UNITED STATES
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, 2007 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.
1310 Lady Street, Suite 601
Columbia, SC 29201
(Address of principal executive offices)
(Zip code)

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

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

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

Large Accelerated Filer [ ] Accelerated Filer [ ] Non-Accelerated Filer [X]

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

Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.

45,267,398 shares of Common Stock, $0.0001 par value, as of August 1, 2007.

AFFINITY TECHNOLOGY GROUP, INC. AND SUBSIDIARIES

INDEX

PAGE
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets as of June 30, 2007 and

December 31, 2006 4
Condensed Consolidated Statements of Operations for the three and six months
ended June 30, 2007 and 2006 5
Condensed Consolidated Statements of Cash Flows for the six months ended
June 30, 2007 and 2006 6
Notes to Condensed Consolidated Financial Statements 7
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 11
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk 15
ITEM 4. Controls and Procedures 15
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings 15
ITEM 1A. Risk Factors 15
ITEM 4. Submission of Matters to a Vote of Security Holders 15
ITEM 6. Exhibits 16
Signature 17

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995

Statements in this report (including Management's Discussion and Analysis
of Financial Condition and Results of Operations) that are not descriptions of
historical facts, such as statements about the Company's future prospects and
cash requirements, are forward-looking statements and are made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements typically are identified by words such as "may,"
"will," "should," "anticipate," "estimate," "expect," "plan," "believe,"
"predict," "potential," "intend," "continue" and similar expressions, although
some forward-looking statements may be expressed differently. Actual results may
vary due to risks and uncertainties, including the Company's very limited
capital resources and the possibility that it may be unable to raise additional
capital in amounts sufficient to permit it to continue operations; the risk that
the Company may lose all or part of the claims covered by its patents as a
result of challenges to its patents; the risk that its patents may be subject to
additional reexamination by the U.S. Patent and Trademark Office or challenges
by third parties; the results of ongoing litigation, including the Company's
appeal to the U.S. Court of Appeals for the Federal Circuit regarding certain
rulings in its patent litigation and its efforts to persuade the South Carolina
Supreme Court to rehear and reverse an unfavorable reinstatement of a jury
verdict in its ongoing litigation with Temple Ligon; and, unanticipated costs
and expenses affecting the Company's cash position. If the Company is not able
to raise additional capital to fund its ongoing operations and patent
infringement litigation expenses, it may be forced to consider alternatives for
winding down its business, which may include offering its patents for sale or
filing for bankruptcy protection. Moreover, there can be no assurance that the
Company will prevail on its claims of patent infringement against third parties
or that such claims will result in the award of monetary damages to the Company.
These and other factors discussed in the Company's filings with the Securities
and Exchange Commission, including the information set forth in Part I, Item 1A.
"Risk Factors" of the Company's Annual Report on Form 10-K for the year ended
December 31, 2006, may cause actual results to differ materially from those
anticipated. You are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date they are made. The
Company undertakes no ongoing obligation to update any forward-looking
statements if it learns that any such forward-looking statements or the
underlying assumptions are incorrect. As used in this report, unless the context
otherwise requires, the terms "we," "our," "us" (or similar terms), the
"Company" or "Affinity" include Affinity Technology Group, Inc. and its
subsidiaries, except that when used with reference to common stock or other
securities described herein and in describing the positions held by management
of the Company, the term includes only Affinity Technology Group, Inc.

Part I. Financial Information

Item 1. Financial Statements

Affinity Technology Group, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets

June 30,
2007 December 31,
(Unaudited) 2006
------------------ -----------------------
Assets
Current assets:

Cash and cash equivalents $ 372,202 $ 1,026,978
Prepaid expenses 72,858 77,702
------------------ -----------------------
Total current assets 445,060 1,104,680
Property and equipment, net 6,962 7,566
------------------ -----------------------
Total assets $ 452,022 $ 1,112,246
================== =======================

Liabilities and stockholders' deficiency
Current liabilities:
Accounts payable $ 120,385 $ 248,834
Accrued expenses 867,579 856,964
Deferred revenue 33,333 33,333
------------------ -----------------------
Total current liabilities 1,021,297 1,139,131
Non-current liabilities:
Convertible notes 3,140,666 3,140,666
Accrued interest 210,049 84,423
Deferred revenue 11,111 27,778
------------------ -----------------------
Total non-current liabilities 3,361,826 3,252,867
------------------ -----------------------
Total liabilities 4,383,123 4,391,998
Commitments and contingent liabilities
Stockholders' deficiency:
Common stock, par value $0.0001; authorized
100,000,000 shares, issued 47,435,406 shares at
June 30, 2007 and December 31, 2006 4,744 4,744
Additional paid-in capital 72,432,090 72,164,732
Treasury Stock, at cost (2,168,008 shares at
June 30, 2007 and December 31, 2006) (3,505,287) (3,505,287)
Accumulated deficit (72,862,648) (71,943,941)
------------------ -----------------------
Total stockholders' deficiency (3,931,101) (3,279,752)
------------------ -----------------------
Total liabilities and stockholders' deficiency $ 452,022 $ 1,112,246
================== =======================

See accompanying notes to Condensed Consolidated Financial Statements.

Affinity Technology Group, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)

Three months ended Six months ended
June 30, June 30,
2007 2006 2007 2006
--------------- ---------------- --------------- ----------------

Revenues:

Patent license revenue $ 8,334 $ 8,334 $ 16,667 $ 16,667
--------------- ----------------------------------- ----------------
Costs and expenses:
Cost of revenues 834 834 1,667 1,667
General and administrative expenses 426,257 206,458 822,249 278,177
--------------- ---------------- --------------- ----------------
Total cost and expenses 427,091 207,292 823,916 279,844
--------------- ---------------- --------------- ----------------
Operating loss (418,757) (198,958) (807,249) (263,177)
Other income (expense):
Interest income 5,555 478 14,169 722
Interest expense (62,814) (21,485) (125,627) (47,456)
--------------- ---------------- --------------- ----------------
Net loss $ (476,016) $ (219,965) $ (918,707) $ (309,911)
=============== ================ =============== ================
Net loss per share - basic and diluted: $ (0.01) $ (0.00) $ (0.02) $ (0.01)
=============== ================ =============== ================
Shares used in computing net loss per
share 45,267,398 44,217,651 45,267,398 43,235,883
=============== ================ =============== ================

See accompanying notes to Condensed Consolidated Financial Statements.

Affinity Technology Group, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)

Six Months Ended
June 30,
2007 2006
-------------------------------------
Operating activities

Net loss $ (918,707) $ (309,911)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization 604 2,564
Amortization of stock option compensation 267,358 1,597
Deferred revenue (16,667) (16,667)
Other - 3,200
Changes in current assets and liabilities:
Accounts receivable - 100,000
Prepaid expenses 4,844 2,150
Accounts payable and accrued expenses 7,792 126,178
--------------- ---------------------
Net cash used in operating activities (654,776) (90,889)

Investing activities
Purchases of property and equipment, net - (786)
--------------- ---------------------
Net cash used in investing activities - (786)

Financing activities
Proceeds from convertible notes - 150,000
--------------- ---------------------
Net cash provided by financing activities - 150,000
--------------- ---------------------
Net (decrease) increase in cash (654,776) 58,325
Cash and cash equivalents at beginning of period 1,026,978 13,776
--------------- ---------------------
Cash and cash equivalents at end of period $ 372,202 $ 72,101
=============== =====================

See accompanying notes to Condensed Consolidated Financial
Statements.

Notes to Condensed Consolidated Financial Statements

1. The Company - Going Concern

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

In conjunction with its product development activities, the Company
applied for and obtained three patents. The Company has been granted two patents
covering its fully-automated loan processing systems (U.S. Patent Nos. 5,870,721
C1 and 5,940,811 C1). In August 2000, the U.S. Patent and Trademark Office
("PTO") 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 C1).

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

To date, the Company has generated substantial operating losses and has
been required to use a substantial amount of cash resources to fund its
operations. At June 30, 2007, the Company had cash and cash equivalents of
$372,202 and a working capital deficit of $576,237. The Company generally has
been unable to enter into licensing agreements with potential licensees upon
terms that are acceptable to it and has sought recourse through litigation with
alleged infringers of its patents. The Company's lawsuits against the alleged
infringers have been dismissed by the United States District Court in Columbia,
South Carolina (the "Columbia Federal Court") and the Company has initiated an
appeal to the U.S. Court of Appeals for the Federal Circuit ("the Federal
Appeals Court"). The Company is not certain as to the length of time it will
take to complete the appeal to the Federal Appeals Court; however, the Company
believes that it is unlikely that its existing cash resources will be sufficient
to complete the appeals process. Accordingly, to remain viable through 2007, it
is likely that the Company will be required to raise additional capital through
the sale of debt and/or equity securities or from licensing its patents. No
assurances can be given that the Company will be able to raise additional
capital or generate capital from its patent licensing business at all or in
amounts sufficient to complete its appeal process. Unless the Company raises
additional capital, it may have to consider alternatives for winding down its
business, which may include offering its patents for sale or filing for
bankruptcy protection.

Moreover, the Company is the defendant in a lawsuit as explained
further in Note 8, "Commitments and Contingent Liabilities." If the Company
becomes obligated to pay more than an insignificant amount of damages in
connection with this litigation, it could be forced to consider alternatives for
winding down its business, which may include offering its patents for sale or
filing for bankruptcy protection.

Management's plans with respect to addressing the matters discussed
above are to pursue an appeal of certain rulings made in its patent litigation
by the Columbia Federal Court and if successful in the appeal, to continue to
prosecute these patent infringement lawsuits. The Company's currently limited
capital resources may not be sufficient to complete the appeals process, and if
successful with its appeal, to continue to prosecute its patent infringement
lawsuits. In the event the Company's current capital resources are not
sufficient, management intends to attempt to raise additional capital to
continue the prosecution of its lawsuits and any necessary appeals. No assurance
can be given, however, that management will be successful in raising additional
capital if needed to continue the operations of the Company.

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

2. Basis of Presentation

The accompanying unaudited financial statements of 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, 2006 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
included in the Company's Annual Report on Form 10-K for the year ended December
31, 2006.

In accordance with management's oversight of the Company's operations,
the Company conducts its business in one industry segment - financial services
technology (see Note 7).

Certain amounts in 2006 have been reclassified to conform to 2007
presentation for comparability. These reclassifications have no effect on
previously reported stockholders' equity or net loss.

3. New Accounting Standards

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

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

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

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

4. Stock Based Compensation

The Company adopted Statement of Financial Accounting Standards (SFAS)
No. 123R, "Share-Based Payments" (SFAS 123R), on January 1, 2006. This statement
requires the Company to recognize the cost of employee and director services
received in exchange for the stock options it has awarded. Under SFAS 123R the
Company is required to recognize compensation expense over an award's vesting
period based on the award's fair value at the date of grant. The Company elected
to adopt SFAS 123R on a modified prospective basis.

During the six month periods ended June 30, 2007 and June 30, 2006, the
Company granted no stock options or other instruments under share-based
arrangements. Total compensation expense associated with stock options,
including expense related to options granted before January 1, 2006, during the
three and six month periods ended June 30, 2007 was $133,644 and $267,358,
respectively, and during the three and six month period ended June 30, 2006 was
$754 and $1,597, respectively.

Using the Black-Scholes option-pricing model, the fair value at the
date of grant for the options underlying the expense the Company recognized was
estimated using the following assumptions: expected volatility, 132% to 138%;
risk free rate of return, 1.99% to 4.82%; dividend yield, 0%; and expected
option life, 3 years.

The Black-Scholes and other option pricing models were developed for
use in estimating fair value of traded options, which have no vesting
restrictions and are fully transferable. In addition, option-pricing models
require the input of highly subjective assumptions. The Company's employee stock
options have characteristics significantly different than those of traded
options, and changes in the subjective assumptions can materially affect the
fair value estimate. Accordingly, in management's opinion, these existing models
may not necessarily provide a reliable single measure of the fair value of
employee stock options.

5. Net Loss Per Share of Common Stock

Net loss per share of Common Stock amounts presented on the face of the
consolidated statements of operations have been computed based on the weighted
average number of shares of Common Stock outstanding in accordance with the SFAS
No. 128, "Earnings Per Share." Stock warrants and stock options were not
included in the calculation of diluted loss per share because the Company has
experienced operating losses in all periods presented and, therefore, the effect
would be anti-dilutive.

6. Convertible Notes

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

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

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

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

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

In September 2006, The Company sold additional convertible notes in the
aggregate principal amount of $1,905,000. The terms of these notes are the same
as the notes previously issued by the Company, except that they may be converted
into the Company's common stock at a rate of $.42 per share. The Company has
filed with the Securities and Exchange Commission, on January 31, 2007, a
registration statement with respect to the Company's common stock issuable upon
conversion of these notes, and is currently undertaking revisions to such
registration statement in an effort to have it declared effective by the
Securities and Exchange Commission.

7. 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.

8. Commitments and Contingent Liabilities

The Company and its founder, Jeff Norris, are defendants in a lawsuit
filed by Temple Ligon on November 30, 1996 in the Court of Common Pleas for the
County of Richland in Columbia, South Carolina. Mr. Ligon claims, among other
things, that the Company and Mr. Norris breached an agreement to give him a 1%
equity interest in the Company in consideration of services Mr. Ligon claims to
have performed in 1993 and 1994 in conjunction with the formation of the
Company, and seeks monetary damages of $5,463,000. This lawsuit initially
resulted in a jury verdict against the Company of $68,000. However, Mr. Ligon
subsequently requested and was granted a new trial. In January 2004, this
lawsuit resulted in another jury verdict against the Company of $382,148. In
connection with the litigation and the resulting jury verdict, the Company filed
post-trial motions with the trial court in which, among other things, it claimed
that the jury verdict should be set aside. On July 23, 2004, the trial judge
granted the Company's motions, set aside the jury verdict, and ordered entry of
a judgment in favor of the Company. The plaintiff appealed the trial judge's
ruling to the South Carolina Court of Appeals (the "Appeals Court"). On October
30, 2006, the Appeals Court reversed the trial judge's decision and reinstated
the jury verdict of $382,148. The Company's petition to the Appeals Court for a
rehearing of the case was denied, and the Company has petitioned the South
Carolina Supreme Court to hear the case and to grant the Company relief from
this ruling. If the Company becomes obligated to pay more than an insignificant
amount of damages in connection with this litigation, it could be forced to
consider alternatives for winding down its business, which may include offering
its patents for sale or filing for bankruptcy protection.

Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations

Overview

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

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

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

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

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

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

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

We have initiated an appeal with the U.S. Court of Appeals for the
Federal Circuit (the "Federal Appeals Court") in which we have requested the
Federal Appeals Court to reverse certain of the Markman rulings made by the
Columbia Federal Court and grant to us more favorable interpretations and
definitions related to certain of the claim terms in our patents. Unless we can
obtain a more favorable interpretation of certain claim terms, it is possible
the scope of our patents could be significantly limited. Furthermore, we believe
it is unlikely that the U.S. Supreme Court, the only further appeals body beyond
the Federal Appeals Court, will review or reconsider their rulings and,
therefore, we believe that the Federal Appeals Court's rulings will be
dispositive and will probably determine the outcome of our business. Moreover,
we believe that the rulings made by the Columbia Federal Court, including the
Markman rulings, that necessitated our appeal to the Federal Appeals Court, will
hinder our ability to license our patents. Further, our appeal will likely
require substantial resources and may require an extended period of time to
complete, which will in turn likely increase the already significant costs and
expected time required to prosecute our existing infringement actions. We can
give no assurance that we will have, or be able to raise, if necessary, the
resources necessary to complete our appeal of the Markman rulings. We also can
give no assurance that, even if we are able to finance our appeal to completion,
such appeal will result in a favorable outcome. Even if we are successful in
pursuing our appeal to completion and a favorable outcome, we cannot assure you
that we will then have sufficient funding to continue our underlying lawsuits or
that such lawsuits would succeed in obtaining a favorable outcome for us.

In addition, we and our founder, Jeff Norris, are defendants in a
lawsuit filed by Temple Ligon on November 30, 1996 in the Court of Common Pleas
for the County of Richland in Columbia, South Carolina. Mr. Ligon claims, among
other things, that Affinity and Mr. Norris breached an agreement to give him a
1% equity interest in Affinity in consideration of services Mr. Ligon claims to
have performed in 1993 and 1994 in conjunction with the formation of Affinity,
and seeks monetary damages of $5,463,000. This lawsuit initially resulted in a
jury verdict against us of $68,000. However, Mr. Ligon subsequently requested
and was granted a new trial. In January 2004, this lawsuit resulted in another
jury verdict against us of $382,148. In connection with the litigation and the
resulting jury verdict, we filed post-trial motions with the trial court in
which, among other things, we claimed that the jury verdict should be set aside.
On July 23, 2004, the trial judge granted our motions, set aside the jury
verdict, and ordered entry of a judgment in favor of us. The plaintiff appealed
the trial judge's ruling to the South Carolina Court of Appeals (the "South
Carolina Appeals Court"). On October 30, 2006, the South Carolina Appeals Court
reversed the trial judge's decision and reinstated the jury verdict of $382,148.
Our petition to the South Carolina Appeals Court for a rehearing of this case
was denied, and we have petitioned the South Carolina Supreme Court to hear this
case and to grant us relief from this ruling. If we become obligated to pay more
than an insignificant amount of damages in connection with this litigation, we
could be forced to consider alternatives for winding down our business, which
may include offering our patents for sale or filing for bankruptcy protection.

To date, we have generated substantial operating losses and have been
required to use a substantial amount of cash resources to fund our operations.
At June 30, 2007, we had cash and cash equivalents of $372,202 and a working
capital deficit of $576,237. We generally have been unable to enter into
licensing agreements with potential licensees upon terms that are acceptable to
us and, as discussed above, we have sought recourse through litigation with
alleged infringers of our patents. Additionally and as also discussed above, our
lawsuits against the alleged infringers have been dismissed by the Columbia
Federal Court and we have initiated an appeal to the Federal Appeals Court. We
are not certain as to the length of time it will take to complete our appeal to
the Federal Appeals Court; however, we believe that it is unlikely that our
existing cash resources will be sufficient to complete the appeals process.
Accordingly, to remain viable through 2007, it is likely that we will be
required to raise additional capital through the sale of debt and/or equity
securities or from licensing our patents. We can give no assurances, however,
that we will be able to raise additional capital or generate capital from our
patent licensing business at all or in amounts sufficient to complete our appeal
process. Unless we raise additional capital, we may have to consider
alternatives for winding down our business, which may include offering our
patents for sale or filing for bankruptcy protection.

Critical Accounting Policies

We apply certain accounting policies, which are critical in
understanding our results of operations and the information presented in our
condensed consolidated financial statements. We consider critical accounting
policies to be those that require more significant judgments and estimates in
the preparation of our financial statements, the most critical of which pertains
to the valuation reserve on net deferred tax assets. We record a valuation
allowance to reduce our deferred tax assets to the amount that we estimate is
more likely than not to be realized. As of June 30, 2007 and December 31, 2006,
we recorded a valuation allowance that reduced our deferred tax assets to zero.
As of June 30, 2007, there have been no material changes to our critical
accounting policies as described in our Annual Report on Form 10-K for the year
ended December 31, 2006.

Results of Operations

Revenues

Patent license revenue. We recognized $8,334 and $16,667 for the three
and six month periods ended June 30, 2007, respectively, compared to $8,334 and
$16,667 in the corresponding periods in 2006. All the Company's patent licensing
revenues are related to a license agreement entered into in 1999 which is
renewable every three years.

Costs and Expenses

Cost of Revenues. Cost of revenues for the three month and six month
periods ended June 30, 2007 were $834 and $1,667, respectively, compared to $834
and $1,667 in the corresponding periods in 2006. Cost of revenues consists of
commissions paid to the Company's patent licensing representatives.

General and Administrative Expenses. General and administrative
expenses totaled $426,257 and $822,249 for the three and six month periods ended
June 30, 2007, respectively, as compared to $206,458 and $278,177 for the
corresponding periods in 2006. The increase for the three and six month periods
ended June 30, 2007, as compared to the corresponding periods of 2006 is
primarily related to an increase in professional fees related to legal and other
expenses associated with the Company's patent litigation and increased
compensation expense, including the recognition of stock-based compensation
expense. As more fully explained at Part I, Item 2, "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Overview," we have
been involved in three patent infringement lawsuits, for which we continued to
incur expenses through the end of the second quarter of 2007. Despite the recent
dismissal of these lawsuits, we are seeking an appeal through the Federal
Appeals Court and will be incurring further expenses in connection with that
appeal. Compensation expense increased primarily as a result of the Chief
Executive Officer's return to the Company on a full-time basis in the latter
half of 2006 and a new compensation plan that was implemented in July 2006. The
compensation plan included stock-based compensation, and during the three and
six month periods ended June 30, 2007 we recognized non-cash expenses of
$133,644 and $267,358, respectively, related to the stock-based compensation
plan.

Interest expense. Interest expense for the three and six month periods
ended June 30, 2007, was $62,814 and $125,627, respectively, compared to $21,485
and $47,456 for the corresponding periods in 2006. Interest expense is related
to the Company's convertible notes, which accrue interest at 8%. The changes in
interest expense during the three and six month periods ended June 30, 2007
compared to the corresponding periods in 2006 are due to changes in the
aggregate average balance of the convertible notes outstanding during the
respective periods resulting from the issuance of new notes. In May 2006 and
September 2006, the Company issued convertible notes in an aggregate principal
amount of $150,000 and $1,905,000, respectively.

Liquidity and Capital Resources

We have generated net losses of $72,862,648 since our inception and
have financed our operations primarily through net proceeds from our initial
public offering in May 1996 and cash generated from operations and other
financing transactions. Net proceeds from our initial public offering were
$60,088,516.

Net cash used by operations during the six months ended June 30, 2007,
was $654,776, compared to $90,889 used by operations for the same period in
2006. The increase in cash used during the six month period ended June 30, 2007
compared to the corresponding period in 2006 was primarily due to increased
general and administrative expenses, as discussed above, and the payment of
certain accounts payable and accrued expenses incurred in the fourth quarter of
2006. Additionally, in the first quarter of 2006, we received a $100,000 patent
license payment related to a three year patent license. At June 30, 2007 cash
and liquid investments were $372,202, as compared to $1,026,978 at December 31,
2006. At June 30, 2007 working capital was a deficit of $576,237 as compared to
a deficit of $34,451 at December 31, 2006.

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

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

The Company does not believe that its current business exposes it to
significant market risk for changes in interest rates.

Item 4. Controls and Procedures

The Company has carried out an evaluation, under the supervision and
with the participation of the Company's Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures as defined in Rule 13a-15 of the
Securities Exchange Act of 1934 (the "Exchange Act"). Based upon that
evaluation, the Company's Chief Executive Officer and Chief Financial Officer
concluded that the Company's disclosure controls and procedures were effective
as of June 30, 2007, in recording, processing, summarizing and reporting
information required to be disclosed by the Company (including consolidated
subsidiaries) in the Company's Exchange Act filings.

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

Part II. Other Information

Item 1. Legal Proceedings

See Part I, Item 2, "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Overview" for updated information
regarding patent litigation and related appeal and the Temple Ligon 1awsuit.

Item 1A. Risk Factors

In addition to the other information set forth in this report, you
should carefully consider the factors discussed in Part I, Item 1A. "Risk
Factors" in our Annual Report on Form 10-K for the year ended December 31, 2006,
which could materially affect our business, financial condition or results of
operations.

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

The 2007 Annual Meeting of Stockholders of Affinity Technology Group,
Inc., was held on May 31, 2007 (the "Annual Meeting"). At the Annual Meeting,
o Joseph A. Boyle, Robert M. Price, and Peter R. Wilson were duly
elected to the Board of Directors of the Company;
o the appointment of Scott McElveen LLP as independent auditors for
the year ending December 31, 2007, was ratified.

Votes cast by the stockholders of the Company at the Annual Meeting
were as follows:

Nominees for Director Shares Voted in Favor Shares Withheld Broker Non-Votes
- ------------------------------- --------------------- --------------------- -------------------

Joseph A. Boyle 43,082,381 1,595,227 -
Robert M. Price 43,397,888 1,279,720 -
Peter R. Wilson 43,394,568 1,283,040 -

Ratification of the appointment of Scott McElveen LLP
Shares Voted In Favor Shares Voted Against Shares Abstaining Broker Non-Votes
- ------------------------------- --------------------- --------------------- --------------------

43,494,003 1,172,362 11,243 -

Item 6. Exhibits

Exhibit Number Description
- --------------------------------------------------------------------------------
3.1 Certificate of Incorporation of Affinity Technology Group,
Inc., which is hereby incorporated by reference to Exhibit
3.1 to the Registration Statement on Form S-1 of Affinity
Technology Group, Inc. (File No. 333-1170).
3.2 Certificate of Amendment to Certificate of Incorporation of
the Company, which is hereby incorporated by reference to
Exhibit 3.2 to the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 2006
3.3 Bylaws of Affinity Technology Group, Inc., which is hereby
incorporated by reference to Exhibit 3.2 to the Registration
Statement on Form S-1 of Affinity Technology Group,
Inc. (File No. 333-170).
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. 33-1170).
4.2 Sections 4, 7 and 8 of the Certificate of Incorporation of
Affinity Technology Group, Inc., as amended, and Article II,
Sections 3, 9 and 10 of the Bylaws of Affinity Technology
Group, Inc., as amended, which are incorporated by reference
to Exhibits 3.1 and 3.2, respectively, to the Registration
Statement on Form S-1 of Affinity Technology Group, Inc.
(File No. 333-1170).
4.3 Convertible Note Purchase Agreement, dated June 3, 2002,
between Affinity Technology Group, Inc., and certain
investors, which is incorporated by reference to Exhibit 4.1
to the Company's Quarterly Report on Form 10-Q for the
Quarter ended June 30, 2002.
4.4 Amended and Restated Convertible Note Purchase Agreement,
dated August 9, 2006, among the Company and the investors
named therein, which is hereby incorporated by reference to
Exhibit 4.1 to the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 2006.
4.5 Form of 8% Convertible Secured Note, which is hereby
incorporated by reference to Exhibit 4.2 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30,
2006.
4.6 Amended and Restated Security Agreement, dated August 9,
2006, among the Company and the investors named therein,
which is hereby incorporated by reference to Exhibit 4.3 to
the Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 2006.
4.7 Letter Agreement, dated as of September 12, 2006, among
Affinity Technology Group, Inc. and certain purchasers of
convertible notes under the Amended and Restated Convertible
Note Purchase Agreement, dated as of August 9, 2006, among
the Company and the investors named therein, which is hereby
incorporated by reference to Exhibit 4.1 to the Company's
Current Report on Form 8-K filed on September 20, 2006.
31 Rule 13a-14(a)/15d-14(a) Certifications.
32 Section 1350 Certifications.

SIGNATURE

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
Chairman, President, Chief Executive Officer and Chief Financial Officer
(principal executive and financial officer)

Date: August 14, 2007

EXHIBIT INDEX

Exhibit 31 Rule 13a-14(a) 15d-14(a) Certifications

Exhibit 32 Section 1350 Certifications