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 March 31, 2008 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, a non-accelerated filer, or a smaller reporting company.
See the definitions of "large accelerated filer," "accelerated filer" and
"smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

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

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

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

47,142,398 shares of Common Stock, $0.0001 par value, as of May 1, 2008.

AFFINITY TECHNOLOGY GROUP, INC. AND SUBSIDIARIES

INDEX

PAGE
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets as of March
31, 2008 and December 31, 2007 4
Condensed Consolidated Statements of Operations for
the three months ended March 31, 2008 and 2007 5
Condensed Consolidated Statements of Cash Flows for
the three months ended March 31, 2008 and 2007 6
Notes to Condensed Consolidated Financial Statements 7
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 12
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk 16
ITEM 4. Controls and Procedures 16
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings 17
ITEM 1A. Risk Factors 17
ITEM 6. Exhibits 17
Signature 18

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 recent adverse ruling of the
Federal Appeals Court in its patent litigation as discussed in this report,
which, combined with the Company's very limited capital resources, has
threatened the viability of the Company's business as a going concern and may
make it difficult or impossible to raise additional capital in amounts
sufficient to permit it to continue operations or pursue further legal options
for vindicating its patent claims; 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 recent adverse ruling of the Federal
Appeals Court in the Company's patent litigation; and, unanticipated costs and
expenses affecting the Company's cash position. Additionally, the Company's
petition to the South Carolina Supreme Court relating to its lawsuit with Temple
Ligon was denied. As a result, a judgment will be entered against the Company of
$382,148, plus accrued interest. The Company does not have the cash resources to
pay this judgment. If the Company is not able to raise additional capital to
fund its ongoing operations and patent infringement litigation expenses or is
unable to resolve or postpone the judgment in the Temple Ligon matter in a
manner which will alleviate the payment of more than an insignificant amount of
cash in the near term, it would, for reasons in addition to the other reasons
discussed above, likely be forced to implement alternatives under consideration
for 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, 2007, 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

March 31,
2008 December 31,
(Unaudited) 2007
------------------- ---------------------
Assets
Current assets:
Cash and cash equivalents $ 35,391 $ 50,217
Prepaid expenses 57,093 77,118
------------------- ---------------------
Total current assets 92,484 127,335
Property and equipment, net 6,142 6,377
------------------- ---------------------
Total assets $ 98,626 $ 133,712
=================== =====================

Liabilities and stockholders' deficiency
Current liabilities:
Accounts payable $ 25,439 $ 19,681
Accrued expenses 1,347,332 1,196,951
Convertible notes 3,140,666 3,140,666
Deferred revenue 19,445 27,778
------------------- ---------------------
Total current liabilities 4,532,882 4,385,076
Commitments and contingent liabilities
Stockholders' deficiency:
Common stock, par value $0.0001; authorized
100,000,000 shares, issued 49,310,406
shares at March 31, 2008 and
December 31, 2007 4,931 4,931
Additional paid-in capital 72,715,679 72,671,087
Treasury Stock, at cost (2,168,008 shares at
March 31, 2008 and December 31, 2007) (3,505,287) (3,505,287)
Accumulated deficit (73,649,579) (73,422,095)
------------------- ---------------------
Total stockholders' deficiency (4,434,256) (4,251,364)
------------------- ---------------------
Total liabilities and stockholders' deficiency $ 98,626 $ 133,712
=================== =====================

See accompanying notes to Condensed Consolidated Financial Statements.

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

Three months ended
March 31,
2008 2007
-------------------- -----------------
Revenues:
Patent license revenue $ 8,333 $ 8,333
-------------------- -----------------
Costs and expenses:
Cost of revenues 833 833
General and administrative expenses 172,171 395,992
-------------------- -----------------
Total costs and expenses 173,004 396,825
-------------------- -----------------
Operating loss (164,671) (388,492)
Other income (expenses):
Interest income - 8,614
Interest expense (62,813) (62,813)
-------------------- -----------------
Net loss $ (227,484) $ (442,691)
==================== =================
Net loss per share - basic and diluted $ (0.00) $ (0.01)
==================== =================
Shares used in computing net loss per share 47,142,398 45,267,398
==================== =================

See accompanying notes to Condensed Consolidated Financial Statements.

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

Three months ended
March 31,
2008 2007
------------------- ----------------
Operating activities
Net loss $ (227,484) $ (442,691)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 235 307
Amortization of stock option compensation 44,592 133,714
Deferred revenue (8,333) (8,333)
Changes in current assets and liabilities:
Prepaid expenses 20,025 9,676
Accounts payable and accrued expenses 156,139 (118,189)
------------------- ----------------
Net cash used in operating activities (14,826) (425,516)
------------------- ----------------

Net decrease in cash (14,826) (425,516)
Cash and cash equivalents at beginning of period 50,217 1,026,978
------------------- ----------------
Cash and cash equivalents at end of period $ 35,391 $ 601,462
=================== ================

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

To date, the Company has generated substantial operating losses and has
been required to use a substantial amount of cash resources to fund its
operations. At March 31, 2008, the Company had cash and cash equivalents of
$35,391 and a working capital deficit of $4,440,398. The Company has generally
been unable to enter into licensing agreements with potential licensees of its
patents upon terms that are acceptable 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 for the District of South Carolina located in Columbia, South Carolina
(the "Columbia Federal Court"), and its appeal to the United States Court of
Appeals for the Federal Circuit (the "Federal Appeals Court") resulted in a
claim construction of the term "remote interface" that is unfavorable.
Accordingly, unless the Company is able to secure a reversal of the Federal
Appeals Court's construction of the term "remote interface" in a very short
period of time, the Company believes its business and the value of its patents
will likely be materially and adversely affected and that it will likely be
unable to access new capital resources sufficient to allow it to pursue
enforcement of its remaining patent rights or to continue operations. The
Company can give no assurances that it will be able to secure a reversal of the
Federal Appeals Court's construction of the term "remote interface" or that it
will be able to raise additional capital or generate capital from its patent
licensing business at all or in amounts sufficient to continue its business in
its present form or at all. Additionally, the Company has convertible notes
outstanding in the aggregate principal amount of $3,140,666 and interest accrued
thereon of $398,489. The notes become due in August and September 2008. The
general provisions of these notes are explained at Note 6. The Company does not
currently have, or expect to have, the capital resources to pay either principal
or accrued interest on these notes when they become due, unless unforeseen
positive developments in the Company's patent litigation or sources of capital
emerge in the very near future. The near exhaustion of the Company's cash
resources, coupled with the adverse developments concerning its patent
litigation, the proximity of the maturity of its convertible notes and its
litigation with Temple Ligon, as described below, continues to threaten the
viability of its business as a going concern and may force it in the near future
to implement one or more alternatives, including the possibility of filing for
bankruptcy protection or selling its patents, under consideration for winding
down its business.

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

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, 2007 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, 2007.

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).

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.

In December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests
in Consolidated Financial Statements" ("SFAS No. 160"), an amendment of
Accounting Research Bulletin No. 51, which establishes new standards governing
the accounting for and reporting on noncontrolling interests ("NCIs") in
partially owned consolidated subsidiaries and the loss of control of
subsidiaries. Certain provisions of the SFAS No. 160 indicate, among other
things, that NCIs (previously referred to as minority interests) be treated as a
separate component of equity, not as a liability; that increases and decreases
in the parent's ownership interest that leave control intact be treated as
equity transactions, rather than a step acquisition or dilution gains or losses;
and that losses of a partially owned consolidated subsidiary be allocated to the
NCI even when such allocation might result in a deficit balance. SFAS No. 160
also requires changes to certain presentation and disclosure requirements. SFAS
No. 160 is effective beginning January 1, 2009. The Company is currently
evaluating the impact and disclosure implications of SFAS No. 160 but does not
expect it to have a significant impact, if any, on its financial statements.

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.

In July 2006, the Company granted to its management and directors 4,350,000
stock options. All options granted were at or above the market value at the date
of grant. The grant date fair value of stock options granted was $1,136,000. Of
the stock options granted, 1,616,666 vested as of the grant date. The fair value
of these options, $425,333, was recognized as compensation expense as of the
date of grant. The remaining 2,733,334 options with a fair value of $710,667
vest over a two year period.

During the three month period ended March 31, 2008 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 month period ended
March 31, 2008 was $44,592.

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.

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, were defendants in a lawsuit
filed by Temple Ligon on November 30, 1996 in the Court of Common Pleas for the
County of Richland in Columbia, South Carolina. Mr. Ligon claimed, among other
things, that 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 sought 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 petitioned the South Carolina
Supreme Court to hear the case and to grant the Company relief from this ruling.
In October 2007, the Company was notified that the South Carolina Supreme Court
had denied its petition to hear this case. Accordingly, the Company has no
further legal recourse, and a judgment will be entered against the Company of
$382,148, plus accrued interest. At this time, the Company does not have the
cash resources to pay this judgment. The Company will continue to evaluate its
options to resolve or postpone any payments related to this matter; however, if
the Company is required to pay more than an insignificant amount in connection
with this judgment in the near term, it would, for reasons in addition to those
discussed in Note 1, likely be forced to implement one or more alternatives
under consideration 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 loan processing system, which automated the processing and
consummation of consumer financial services transactions; the Affinity Automated
Loan Machine (the ALM), which allowed an applicant to apply for and, if
approved, obtain a loan in as little as ten minutes; the Mortgage ALM, which
allowed an applicant to apply for a mortgage loan; e-xpertLender, which
permitted a financial institution to make automated lending decisions through
its call centers and branches; iDEAL, which permitted automobile lenders to make
automobile lending decisions for loan applications originated at automobile
dealers; and rtDS, which permitted lenders to deliver credit decisions to
applicants over the Internet. Due to capital constraints, we have suspended all
efforts to further develop, market and operate these products and services. Our
last processing contract terminated in late 2002, and we have no plans in the
near term to engage in further sales or other activities related to our products
or services, other than to attempt to license certain of the patents that we
own. Currently, our business activities consist exclusively of attempting to
enter into license agreements with third parties to license our rights under
certain of our patents and in pursuing 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.

Recent Developments in Patent Litigation

Through our wholly-owned subsidiary, decisioning.com, we have been engaged
in several patent infringement lawsuits against Federated Department Stores,
Ameritrade Holding Corporation and HSBC, the progression and history of which
are discussed more fully below. In December 2006, we received several adverse
rulings from the United States District Court for the District of South Carolina
located in Columbia, South Carolina (the "Columbia Federal Court"). The rulings
resulted from a Markman hearing, which are specific to patent lawsuits, and
generally involve the interpretation and definition of a patent's claim terms
which have a direct bearing on the determination of infringement. The adverse
rulings involved the Columbia Federal Court's interpretation and definition of
several claim terms that were adverse to us. As a result of the adverse rulings
the Columbia Federal Court dismissed our pending lawsuits based on summary
judgment motions filed by the defendants.

We appealed the Columbia Federal Court's dismissal of our lawsuits to the
United States Court of Appeals for the Federal Circuit (the "Federal Appeals
Court"). In our appeal, we requested that the Federal Appeals Court reverse
three of the Columbia Federal Court's Markman rulings and grant to us more
favorable interpretations and definitions related to certain claim terms in our
patents that we disputed. We argued our case before the Federal Appeals Court on
December 3, 2007. As we previously disclosed, on May 7, 2008, the Federal
Appeals Court issued its opinion and revised the Columbia Federal Court's
definitions of all the disputed claim terms. The Federal Appeals Court revised
the terms "verify the applicant's identity" and "compare...and..." in the manner
requested by and favorable to us. However, in a split decision (2-1), the
Federal Appeals Court revised the term "remote interface" in a manner
unfavorable to us by ruling that a remote interface as used in U.S. Patent No.
6,105,007 C1, our patent which covers the automated establishment of financial
accounts, is limited to systems that are publicly accessible and does not
include a personal computer owned by a consumer.

As a result of the Federal Appeals Court's definition of the term "remote
interface," the Federal Appeals Court upheld the Columbia Federal Court's
dismissal of our lawsuit against Federated and remanded our lawsuits against
Ameritrade and HSBC back to the Columbia Federal Court. However, due to the
limitation of the term "remote interface" in U.S. Patent No. 6,105,007 C1, our
current lawsuits against Ameritrade and HSBC only encompass systems they may use
which are publicly accessible or which infringe U.S. Patent No. 5,870,721 C1,
our first loan processing patent. We believe that the level of infringement
associated with such systems as used by Ameritrade and HSBC, as well as the
financial services industry in general, are insignificant compared to systems
used to automate the establishment of financial and credit accounts that are
remotely accessed by a personal computer owned by a consumer. Therefore, unless
we can obtain a reversal of the Federal Appeals Court's definition of the term
"remote interface," we believe that the scope of our patents will be
significantly and materially limited. As more fully explained below, our capital
resources are nearing exhaustion, which we believe will preclude our ability to
pursue our cases against Ameritrade and HSBC unless unforeseen positive
developments in our patent litigation or sources of capital emerge in the very
near future.

We intend to file a request, within a matter of days, with the Federal
Appeals Court to reconsider its construction of the term "remote interface" or,
alternatively, to grant us an "en banc" hearing before all members of the
Federal Appeals Court to hear our case and grant us a favorable definition of
the term "remote interface." We have been advised by legal counsel that
reconsideration of issued opinions or the granting of en banc hearings is rare.
Even if we are successful in obtaining a hearing in which the Federal Appeals
Court agrees to reconsider its ruling or, alternatively, to grant us an en banc
hearing, we do not believe that our existing cash resources will be sufficient
to enable us to complete the process, and, if successful, to complete the
prosecution of our lawsuits against the alleged infringers. Our capital
resources are nearing exhaustion, and we believe it is unlikely in our current
posture that we will be able to access new capital resources in a manner
sufficient to allow us to pursue an extended process to obtain reconsideration
of, or recourse from, the Federal Appeals Court's adverse construction of the
term "remote interface."

Moreover, if we are not successful in our attempt to have the construction
of the term "remote interface" reversed in a very short period of time, we
believe that it is unlikely that we will be able to access new capital resources
sufficient to allow us to enforce our remaining patents due to the significant
limitation of our patent rights as discussed above and the expense of pursuing
enforcement through litigation.

Accordingly, we believe that the adverse ruling of the Federal Appeals
Court, coupled with our very limited capital resources, has seriously threatened
the viability of our business as a going concern. Therefore, in conjunction with
our attempts to secure a reversal of the Federal Appeals Court's recent adverse
decision, we are evaluating our available strategic alternatives, including the
possibility of filing for bankruptcy protection, selling assets or otherwise
winding down our business. We can give no assurances that in the near future we
will not be forced to pursue one or more of these alternatives.

Background - Patent Portfolio and Enforcement

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. Further, as more fully discussed above under the caption,
"Recent Developments in Patent Litigation," our appeal of the Columbia Federal
Court's interpretation and application of the term "remote interface" to the
Federal Appeals Court failed to secure us a favorable interpretation of that
term.

Other Matters

In addition, we and our founder, Jeff Norris, were defendants in a lawsuit
filed by Temple Ligon on November 30, 1996 in the Court of Common Pleas for the
County of Richland in Columbia, South Carolina. Mr. Ligon claimed, among other
things, that Affinity and Mr. Norris breached an agreement to give him a 1%
equity interest in Affinity in consideration of services Mr. Ligon claims to
have performed in 1993 and 1994 in conjunction with the formation of Affinity,
and sought monetary damages of $5,463,000. This lawsuit initially resulted in a
jury verdict against us of $68,000. However, Mr. Ligon subsequently requested
and was granted a new trial. In January 2004, this lawsuit resulted in another
jury verdict against us of $382,148. In connection with the litigation and the
resulting jury verdict, we filed post-trial motions with the trial court in
which, among other things, we claimed that the jury verdict should be set aside.
On July 23, 2004, the trial judge granted our motions, set aside the jury
verdict, and ordered entry of a judgment in favor of us. The plaintiff appealed
the trial judge's ruling to the South Carolina Court of Appeals (the "South
Carolina Appeals Court"). On October 30, 2006, the South Carolina Appeals Court
reversed the trial judge's decision and reinstated the jury verdict of $382,148.
Our petition to the South Carolina Appeals Court for a rehearing of this case
was denied, and we petitioned the South Carolina Supreme Court to hear this case
and to grant us relief from this ruling. In October 2007, we were notified that
the South Carolina Supreme Court had denied our petition to hear this case.
Accordingly, we have no further legal recourse and a judgment will be entered
against us of $382,148, plus accrued interest. At this time, we do not have the
cash resources to pay this judgment. We will continue to evaluate our options to
resolve or postpone any payments related to this matter; however, if we are
required to pay more than an insignificant amount in connection with this
judgment in the near term, we would, for reasons in addition to those described
above relating to our patent litigation, likely be forced to implement one or
more alternatives under consideration 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 March 31, 2008 and December 31, 2007,
we recorded a valuation allowance that reduced our deferred tax assets to zero.
As of March 31, 2008, 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, 2007.

Results of Operations

Revenues

Patent license revenue. We recognized $8,333 for the three month periods
ended March 31, 2008 and 2007, respectively. All of our 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 periods ended March
31, 2008 and 2007 were $833, respectively. Cost of revenues consists of
commissions paid to our patent licensing representatives.

General and Administrative Expenses. General and administrative expenses
totaled $172,171 for the three month period ended March 31, 2008, as compared to
$395,992 for the corresponding period in 2007. The decrease for the three month
period ended March 31, 2008, as compared to the corresponding period of 2007 is
primarily related to a decrease in professional fees related to legal and other
expenses associated with our patent litigation and a decrease in the amount of
stock-based compensation expense.

Interest expense. Interest expense for the three month periods ended March
31, 2008 and 2007, was $62,813. Interest expense is related to the Company's
convertible notes, which accrue interest at 8%. There was no change in interest
expense during the three month period ended March 31, 2008 compared to the
corresponding period in 2007 because no new notes have been issued since
September 2006 and no notes have been converted since 2006.

Liquidity and Capital Resources

We have generated net losses of $73,649,579 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.

Other financing transactions we have entered include the issuance of
convertible notes, the terms of which are explained in Note 6 to our
consolidated financial statements included herein in Part I. Item 1, "Financial
Statements." At March 31, 2008, the aggregate convertible note principal amount
outstanding was $3,140,666 and interest accrued thereon was $398,489. Of the
total aggregate note principal outstanding, notes in the principal amount of
$1,235,666 become due in August 2008 and notes in the principal amount of
$1,905,000 become due in September 2008. Our failure to pay these notes
according to their terms when due would constitute a default that could enable
the holders of these notes to declare the entire amounts thereunder due and
payable. In addition, certain other events, including the filing of bankruptcy
or similar proceedings by or against the Company, would also constitute a
default that would permit the holders of these notes to declare all amounts
thereunder due and payable. We do not currently have, or expect to have, the
capital resources to pay either principal or accrued interest on these notes
when they become due, unless unforeseen positive developments in our patent
litigation or sources of capital emerge in the very near future.

Net cash used by operations during the three months ended March 31, 2008
was $14,826, compared to $425,516 used by operations for the same period in
2007. The decrease in cash used during the three month period ended March 31,
2008 compared to the corresponding period in 2007 was due to several factors.
First, our expenses associated with our patent lawsuits were minimal during the
first three months of 2008 compared to the corresponding period in 2007. As
discussed more fully above in Part I, Item 2, "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Overview" our patent
lawsuits were reactivated in 2006 and we received an adverse ruling in late in
2006. As a result, we incurred expenses in the first three months of 2007
associated with the preparation of our appeal of the ruling and, additionally,
paid other associated litigation expenses which were incurred in late 2006, but
not paid until 2007. In addition, both our employees have deferred all of their
base salaries since January 1, 2008. At March 31, 2008, cash and liquid
investments were $35,391, as compared to $50,217 at December 31, 2007. At March
31, 2008, our working capital deficit was $4,440,398 as compared to a deficit of
$4,257,741 at December 31, 2007.

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. The
near exhaustion of our cash resources, coupled with the adverse developments
described above in connection with our patent litigation, the proximity of the
maturity of our convertible notes, and our litigation with Temple Ligon,
continues to threaten the viability of our business as a going concern and may
force us in the near future to implement one or more alternatives under
consideration for winding down our business.

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 March 31,
2008, 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 our patent litigation 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, 2007, which could
materially affect our business, financial condition or results of operations.

Item 6. Exhibits

Exhibit Number Description
- --------------- ---------------------------------------------------------------------------------------------
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
3.1 Group, Inc. (File No. 333-1170).
- --------------- ---------------------------------------------------------------------------------------------
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
3.2 the quarter ended June 30, 2006
- --------------- ---------------------------------------------------------------------------------------------
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,
3.3 Inc.(File No. 333-1170).
- --------------- ---------------------------------------------------------------------------------------------
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.
4.1 33-1170).
- --------------- ---------------------------------------------------------------------------------------------
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-
4.2 1170).
- --------------- ---------------------------------------------------------------------------------------------
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
4.3 Company's Quarterly Report on Form 10-Q for the Quarter ended June 30, 2002.
- --------------- ---------------------------------------------------------------------------------------------
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,
4.4 2006.
- --------------- ---------------------------------------------------------------------------------------------
Form of 8% Convertible Secured Note, which is hereby incorporated by reference to Exhibit 4.2
4.5 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2006.
- --------------- ---------------------------------------------------------------------------------------------
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
4.6 Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2006.
- --------------- ---------------------------------------------------------------------------------------------
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
4.7 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: May 20, 2008

EXHIBIT INDEX

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

Exhibit 32 Section 1350 Certifications