cost
of revenues. Costs associated with initial set-up fees include labor, other
direct costs and an allocation of related indirect costs. The Company did not
deploy any ALMs during 2001, 2000 and 1999. No costs were incurred in 2001,
2000, and 1999 in association with initial set-up revenue recognized. 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 $42,000, $108,000, and $209,000 in 2001, 2000, and
1999, respectively. Costs associated with sales and rental revenues include the
cost of the leased ALM hardware, other direct costs and an allocation of related
indirect costs. Costs of ALM hardware sold under sales-type leases, depreciation
expense for hardware leased to customers under operating leases and other direct
costs associated with sales and rental revenues totaled approximately $5,000,
$52,000, and $446,000 for the years ended December 31, 2001, 2000, and 1999,
respectively. Costs associated with professional services include labor, other
direct costs and an allocation of


                                       32
<PAGE>

related indirect costs. Labor and other direct and allocation of indirect costs
associated with professional services totaled approximately $15,000, $133,000,
and $573,000 for the years ended December 31, 2001, 2000, and 1999,
respectively. Costs of patent license revenues consist of commissions paid by
the Company to its previous patent licensing agent and totaled $2,000, $51,000
and $64,500 for the years ended December 31, 2001, 2000 and 1999, respectively.
In 1999 the Company recorded contract loss provisions of approximately $775,000.

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 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. For performance based stock options, the Company records
compensation expense related to these options over the performance period.

         Statement of Financial Accounting Standards No. 123, "Accounting for
Stock Based Compensation" ("SFAS 123"), 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 pro forma effect
on net income and earnings per share were not material for the years-ended
December 31, 2001, 2000, and 1999. 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.

ADVERTISING EXPENSE

         The cost of advertising is expensed as incurred. Advertising and
marketing expense was approximately $8,000, $33,000, and $77,000 during 2001,
2000, and 1999, respectively.

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 July 2001, the Financial Accounting Standards Board issued Statement
No. 142 "Goodwill and Other Intangible Assets" ("SFAS 142"). SFAS 142 supercedes
Accounting Principles Bulletin No. 17 "Intangible Assets." SFAS 142 primarily
addresses the accounting for goodwill and intangible assets subsequent to their
acquisition. The most significant changes made by SFAS 142 are: (a) goodwill and
indefinite lived intangible assets will no longer be amortized, (b) goodwill
will be tested for impairment at least annually, (c) intangible assets deemed to
have indefinite life will be tested for impairment at least annually and (d) the
amortization period of intangible assets with finite lives will no longer be
limited to forty years. The provisions of SFAS 142 will be effective for fiscal
years beginning after December 15, 2001. The Company does not expect the
adoption of SFAS 142 to have a material effect on its financial statements.

         In October 2001, the Financial Accounting Standards Board issued
Statement No. 144, "Accounting for the Impairment or Disposal of Long-Lived
Assets" ("SFAS 144"). SFAS 144 provides accounting guidance for financial
accounting and reporting for the impairment or disposal of long-lived assets.
The statement supersedes Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and


                                       33
<PAGE>

for Long-Lived Assets to be Disposed Of." It also supersedes the accounting and
reporting provisions of APB Opinion No. 30, "Reporting the Results of
Operations--Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions"
related to the disposal of a segment of a business. The statement is effective
for fiscal years beginning after December 15, 2001. The Company does not expect
the adoption of SFAS 144 to have a material effect on its financial statements.

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 markets its products and services to financial institutions
throughout the United States. The Company performs ongoing credit evaluations of
customers and retains a security interest in leased equipment related to
sales-type leases.

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.

RECLASSIFICATION

         Certain amounts in 1999 and 2000 have been reclassified to conform to
2001 presentations for comparability. These reclassifications have no effect on
previously reported stockholders' equity or net loss.

4.       SALES-TYPE AND OPERATING LEASES

         The components of the net investment in sales-type leases are as
follows:

<TABLE>
<CAPTION>
                                                                         DECEMBER 31,
                                                                             2000
                                                                         ------------
  <S>                                                                    <C>
  Total minimum lease payments receivable                                 $ 162,972
  Less unearned interest income                                              (5,833)
                                                                          ---------
  Net investment in sales-type leases                                     $ 157,139
                                                                          =========
  Net investment in sales-type leases is classified as:
     Current                                                              $ 157,139
     Non-current                                                                 --
                                                                          ---------
                                                                          $ 157,139
                                                                          =========
</TABLE>


                                       34
<PAGE>

5.       INVENTORIES

Inventories consist of the following:

<TABLE>
<CAPTION>
                                                                           DECEMBER 31,
                                                                     2001                 2000
                                                                 -------------       -------------
<S>                                                              <C>                 <C>
Electronic parts and other components                             $    312,164       $     676,546
Work in process                                                         28,784             774,331
Finished goods                                                         744,324             754,325
                                                                  ------------       -------------
                                                                     1,085,272           2,205,202
Reserve for obsolescence                                              (984,893)         (1,227,928)
                                                                  -------------      -------------
                                                                  $     100,379      $     977,274
                                                                  =============      =============
</TABLE>


6.       PROPERTY AND EQUIPMENT

Property and equipment consists of the following:

<TABLE>
<CAPTION>
                                                                            DECEMBER 31,
                                                                     2001                 2000
                                                              ----------------      ---------------
<S>                                                           <C>                    <C>
Data processing equipment                                         $  2,137,414       $   2,618,284
Demonstration equipment                                                113,106             727,267
Office furniture and fixtures                                          355,441           1,426,348
Automobiles                                                             72,003              72,003
Purchased software                                                   1,962,273           2,017,891
                                                                  -------------      -------------
                                                                     4,640,237           6,861,793
Less accumulated depreciation and amortization                      (4,457,319)         (5,998,980)
                                                                  -------------      -------------
                                                                  $     182,918      $     862,813
                                                                  =============      =============
</TABLE>


7.       NOTES PAYABLE

         During June 1998, Surety entered into an agreement with a lender to
establish a credit facility with a maximum borrowing amount of $2,000,000.
Pursuant to the terms of the agreement, Surety obtained advances from the lender
for funding of mortgage loans made by Surety during the interim period between
the funding and sale of the loans to permanent investors. All advances made
pursuant to the agreement were secured by a security interest in the rights and
benefits due Surety in conjunction with the making of the underlying loan. The
interest rate of the credit facility was at the lender's prime rate plus 50
basis points. The credit facility was eliminated in conjunction with the
tendering of Surety's stock in satisfaction of a note payable. Outstanding
borrowings under the Loan Warehousing Agreement at December 31, 2000 were
$922,545 bearing an interest rate of 10%. There were no outstanding borrowings
under the Loan Warehousing Agreement as of December 31, 1999.

8.       CONVERTIBLE DEBENTURE

         On September 22, 2000, the Company entered into a convertible debenture
and warrants purchase agreement with AMRO International, S.A. ("AMRO"). The
agreement was amended in August 2001 as described below. Under the original
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.
Under the original agreement, the debenture matured on May 22, 2002, subject to
earlier conversion and certain provisions regarding acceleration upon default
and prepayment. Under the original agreement, on November 22, 2000 the Company
also issued to AMRO a three-year warrant to acquire 200,000 shares of the
Company's common stock. The warrant

                                       35
<PAGE>

exercise price was $0.3542 per share. As of December 31, 2001, AMRO had
exercised a portion of the debenture into an aggregate of 6,214,655 shares of
the Company's stock.

         In August 2001, the Company and AMRO amended the convertible debenture
and warrants purchase agreement. Under the terms of the amendment, the Company
agreed to repay the debenture in full in a series of monthly payments through
June 2002, and AMRO agreed not to convert the debenture into any additional
shares of the Company's common stock. In addition, the Company agreed to reduce
the exercise price of the warrant issued to AMRO from $0.3542 per share to $0.05
per share, and to reduce the exercise price for a warrant to acquire 720,000
shares issued to the investor for the Company's equity line agreement from
$0.8554 per share to $0.05 per share. The effect of such warrant repricing was
not material to the Company's financial statements. AMRO's agreement to refrain
from converting the debenture into additional shares of the Company's common
stock is subject to the Company's timely payment of amounts under the debenture
in accordance with the amendment. The amendment requires the Company to use 25%
of the net proceeds of any debt or equity financing to repay amounts outstanding
under the debenture, and to repay the debenture in full if the Company enters
into a merger, consolidation or sale of all or substantially all of its assets.
The outstanding principal and interest under the debenture as of the date it was
amended was $703,435.

9.       STOCKHOLDERS' EQUITY

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, 2001 and 2000 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,
2001, approximately 161,000 options were exercisable under the 1995 Option Plan.
At December 31, 2001, the weighted average exercise price was $0.44 and the
weighted average remaining contractual life was 4.0 years. This plan closed
during April 1996.

         In April 1996, the Company adopted the 1996 Incentive Stock Option
Plan. Under the terms of both plans, 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 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. As a result of the
amendment, non-employee directors will receive options to purchase 5,000 shares
of Common Stock of the company on the 5th business day after each annual
shareholder meeting.

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

                                       36
<PAGE>

<TABLE>
<CAPTION>
                                                                            OPTIONS OUTSTANDING
                                                                   ---------------------------------------
                                                     SHARES                             WEIGHTED AVERAGE
                                                   AVAILABLE             NUMBER               PRICE
                                                   FOR GRANT            OF SHARES           PER SHARE
      <S>                                      <C>                 <C>                  <C>
      1995 STOCK OPTION PLAN
                                               ------------------- -------------------- ------------------
      Balance at December 31, 1998                             -             702,214          $0.44
      Options canceled/forfeited                               -             (69,324)         $0.44
      Options exercised                                        -            (387,076)         $0.44
                                               ------------------- -------------------- ------------------
      Balance at December 31, 1999                             -             245,814          $0.44
      Options canceled/forfeited                               -              (9,434)         $0.44
      Options exercised                                        -             (53,000)         $0.44
                                               ------------------- -------------------- ------------------
      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
                                               =================== ==================== ==================


      1996 STOCK OPTION PLAN
      Balance at December 31, 1998                       276,350           1,623,650          $1.55
      Shares reserved                                  1,000,000                   -            -
      Options granted                                   (235,200)            235,200          $1.52
      Options canceled/forfeited                         316,310            (316,310)         $1.20
      Options exercised                                        -              (2,000)         $0.91
                                               ------------------- -------------------- ------------------
      Balance at December 31, 1999                     1,357,460           1,540,540          $1.63
      Options granted                                 (1,067,500)          1,067,500          $1.15
      Options canceled/forfeited                         693,970            (693,970)         $1.16
      Options exercised                                        -            (169,930)         $0.98
                                               ------------------- -------------------- ------------------
      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
                                               =================== ==================== ==================
</TABLE>


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

<TABLE>
<CAPTION>
                                                   1996 STOCK OPTION PLAN
  -------------------------------------------------------------------------------------------------------------------------
                                OPTIONS EXERCISABLE                                 OPTIONS OUTSTANDING
                                AT DECEMBER 31, 2001                               AT DECEMBER 31, 2001
                      ========================================= ===========================================================
                                                                                                              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                 421,480         $0.47                     577,320         $0.56               7.6
    $1.06 - $3.75                 174,197         $2.23                     541,150         $1.72               7.8
    $6.75 - $7.38                     160         $6.75                         200         $6.75               5.0
                      --------------------  -------------------- -------------------- ------------------- -----------------
    $0.09 - $7.38                 595,837         $0.99                   1,118,670         $1.13               7.7
                      ==================== ==================== ==================== ==================== =================
</TABLE>


         The Company has 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


                                       37
<PAGE>

common stock options granted under the 1995 Plan. During 1997, the Company
adjusted the deferred compensation expense to reflect actual compensation
expense earned by terminated employees. The Company continues to amortize the
deferred compensation of the remaining individuals still employed by the Company
over the vesting period of the individual's options. The vesting period for
other options is generally 60 months. Amortization of deferred compensation in
2001, 2000, and 1999 totaled approximately $32,000, $102,000, and $156,000,
respectively.


         During July 1998, independent of the 1995 and 1996 Incentive Stock
Option Plans and in connection with the employment of the President and Chief
Executive Officer of the Company, the Company issued an option to purchase
250,000 shares of Common Stock of the Company at an exercise price of $0.94 per
share. The exercise price equaled the estimated fair market value on the date of
grant and the vesting of this option was ratable over a 60 month term. The
President and Chief Executive Officer resigned on January 10, 2000 and the
option was terminated. Also in conjunction with the President and Chief
Executive Officer's resignation and the termination of his option to purchase
250,000 shares of Common Stock of the Company, the Company's Board of Directors
voted to accelerate the vesting of options granted under the 1996 Stock Option
Plan to purchase 50,000 shares of the Common Stock of the Company. All options
granted to the previous President and Chief Executive Officer were exercised in
2000.

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 owns 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. The warrant is not transferable without regulatory approval. 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.

COMMON STOCK PURCHASE AGREEMENT

         On September 26, 2000, the Company entered into a common stock purchase
agreement. Under the agreement, the company may sell, periodically in monthly
installments during a period of 18 months, up to 6,000,000 shares of the
Company's common stock at a price equal to 85% of the volume adjusted average
market price of the Company's stock at the time of issuance. The Company is not
permitted to sell any shares until it has registered such shares for resale by
the investor under the Securities Act of 1933. Under the agreement, the Company
issued to the investor a three-year warrant to acquire 720,000 shares of the
Company's common stock at a price equal to 115% of the average closing price of
the stock at the time of issuance. The Company ascribed no value to the
warrants. In addition, any time the Company sells any shares of stock under the
agreement, it would be required to issue to the investor a 35-day warrant to
acquire 25% of the number of shares sold. The warrants would be exercisable at
the average purchase price paid by the investor for such shares. Initially the
amount of capital the Company could raise under the common stock purchase
agreement during any month was not less than $250,000 or more than the lesser of
$1,000,000, or 4.5% of the product of the daily volume-weighted average stock
price during the three-month period prior to a drawdown request and the total
trading volume in the Company's stock during the same three-month period. In
March 2001, the minimum drawdown request was reduced to $100,000. At December
31, 2001, the Company would not have been able to sell any shares of its stock
under the equity line agreement.

10.      ACQUISITION

         On May 7, 1997 the Company acquired the assets of Buy American, Inc.
and Project Freedom, Inc., two related companies, for aggregate consideration
consisting of $300,000 in cash and issuance of 259,460 shares of restricted
common stock. The acquisition was accounted for as a purchase. The results of
operations of Buy


                                       38
<PAGE>

American, Inc. and Project Freedom, Inc. are included in the consolidated
financial statements from the date of acquisition.

         The restricted common stock issued in association with the acquisition
was subject to a call option by the Company and put option by the sellers. The
Company had a single option to repurchase any or all shares of restricted common
stock at a price of $5.78 per share. The sellers of Buy American, Inc. and
Project Freedom, Inc. had a single option to sell any or all the shares of
restricted common stock to the Company at a price of $3.47 per share. In April
1999, the Company and sellers of Buy American, Inc. and Project Freedom, Inc.
cancelled the call and put options.

11.      LEASES

         The Company has noncancelable operating leases for the rental of its
offices and warehouse. Future minimum lease payments under these leases at
December 31, 2001 are $29,332, all of which is payable in 2002.

         In 2001, 2000 and 1999, the Company incurred rent expense, including
rent associated with cancelable rental agreements, of approximately $372,000,
$519,000, and $903,000, respectively. Additionally, in 1999 the Company recorded
approximately $449,000 for excess rent capacity as other operating expense.

12.      INCOME TAXES

         As of December 31, 2001, the Company had federal and state net
operating loss carryforwards of approximately $64,402,000. 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 consisted of the
following:

<TABLE>
<CAPTION>
                                                          DECEMBER 31,
                                                    2001                 2000
                                            --------------------- --------------------
    <S>                                     <C>                   <C>
    Deferred tax assets:
       Net operating loss carryforwards             $ 24,022,000  $        21,859,900
       Intangible Assets                                  41,000              668,400
       Inventory valuation reserve                       367,000              458,000
       Writedown of property and
            equipment                                          -              411,300
       Other                                             111,000                9,400
                                            --------------------- --------------------
    Total deferred tax assets                         24,541,000           23,407,000
                                            --------------------- --------------------
    Deferred tax liabilities:
       Capitalized software costs                       (15,000)            (111,600)
       Depreciation                                            -             (47,200)
       Other                                            (34,000)             (30,900)
                                            --------------------- --------------------
    Total deferred tax liabilities                      (49,000)            (189,700)
                                            --------------------- --------------------
    Less:  Valuation allowance                      (24,492,000)         (23,217,300)
                                            --------------------- --------------------
    Total net deferred taxes                $                 -    $                -
                                            ===================== ====================
</TABLE>

         The Company has recorded a valuation allowance for the full amount of
its net deferred tax assets as of December 31, 2001 and 2000, 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 2001, 2000, and 1999.

                                       39
<PAGE>

13.      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. ("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. Except for net
receivables of $429,767 due from HomeGold associated with the transaction, all
of the assets and liabilities of Surety have been removed from the Company's
balance sheet. 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, 2000, and 1999. 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, 2000 and 1999 are as
follows:

<TABLE>
<CAPTION>
                                                                                YEAR ENDED DECEMBER 31,
                                                                         2001                 2000              1999
                                                             ----------------- -------------------- -----------------
        <S>                                                      <C>           <C>                  <C>
        Mortgage revenue                                          $ 2,851,720           $  432,438        $  397,024
        Costs of revenue                                            1,008,266              212,397           194,239
        S G & A                                                     1,378,366              812,711           659,771
                                                             ----------------- -------------------- -----------------
        Total costs and expenses                                    2,386,632            1,025,108           854,010
                                                             ----------------- -------------------- -----------------
                                                                      465,088            (592,670)         (456,986)
        Net interest income                                             2,100               57,692            66,388
                                                             ----------------- -------------------- -----------------
        Net income (loss)                                          $  467,188          $ (534,978)       $ (390,598)
                                                             ================= ==================== =================
</TABLE>

         Surety's operating results are included in the determination of the
Company's net loss for the years ended December 31, 2001, 2000 and 1999 and are
reported as "Income (loss) from operations of discontinued subsidiary." The
effect of Surety's operating results on net loss per share are $0.012, $(0.018)
and $(0.013) in the years ended December 31, 2001, 2000, and 1999, respectively.

14.      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. One customer accounted for 76%, 45%
and 40% of revenues in 2001, 2000, and 1999, 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.

15.      OTHER RELATED PARTY TRANSACTIONS

         During February 1998, Surety entered into an agreement with Resource
Bancshares Mortgage Group, Inc. ("RBMG"), pursuant to which the Company agreed
to underwrite and process mortgage loans in accordance with guidelines specified
by RBMG. The Company received a fee from RBMG for the underwriting and
processing services performed. A member of the Company's Board of Directors
served as the Chairman and Chief Executive Officer of RBMG until December 1999.
During 1999, the Company processed and sold to RBMG approximately $12,369,000 in
mortgage loans resulting in approximately $286,000 in revenue for the Company.

16.      COMMITMENTS AND CONTINGENT LIABILITIES

         The Company is subject to legal actions which from time to time have
arisen in the ordinary course of business. In addition, a claim was filed by a
plaintiff who claimed certain rights, damages and interests incidental to the
Company's formation and development. The claim resulted in a jury verdict of
$68,000 in favor of the plaintiff and the plaintiff subsequently requested, and
was granted, a new trial. The Company is appealing the grant of a new


                                       40
<PAGE>

trial. The Company intends to vigorously contest such actions and, in the
opinion of management, the Company has meritorious defenses and the resolution
of such actions will not materially affect the financial position of the
Company.

         On April 18, 2000, the Company filed a lawsuit against The Dime Savings
Bank of New York, FSB and Hudson United Bancorp in The United States District
Court for the District of South Carolina, Columbia Division. The lawsuit arose
out of the Company's contract with The Dime Savings Bank relating to the
development of a system to process and automate decisioning of automobile loans.
The contract was acquired by The Dime Savings Bank in connection with its
acquisition of the indirect automobile loan business formerly operated by
Citibank, N.A. In January 2001, the Company settled its lawsuit with Dime
through mediation, a provision of which was the release of Hudson from further
legal action by the Company.

         On March 29, 2001, Citibank, N.A. filed a lawsuit against the Company
in the New York Federal Court seeking a declaratory judgment releasing Citibank,
N.A. from any obligation to the Company for amounts the Company has billed to
Citibank, N.A. under the Company's contract to develop a system to process
automobile loans for Citibank, N.A. Citibank, N.A. ultimately transferred this
contract to The Dime Savings Bank of New York. Citibank, N.A.'s lawsuit against
the Company was dismissed on January 8, 2002. Citibank, N.A. has appealed the
Court's decision. On July 19, 2001, the Company filed a lawsuit against
Citibank, N.A. in the Federal Court in South Carolina seeking to collect certain
amounts it believes it is due under the terms of the aforementioned contract.
Citibank, N.A. has petitioned the court to dismiss the Company's lawsuit.

17.      QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

<TABLE>
<CAPTION>
                                  First              Second                Third              Fourth
                                 Quarter             Quarter              Quarter             Quarter
                              --------------     ---------------      ----------------   ----------------
   <S>                         <C>                  <C>                 <C>                <C>
   YEAR ENDED DECEMBER 31,
   2001
   Revenue                     $   776,606          $    114,897         $    307,264       $     87,177
   Gross profit                    760,717               103,942              280,975             76,559
   Loss from continuing
   operations                     (749,088)             (717,125)            (452,954)        (1,757,289)
   Net loss                       (729,407)             (690,197)            (375,150)          (522,945)
   Loss per share - basic
   and diluted
   Continuing operations             (0.02)                (0.02)               (0.01)             (0.04)
   Net loss                          (0.02)                (0.02)               (0.01)             (0.01)
                               -------------        -------------        -------------      -------------

   YEAR ENDED DECEMBER 31,
   2000
   Revenue                     $   279,256         $     565,954         $    313,768       $    564,097
   Gross profit                    207,704               399,568              278,220            492,652
   Loss from continuing
   operations                   (1,676,554)           (1,358,180)          (1,431,572)        (4,201,812)
   Net loss                     (1,811,159)           (1,505,263)          (1,552,311)        (4,334,363)
   Loss per share - basic
   and diluted
   Continuing operations             (0.06)                (0.05)               (0.05)             (0.14)
   Net loss                          (0.06)                (0.05)               (0.05)             (0.14)
</TABLE>

         The sum of certain net loss per share amounts differs from the annual
reported total due to rounding. As more fully explained in Note 13, the Company
disposed of a subsidiary on December 31, 2001, and recorded a gain of $891,569,
or $0.02 per share. In conjunction with such disposal, the quarterly information
has been adjusted to reflect revenue, gross profit and loss from continuing
operations.

                                       41
<PAGE>


ITEM  9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

         On March 20, 2002, Affinity Technology Group, Inc. (the "Company")
dismissed its prior independent accountants, Ernst & Young LLP, and retained as
its new independent accountants, Scott McElveen LLP. Ernst & Young LLP's
reports on the Company's financial statements for the two most recent fiscal
years (i.e., the fiscal years ended December 31, 2000 and December 31, 1999)
contained no adverse opinion or a disclaimer of opinion, and were not qualified
or modified as to audit scope or accounting principles; however, the report on
the Company's financial statements for the year ended December 31, 2000,
contained an explanatory paragraph regarding the uncertainty as to the Company's
ability to continue as a going concern. The decision to change the Company's
accountants was recommended by the Audit Committee of the Company's Board of
Directors and approved by the Company's Board of Directors.

         During the Company's last two fiscal years and the subsequent interim
period to the date hereof, there were no disagreements between the Company and
Ernst & Young LLP on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which disagreements, if
not resolved to the satisfaction of Ernst & Young LLP, would have caused it to
make reference to the subject matter of the disagreements in connection with its
reports.

         None of the "reportable events" described in Item 304(a)(l)(v) of
Regulation S-K occurred with respect to the Company within the last two fiscal
years and the subsequent interim period to the date hereof. During the last two
fiscal years and the subsequent interim period to the date hereof, the Company
did not consult Scott McElveen LLP regarding any of the matters or events set
forth in Item 304 (a) (2) of Regulation S-K.

PART III

ITEM 10.   DIRECTORS AND 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 30, 2002 under the captions "Board of Directors" 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 30, 2002 under the caption "Executive Compensation", which is
incorporated by reference herein.

ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         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 30, 2002 under the caption "Security Ownership of Management and
Certain Beneficial Owners," which is incorporated by reference herein.

ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         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 30, 2002 under the caption "Certain Transactions" which is
incorporated by reference herein.

                                       42
<PAGE>

PART IV

ITEM 14.  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, 2001 and 2000.

         ii.      Consolidated Statement of Operations for the years ended
                  December 31, 2001, 2000, , and 1999.

         iii.     Consolidated Statements of Stockholders' Equity for the years
                  ended December 31, 2001, 2000, and 1999.

         iv.      Consolidated Statements of Cash Flows for the years ended
                  December 31, 2001, 2000, and 1999.

         v.       Notes to the Consolidated Financial Statements for the years
                  ended December 31, 2001, 2000, and 1999.

         (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:

<TABLE>
<CAPTION>
   EXHIBIT NUMBER     DESCRIPTION
--------------------- ------------------------------------------------------------------------------------------------
<S>     <C>           <C>
        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 By-laws 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           Form of Common Stock Purchase  Warrant issued by Affinity  Technology  Group,  Inc., to Redmond
                        Fund,  Inc.,  which is hereby  incorporated  by reference to Exhibit 4.5 to the  Registration
                        Statement on Form S-3 of Affinity Technology Group, Inc. (File No. 333-41898)
        4.4           Convertible Debenture and Warrants Purchase Agreement,  dated as of September 22, 2000, between
                        Affinity Technology Group, Inc., to AMRO  International,  S. A., which is hereby incorporated
                        by reference to Exhibit 4.8 to the  Registration  Statement  Form S-2 of Affinity  Technology
                        Group, Inc. (File No. 333-48176)
        4.5           Form  of  8%  Convertible  Debenture  issued  by  Affinity  Technology  Group,  Inc.,  to  AMRO
                        International,  S. A.,  which is hereby  incorporated  by  reference  to  Exhibit  4.9 to the
                        Registration Statement on Form S-2 of Affinity Technology Group, Inc. (File No. 333-48176).
        4.6           Form  of  Stock  Purchase  Warrant  issued  by  Affinity   Technology  Group,   Inc.,  to  AMRO
                        International,  S. A.,  which is hereby  incorporated  by  reference  to Exhibit  4.10 to the
                        Registration Statement on Form S-2 of Affinity Technology Group, Inc. (File No. 333-48176).
        4.7           Registration  Rights  Agreement,  dated as of September 22, 2000,  between Affinity  Technology
</TABLE>


                                       43
<PAGE>

<TABLE>
<S>     <C>           <C>
                       Group, Inc., and AMRO International, S.A., which is hereby
                       incorporated by reference to Exhibit 4.11 to the Registration
                       Statement Form S-2 of Affinity Technology Group, Inc. (File
                       No. 333-48176).

        4.8           Form of Stock  Purchase  Warrant  issued  by  Affinity  Technology  Group,  Inc.,  to  Cardinal
                        Securities,  LLC,  which  is  hereby  incorporated  by  reference  to  Exhibit  4.12  to  the
                        Registration Statement Form S-2 of Affinity Technology Group, Inc. (File No. 333-48176).
       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.
       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 Form 10-K which was filed on
                        March 31, 1999.
        16.1          Letter from Ernst & Young,  which is  incorporated  by reference to Exhibit 16.1 to the Current
                        Report on Form 8-K of Affinity Technology Group, Inc., filed on March 20, 2002.
         21           Subsidiaries of Affinity Technology Group, Inc.
        23.1          Consent of Scott McElveen, LLP.
        23.2          Consent of Ernst & Young, LLP.
         27           Financial Data Schedule.
</TABLE>

*        Denotes a management contract or compensatory plan or arrangement.

(b)      Reports on Form 8-K filed in the 4th quarter of 2001:

         The Registrant did not file any Current Reports on Form 8-K during the
last fiscal quarter of the period covered by this report.

(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 14 is
submitted under Item 14(a) (3).

(d)      Financial Statement Schedules.

         The response to this portion of Item 14 is submitted under Item
14(a)(2).

                                       44
<PAGE>

SIGNATURES

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

AFFINITY TECHNOLOGY GROUP, INC.

Date:    April 1, 2002           By:      /s/  Joseph A. Boyle
                                          -------------------------------------
                                          Joseph A. Boyle
                                          President and Chief Executive Officer

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

<TABLE>
<CAPTION>
    SIGNATURES                          TITLE                                                   DATE
    --------------------------------    --------------------------------------------        -------------
    <S>                                 <C>                                                 <C>

    /s/ Joseph A. Boyle                                                                     April 1, 2002
    -------------------------------
    Joseph A. Boyle                     Chairman, President, Chief Executive and Chief
                                        Financial Officer and Director
                                        (principal executive and financial officer)


    Alan H. Fishman                                                                         April 1, 2002
    -------------------------------
    Alan H. Fishman                     Director


    /s/  Robert M. Price, Jr.                                                               April 1, 2002
    -------------------------------
    Robert M. Price, Jr.                Director


    /s/  Peter R. Wilson, Ph.D.                                                             April 1, 2002
    -------------------------------
    Peter R. Wilson, Ph.D.              Director


    /s/  S. Sean Douglas                                                                    April 1, 2002
    -------------------------------
    S. Sean Douglas                     Senior Vice President
                                        (principal accounting officer)
</TABLE>

                                       45
<PAGE>

<TABLE>
<CAPTION>
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

---------------------------------------- ----------------- ---------------------------------- ----------------- ------------------
                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, 2001
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
YEAR ENDED DECEMBER 31, 2000
Reserves and allowances deducted
    From asset accounts:
Allowance for doubtful
    accounts                              $  105,076          $ 60,000          $  --          $  155,609(1)          $    9,467
Reserve for inventory
    obsolescence                           1,713,986           120,000             --             606,058(2)           1,227,928

YEAR ENDED DECEMBER 31, 1999
Reserves and allowances
  deducted from asset accounts:
Allowance for doubtful
  accounts                                $   45,513          $ 60,000          $  --          $      437(1)          $  105,076
Reserve for inventory
  obsolescence                             1,095,698           694,940             --              76,652(2)           1,713,986

</TABLE>

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


                                       46