SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended June 30, 1998 Commission file number: 0-28152
Affinity Technology Group, Inc.
(Exact name of registrant as specified in its charter)
Delaware 57-0991269
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Affinity Technology Group, Inc.
1201 Main Street, Suite 2080
Columbia, SC 29201-3201
(Address of principal executive offices)
(Zip code)
(803) 758-2511
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ____
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
29,499,673 shares of Common Stock, $.0001 par value, as of August 1, 1998.
Part I. Financial Information
Item 1. Financial Statements
Affinity Technology Group, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
June 30,
1998 December 31,
(Unaudited) 1997
Assets
Current assets:
Cash and cash equivalents $ 1,097,455 $ 4,470,185
Investments 15,297,698 19,135,415
Accounts receivable, less allowance for doubtful accounts of $258,901
and $400,120 at June 30, 1998 and December 31, 1997, respectively 766,893 1,944,947
Net investment in sales-type leases - current 666,950 1,732,928
Inventories 3,074,463 2,960,038
Other current assets 1,080,414 799,628
------------------- -------------------
Total current assets 21,983,873 31,043,141
Net investment in sales-type leases - non-current 954,249 1,328,741
Property and equipment, net 5,398,835 6,028,980
Software development costs, less accumulated amortization of $74,817 and
$117,807 at June 30, 1998 and December 31, 1997, respectively 652,775 750,323
Other assets 2,857,241 3,058,385
=================== ===================
Total assets $ 31,846,973 $ 42,209,570
=================== ===================
Liabilities and stockholders' equity Current liabilities:
Current portion of capital lease obligations to related party $ 33,307 $ 64,222
Accounts payable 225,471 666,824
Accrued expenses 1,282,545 951,975
Deferred revenue - current 141,998 760,560
------------------- -------------------
Total current liabilities 1,683,321 2,443,581
Deferred revenue - non current 510,047 535,419
Commitments and contingent liabilities
Stockholders' equity:
Common stock, par value $0.0001; authorized 60,000,000 shares, issued
31,572,880 and 31,550,199 shares at June 30,1998 and December 31, 1997
3,157 3,155
Additional paid-in capital 69,862,597 69,858,571
Treasury stock, at cost (2,048,207 shares at June 30, 1998) (3,371,298) (967,035)
Deferred compensation (1,206,753) (1,558,574)
Accumulated deficit (35,634,098) (28,105,547)
------------------- -------------------
Total stockholders' equity 29,653,605 39,230,570
=================== ===================
Total liabilities and stockholders' equity $ 31,846,973 $ 42,209,570
=================== ===================
<FN>
See accompanying notes.
</FN>
Affinity Technology Group, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
Six months ended Three months ended
June 30, June 30,
1998 1997 1998 1997
------------------- ------------------ ----------------- ------------------
Revenues:
Initial set-up, transactions and other $ 886,893 $ 726,107 $ 587,409 $ 192,523
Sales and rental 55,269 352,047 35,769 224,347
Professional Services 797,061 - 16,066 -
------------------- ------------------ ----------------- ------------------
Total revenue 1,739,223 1,078,154 639,244 416,870
Costs and expenses:
Cost of revenues 651,491 540,956 215,717 249,741
Research and development 1,802,323 1,686,874 953,049 843,747
Selling, general and administrative expenses 7,461,106 7,707,443 4,289,731 4,170,174
------------------- ------------------ ----------------- ------------------
Total costs and expenses 9,914,920 9,935,273 5,458,497 5,263,662
------------------- ------------------ ----------------- ------------------
Operating loss (8,175,697) (8,857,119) (4,819,253) (4,846,792)
Interest income, net 647,146 1,095,930 287,177 489,263
------------------- ------------------ ----------------- ------------------
Net loss $ (7,528,551) $ (7,761,189) $ (4,532,076) $ (4,357,529)
=================== ================== ================= ==================
Net loss per share - basic and diluted $ (0.25) $ (0.27) $ (0.15) $ (0.15)
=================== ================== ================= ==================
Shares used in computing net loss per share 30,014,766 28,338,286 29,651,497 28,609,116
=================== ================== ================= ==================
<FN>
See accompanying notes.
</FN>
Affinity Technology Group, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Six months ended
June 30,
1998 1997
------------------- ------------------
Operating activities
Net loss $ (7,528,551) $ (7,761,189)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 1,170,058 952,656
Amortization of deferred compensation 351,821 502,672
Provision for doubtful accounts 60,000 -
Inventory valuation allowance 330,000 -
Deferred revenue (643,932) (131,917)
Other 123,819 88,583
Changes in current assets and liabilities:
Accounts receivable 1,118,054 (397,340)
Net investment in sales-type leases 906,471 481,734
Inventories 123,448 147,949
Other current assets (283,273) (149,422)
Accounts payable and accrued expenses (110,784) (1,340,504)
------------------- ------------------
Net cash used in operating activities (4,382,869) (7,606,778)
Investing activities
Purchases of property and equipment, net (394,574) (1,846,625)
Software development costs (1,855) (408,394)
Proceeds from sale of short term investments 3,837,717 1,079,571
Other - (300,000)
------------------- ------------------
Net cash used in investing activities 3,441,288 (1,475,448)
Financing activities
Payments on notes payable and capital leases (30,915) (43,316)
Exercise of options 4,029 44,310
Exercise of warrants - 37,490
Purchases of treasury stock (2,404,263) -
Other - (483)
------------------- ------------------
Net cash provided by financing activities (2,431,149) 38,001
------------------- ------------------
Net increase (decrease) in cash (3,372,730) (9,044,225)
Cash and cash equivalents at beginning of period 4,470,185 31,563,950
=================== ==================
Cash and cash equivalents at end of period $ 1,097,455 $ 22,519,725
=================== ==================
<FN>
See accompanying notes.
</FN>
Notes to Condensed Consolidated Financial Statements
1. Basis of Presentation
The accompanying unaudited financial statements of Affinity Technology
Group, Inc. (the "Company") have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. The balance sheet at
December 31, 1997 has been derived from the audited consolidated financial
statements at that date, but does not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements.
The accompanying unaudited condensed consolidated financial statements
reflect all adjustments (consisting of normal, recurring accruals) which, in the
opinion of management, are necessary for a fair presentation of the results for
the periods shown. The results of operations for such periods are not
necessarily indicative of the results expected for the full year or for any
future period. The accompanying financial statements should be read in
conjunction with the audited consolidated financial statements of the Company
for the year ended December 31, 1997.
In 1997, the American Institute of Certified Public Accountants issued
Statement of Position 97-2 "Software Revenue Recognition" ("SOP 97-2"),
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. During the six months ended
June 30, 1998, the Company did not enter into any new agreements for the sale or
licensing of computer software for which revenue was recognized during the
period. The Company has adopted SOP 97-2 and continues to assess the impact this
will have on the presentation of the Company's financial statements.
Effective January 1, 1998, the Company adopted the Financial Accounting
Standards Board's Statement of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related Information" ("SFAS
131"). SFAS 131 establishes standards for the disclosure of financial and
descriptive information pertaining to an enterprise's reportable operating
segments in annual and interim financial statements. SFAS 131 is not required to
be applied to interim period financial statements in the initial year of
adoption. The Company will make the disclosures required by SFAS 131, if
applicable, in its financial statements for the year ended December 31, 1998.
Certain amounts in 1997 have been reclassified to conform to 1998
presentation for comparability. These reclassifications have no effect on
previously reported stockholders' equity or net loss.
2. Inventories
Inventories consist of the following:
June 30, December 31,
1998 1997
------------------------- -------------------------
Electronic parts and other components $ 1,017,544 $ 1,396,826
Work in process 1,714,730 829,269
Finished goods 840,012 906,950
------------------------- -------------------------
3,572,286 3,133,045
Reserve for obsolescence (497,823) (173,007)
========================= =========================
$ 3,074,463 $ 2,960,038
========================= =========================
4. Loan Warehousing Agreement
During June of 1998, Surety Mortgage, Inc. a wholly owned subsidiary of
the Company ("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 may obtain 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 credit
facility bears interest at the lender's prime rate plus 50 basis points and
expires on June 1, 1999. There were no outstanding borrowings under the Loan
Warehousing Agreement as of June 30, 1998.
3. Stockholders' Equity
During 1997, the Company adopted a share repurchase plan under which
the Company was authorized to use up to $2 million of general corporate funds to
acquire from time to time in the open market shares of the outstanding common
stock of the Company. During the first quarter of 1998, the Company expanded its
share repurchase plan by authorizing the use of an additional $2 million of
general corporate funds under the plan. As of June 30, 1998, the Company had
repurchased a total of 1,417,000 shares at an average price of $2.31 per share
for an aggregate cost of $3,271,700 under the share repurchase plan. In
addition, during 1997 the Company repurchased an aggregate of 643,066 shares of
its common stock from former employees of the Company at an aggregate cost of
$484 pursuant to stock purchase agreements with such former employees.
4. Net Loss Per Share of Common Stock
During 1997, the Company adopted Financial Accounting Standards Board
Statement of Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS
128"). Net loss per share of Common Stock amounts presented on the face of the
consolidated statements of operations have been computed based on weighted
average number of shares of Common Stock outstanding in accordance with SFAS
128.
5. Commitments and Contingencies
Certain claims have been filed by individuals who claim certain rights,
damages or interests incidental to the Company's formation and development. The
Company intends to vigorously contest all 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.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Overview
Since its formation in 1994, the Company has concentrated its product
development efforts primarily on developing a "closed loop" electronic commerce
system that 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 and link all distribution channels electronically to their
credit departments.
The Company's Automated Loan Machine ("ALM") permits a consumer to
apply for and, if determined to be a suitable credit risk, receive a loan
without human intervention in as little as 10 minutes. Similar in appearance to
an automated teller machine, the Affinity ALM is a fully automated system that
utilizes the Company's proprietary DeciSys/RT(R) technology to process consumer
loans, generate the underlying loan documentation and distribute loan proceeds.
In addition, the ALM can be programmed to process other financial services
transactions such as the establishment of savings and checking accounts, the
consummation of joint loans, certain secured loans and credit consolidation
loans and the issuance of credit cards.
The Company's e-xpertLender system permits an employee of a financial
institution to input consumer applicant information similar to the type of
information captured by the ALM and use DeciSys/RT to process financial services
transactions available via the ALM. In addition to its financial services
processing capabilities, e-xpertLender also provides inquiry, routing and
tracking functions for applications that cannot be automatically approved.
To date, the Company has generated minimal operating revenues, has
incurred significant losses and has experienced substantial negative cash flow
from operations. 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 technology-based companies operating in
unproven markets with unproven products. The Company had an accumulated deficit
as of June 30, 1998 of $35,634,098, with operating losses of $4,532,076 and
$7,528,551 for the three and six months ended June 30, 1998, respectively. The
Company expects to incur additional costs to develop its financial product
origination capabilities, to enhance and market the ALM, e-xpertLender and
Decisys/RT and to complete any new products and services that may be developed
by the Company. Accordingly, there can be no assurance that the Company will
ever be able to achieve profitability or, if achieved, sustain such
profitability.
The market for the Company's products and services is new, evolving and
uncertain and it is difficult to determine the size and predict the future
growth rate, if any, of this market. In addition, the market for products and
services that enable electronic commerce is highly competitive and is subject to
rapid innovation and competition from traditional products and services having
all or some of the same features as products and services 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 has
validated 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.
Results of Operations
Revenues
The Company's revenues for the three and six months ended June 30, 1998
were $639,244 and $1,739,223, respectively, compared to $416,870 and $1,078,154
for the corresponding periods of 1997.
Initial Set-up, Transactions and Other. Revenues from initial set-up,
transactions and other fees were $587,409 and $886,893 for the three and six
months ended June 30, 1998, respectively, compared to $192,523 and $726,107 for
the corresponding periods in 1997. The overall increase in initial set-up,
transaction and other income for the six months ended June 30, 1998, is
primarily attributable to an increase in transaction revenue earned from
financial service applications processed using Decisys/RT and the addition of
mortgage loan underwriting and processing fees during 1998. These increases in
revenues were offset by a decrease in revenue associated with fewer ALM
deployments during the period. The increase in initial set-up, transaction and
other income for the three months ended June 30, 1998, is primarily attributable
to an increase in transaction revenue earned from financial service applications
processed using Decisys/RT and the addition of mortgage loan underwriting and
processing fees during 1998.
Sales and Rental. Sales and rental fees were $35,769 and $55,269 for
the three and six months ended June 30, 1998, respectively, compared to $224,347
and $352,047 for the corresponding periods in 1997. The decrease is primarily
attributable to a decrease in the number of ALMs deployed and in service during
1998 as compared to the same periods in 1997. In 1997, the Company deployed 25
ALMs under a short-term pilot program agreement which was subsequently
terminated during July of 1997 by the customer. In addition, in late 1997 and
early 1998 the Company's relationships with one significant ALM customer several
smaller ALM customers were terminated, which resulted in a reduction of ALMs in
service.
Professional Services. During the three and six months ended June 30,
1998, the Company recognized revenue associated with contracts to perform
professional services primarily for one customer. During the three and six
months ended June 30, 1997, the Company did not perform services of this nature.
Costs and Expenses
Cost of Revenues. Cost of revenues for the three and six months ended
June 30, 1998 was $215,717 and $651,491, respectively, compared to $249,741 and
$540,956 for the corresponding periods in 1997. Cost of revenues for the three
months ended June 30, 1998 consisted primarily of direct costs of processing
financial service applications, depreciation associated with ALMs under
operating leases and direct costs associated with underwriting and processing
mortgage loans. Cost of revenues for the six months ended June 30, 1998
consisted primarily of the items described in the preceding sentence plus labor
and other direct costs and allocation of indirect costs relating principally to
the performance of professional services.
The decrease during the three months ended June 30, 1998 as compared to
the same period in 1997 is attributable to a decrease in ALMs deployed under
sales-type leases in 1998 as compared to the same period in 1997 and reduced
depreciation expense associated with fewer ALMs in service under operating
leases in 1998 compared to the same period in 1997. The decrease in cost of
revenues was offset by the addition in 1998 of expenses associated with the
underwriting and processing of mortgage loans.
The increase during the six months ended June 30, 1998 as compared to
the same period in 1997 is attributable to an increase in labor and other direct
and indirect costs associated with the performance of professional services, the
addition of expense associated with the underwriting and processing of mortgage
loans, an increase in the number of financial service applications processed
using Decisys/RT and an increase in the quantity of credit card and other debit
card transactions processed. The increase in cost of revenues was offset by a
decrease in ALMs deployed under sales-type leases in 1998 as compared to the
same period in 1997 and reduced depreciation expense associated with fewer ALMs
in service under operating leases in 1998 compared to the same period in 1997.
Research and Development. Costs incurred for research and development
for the three and six months ended June 30, 1998 totaled $953,049 and
$1,802,323, respectively, compared to $843,747 and $1,686,874 for the
corresponding periods in 1997. Research and development costs reflect the
Company's continued commitment to initiatives associated with the technological
enhancement of the Company's Decisys/RT technology and its financial product
origination capabilities.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses totaled $4,289,730 and $7,461,105 for the three and six
months ended June 30, 1998, respectively, as compared to $4,170,174 and
$7,707,443 for the corresponding periods in 1997.
The increase for the three months ended June 30, 1998 as compared to
the corresponding period of 1997 is attributable to an increase in (i.)
employment costs, including benefits and signing bonuses paid to key employees
and costs associated with termination benefits paid to certain employees in
1998; and (ii.) depreciation and amortization expense associated with an overall
increase in the Company's depreciable assets. The overall increase in selling,
general and administrative expense was offset by a decrease in: (i.) advertising
and marketing costs; (ii.) travel costs; (iii.) professional fees consisting
primarily of legal, accounting, recruiting and relocation fees; and, (iv.)
deferred compensation expense due to the forfeiture of common stock options
granted under the Company's 1995 Stock Option Plan.
The decrease for the six months ended June 30, 1998 as compared to the
corresponding period of 1997 is primarily attributable to a decrease in: (i.)
advertising and marketing costs; (ii.) professional fees consisting primarily of
legal, accounting, recruiting and relocation fees; (iii.) travel costs; and,
(iv.) deferred compensation expense due to the forfeiture of common stock
options granted under the Company's 1995 Stock Option Plan. The overall decrease
in selling, general and administrative expense was offset by an increase in:
(i.) employment costs, including salaries, wages, benefits and signing bonuses
paid to key employees and costs associated with termination benefits paid to
certain employees in 1998; and (ii.) depreciation and amortization expense
associated with an overall increase in the Company's depreciable assets.
Interest Income/Expense. Interest income for the three and six months
ended June 30, 1998 totaled $291,405 and $656,808, respectively, as compared to
$496,744 and $1,118,778 for the corresponding periods in 1997. The decrease in
interest income for the three and six months ended June 30, 1998 is due to a
decrease in cash and cash equivalents and investments balances as compared to
the same periods of 1997 coupled with a decrease in the amount of amortization
of deferred interest income associated with ALMs under sales-type lease
agreements. Interest expense for the three and six months ended June 30, 1998
was $4,230 and $9,663 compared to $7,481 and $22,848, for the corresponding
periods in 1997.
Liquidity and Capital Resources
The Company has generated operating losses of $35,634,098 since its
inception and has financed its operations primarily through net proceeds from
its initial public offering in May 1996 and, prior to such offering, through the
private sale of debt and equity securities, capital lease obligations, bank
financing, factoring of ALM rental contracts, and loans from affiliates. Net
cash used during the six months ended June 30, 1998 to fund operations was
$4,382,869. Proceeds from the offering and other sources of cash were used to
fund current period operations, research and development of $1,802,323, capital
expenditures of $394,574 and repurchase of outstanding shares of the Company's
common stock of $2,404,263. At June 30, 1998, cash and liquid investments were
$16,395,153 and working capital was $20,300,552.
During June of 1998, Surety Mortgage, Inc. a wholly owned subsidiary of
the Company ("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 may obtain 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 credit
facility bears interest at the lender's prime rate plus 50 basis points and
expires on June 1, 1999. There were no outstanding borrowings under the Loan
Warehousing Agreement as of June 30, 1998.
The Company continues to use a substantial amount of existing cash
resources to fund its operations. If the Company continues to use cash resources
at the rate used in 1997 and the first six months of 1998, the Company will
deplete its existing cash resources in the latter part of 1999. The Company
believes existing cash, cash equivalents, internally generated funds and
available borrowings will be sufficient to meet the Company's currently
anticipated operating expenditure requirements during the remainder of 1998.
During the remainder of 1998, the Company expects to continue to use a
significant amount of existing cash, cash equivalents and internally generated
funds to fund operations, capital expenditures, research and development and
marketing efforts designed to promote consumer awareness and use of its products
and services. In order to fund more rapid expansion, to develop new or enhanced
products or to address liquidity needs caused by shortfalls in revenues, the
Company may need to raise additional capital in the future. If additional funds
are raised through the issuance of equity securities, 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 when needed on terms favorable to the Company or at
all. If adequate funds are not available or not available on acceptable terms,
the Company may be unable to develop, enhance and market products, retain
qualified personnel, take advantage of future opportunities, or respond to
competitive pressures, any of which could have a material adverse effect on the
Company's business, operating results and financial condition.
During 1997, the Company adopted a share repurchase plan under which
the Company was authorized to use up to $2 million of general corporate funds to
acquire from time to time in the open market shares of the outstanding common
stock of the Company. During the first quarter of 1998, the Company expanded its
share repurchase plan by authorizing the use of an additional $2 million of
general corporate funds under the plan. As of June 30, 1998, the Company had
repurchased a total of 1,417,000 shares at an average price of $2.31 per share
for an aggregate cost of $3,271,700 under the share repurchase plan. In
addition, during 1997 the Company repurchased an aggregate of 643,066 shares of
its common stock from former employees of the Company at an aggregate cost of
$484 pursuant to stock purchase agreements with such former employees.
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
Statements in this report that are not descriptions of historical facts
may be forward-looking statements that are subject to risks and uncertainties,
including economic, competitive and technological factors affecting the
Company's operations, markets, products, services and prices, as well as other
specific factors discussed in the Company's filings with the Securities and
Exchange Commission, including the information set forth under the caption
"Business Risks" in Item 1 of the Company's Annual Report on Form 10-K for the
year ended December 31, 1997. These and other factors may cause actual results
to differ materially from those anticipated.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable
Part II. Other Information
Items 1, 3 and 5 are not applicable.
Item 2. Changes in Securities and Use of Proceeds.
(a) Not applicable.
(b) Not applicable.
(c) Not applicable.
(d) The Company's registration statement on Form S-1 (File No.
333-1170) with regard to an initial public offering of 5,060,000
shares of common stock, par value $.0001 per share, of the Company
was declared effective by the Securities and Exchange Commission
on April 24, 1996. As set forth in the Company's Form SR, Report
of Sales of Securities and Use of Proceeds Therefrom, Montgomery
Securities and Donaldson, Lufkin & Jenrette Securities Corporation
acted as the managing underwriters for the offering, which
commenced April 25, 1996. As of June 30, 1998, the Company has
used net proceeds of $60,078,000 from the offering as follows:
Direct or indirect payments to
directors, officers, general
partners of the issuer or their
associates; to persons owning ten
percent or more of any class of
equity securities of the issuer; Direct or indirect
and to affiliates of the issuer. payments to others
------------------------------------- --------------------------
Construction of plant, building and facilities $ -
Purchase and installation of machinery and equipment 5,031,000
Purchase of real estate -
Acquisition of other business(es) 300,000
Repayment of indebtedness $ 771,000 1 1,000,000
Working capital 22,258,990
Temporary investments:
US Treasury obligations 13,776,554
Commercial paper 1,521,000
Money market / cash 1,097,446
Other purposes
Marketing 4,104,001
Research & development 7,818,009
Purchase of software 2,400,000
<FN>
1 Reflects the repayment of debt owned to Carolina First Corporation, as
described under the caption "Use of Proceeds" in the Company's Prospectus, dated
April 25, 1996.
</FN>
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Stockholders of Affinity Technology Group, Inc. was held
on May 28, 1998 (the "Annual Meeting"). At the Annual Meeting, Alan H. Fishman,
Jeff A. Norris, Robert M. Price, Edward J. Sebastian and Peter R. Wilson were
duly elected to the Board of Directors of the Company and the selection of Ernst
& Young, LLP as independent accountants for the year ending December 31, 1998
was ratified. Votes cast by the stockholders of the Company at the Annual
Meeting are as follows:
Nominees for Director Shares Voted in Favor Shares Withheld Broker Non-Votes
Alan H. Fishman 27,871,266 371,983 -
Jeff A. Norris 27,862,730 380,519 -
Robert M. Price 27,893,080 350,169 -
Edward J. Sebastian 27,719,695 523,554 -
Peter R. Wilson 27,893,080 350,169 -
Ratification of the selection of Ernst & Young LLP.
Shares Voted In Favor Shares Voted Against Shares Abstaining Broker Non-Votes
28,023,225 53,965 166,059 -
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
On May 18, 1998 the Company filed a current report on Form 8-K to disclose
the appointment of Murray Smith as the Company's Chief Executive Officer and
President.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Affinity Technology Group, Inc.
By: /s/ Joseph A. Boyle
Joseph A. Boyle
Senior Vice President, Chief Financial Officer and Treasurer
Date: August 14, 1998
Exhibit 27 - Financial Data Schedule
This schedule contains summary financial information extracted from the
consolidated financial statements for the three and six months ended June 30,
1998 and is qualified in its entirety by reference to such statements.