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, 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 August 1, 2008.

AFFINITY TECHNOLOGY GROUP, INC. AND SUBSIDIARIES

INDEX

PAGE
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets as of June 30, 2008
and December 31, 2007...................................... 4
Condensed Consolidated Statements of Operations for the
six months ended June 30, 2008 and 2007.................... 5
Condensed Consolidated Statements of Cash Flows for the
six months ended June 30, 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..................................... 13
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk..... 18
ITEM 4. Controls and Procedures........................................ 18
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings.............................................. 18
ITEM 1A. Risk Factors.................................................. 18
ITEM 3. Defaults Upon Senior Securities................................ 18
ITEM 4. Submision of Matters To a Vote of Security Holders............. 18
ITEM 5. Other Infromation.............................................. 19
ITEM 6. Exhibits....................................................... 19
Signature................................................................. 20

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, the judgment
against the Company related to its lawsuit with Temple Ligon and its inability
and failure to pay amounts due under its secured convertible notes, 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, due to its inability to pay its judgment of $382,148 plus accrued
interest of $238,481 associated with its longstanding lawsuit with Temple Ligon
and its inability and failure to pay amounts due related to its convertible
notes, the Company filed a voluntary petition for relief under Chapter 11 of the
United States Bankruptcy Code and plans to offer its remaining patents and
rights thereunder for sale. The Company can give no assurances that it will be
successful in completing a sale of its patents or that any proceeds from such
sale would be sufficient to satisfy any of its obligations in whole or in part
or that there will be any residual proceeds that would accrue to the benefit of
any of the Company's constituencies, including the Company's secured or
unsecured creditors or its stockholders. Moreover, the Company can give no
assurances that it will have the financial resources to complete the Chapter 11
bankruptcy process and that it will not be forced to later convert its Chapter
11 proceedings to one under Chapter 7 of the United States Bankruptcy Code,
under which a trustee would be appointed by the Bankruptcy Court to liquidate
the Company. 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

June 30,
2008 December 31,
(Unaudited) 2007
-----------------------------------------
Assets
Current assets:
Cash and cash equivalents $ 16,861 $ 50,217
Prepaid expenses 36,617 77,118
-----------------------------------------
Total current assets 53,478 127,335
Property and equipment, net 5,906 6,377
-----------------------------------------
Total assets $ 59,384 $ 133,712
=========================================

Liabilities and stockholders' deficiency
Current liabilities:
Accounts payable $ 50,499 $ 19,681
Accrued expenses 1,760,830 1,196,951
Convertible notes 3,140,666 3,140,666
Deferred revenue 11,111 27,778
-----------------------------------------
Total current liabilities 4,963,106 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 June 30, 2008 and December 31, 2007 4,931 4,931
Additional paid-in capital 72,760,271 72,671,087
Treasury Stock, at cost (2,168,008 shares at
June 30, 2008 and December 31, 2007) (3,505,287) (3,505,287)
Accumulated deficit (74,163,637) (73,422,095)
-----------------------------------------
Total stockholders' deficiency (4,903,722) (4,251,364)
-----------------------------------------
Total liabilities and stockholders' deficiency $ 59,384 $ 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 Six months ended
June 30, June 30,
2008 2007 2008 2007
------------------------------- -------------------------------

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 220,263 426,257 392,434 822,249
------------------------------- -------------------------------
Total cost and expenses 221,097 427,091 394,101 823,916
------------------------------- -------------------------------
Operating loss (212,763) (418,757) (377,434) (807,249)
Other income (expense):
Interest income - 5,555 - 14,169
Interest expense (301,295) (62,814) (364,108) (125,627)
------------------------------- -------------------------------
Net loss $ (514,058) $ (476,016) $ (741,542) $ (918,707)
=============================== ===============================
Net loss per share - basic and diluted: $ (0.01) $ (0.01) $ (0.02) $ (0.02)
=============================== ===============================
Shares used in computing net loss per
share 47,142,398 45,267,398 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)

Six Months Ended
June 30,
2008 2007
----------------------------------
Operating activities
Net loss $ (741,542) $ (918,707)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization 471 604
Amortization of stock option compensation 89,184 267,358
Deferred revenue (16,667) (16,667)
Changes in current assets and liabilities:
Prepaid expenses 40,501 4,844
Accounts payable and accrued expenses 594,697 7,792
----------------------------------
Net cash used in operating activities (33,356) (654,776)

Net decrease in cash (33,356) (654,776)
Cash and cash equivalents at beginning of period 50,217 1,026,978
----------------------------------
Cash and cash equivalents at end of period $ 16,861 $ 372,202
==================================

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. Since
2002, the Company's business activities have consisted exclusively of attempting
to enter into license agreements with third parties to license its rights under
certain of its patents and in pursuing patent litigation in an effort to protect
its intellectual property and obtain recourse against alleged infringement of
its patents. Accordingly, the Company's prospects have been wholly dependent on
these efforts to finance and execute a sustainable patent licensing program. As
more fully explained below, the scope of the Company's patents has been
significantly and materially limited by recent court rulings. As a result and as
discussed below, the Company has filed a voluntary petition for relief under
Chapter 11 of the United States Bankruptcy Code and plans to offer its remaining
patents and rights thereunder for sale.

On August 19, 2008, the Company filed a voluntary petition in the
United States Bankruptcy Court for the District of South Carolina (the
"Bankruptcy Court") seeking relief under the provisions of Chapter 11 of the
United States Bankruptcy Code (Case No. 08-04979-dd). The Company's domestic
subsidiary, decisioning.com, Inc., also intends to file a voluntary petition
under Chapter 11 in the Bankruptcy Court (collectively, the "Chapter 11 cases")
shortly. The Chapter 11 Cases have been or will be assigned to the Honorable
David R. Duncan and will be jointly administered. For the present time, the
Company will continue to manage its properties and operate its business as a
debtor-in-possession under the jurisdiction of the Bankruptcy Court and in
accordance with the applicable provisions of the United States Bankruptcy Code
and orders of the Bankruptcy Court. As discussed below, however, the Company can
give no assurance that it will be successful in completing a sale of its assets
or otherwise generating proceeds from the Chapter 11 Cases, or that it will not
be forced to convert the Chapter 11 Cases to cases under Chapter 7 of the United
States Bankruptcy Code, under which a trustee would be appointed by the
Bankruptcy Court to liquidate the Company.

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, 2008, the Company had cash and cash equivalents of
$16,861 and a working capital deficit of $4,909,628. 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 resulted in certain adverse rulings 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 a term ("remote interface") that is
unfavorable and that the Company believes materially and adversely affects the
value of its business and its patents. As a result, the Company's ability to
access new capital resources sufficient to allow it to pursue enforcement of its
remaining patent rights or to continue operations has been materially and
adversely impacted. Additionally, the Company has convertible notes outstanding
in the aggregate principal amount of $3,140,666 and interest accrued thereon of
$461,302. The general provisions of these notes, as well as the nature of the
existing default under these notes, are explained in Note 6.

As a result of the near exhaustion of the Company's cash resources,
coupled with the adverse developments concerning its patent litigation, the
maturity of its convertible notes and its litigation with Temple Ligon, as
described below, on August 19, 2008 the Company filed a voluntary petition for
relief under Chapter 11 of the United States Bankruptcy Code in the Bankruptcy
Court.

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 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 "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 is obligated for the
judgment of $382,148, plus accrued interest of $238,481. As discussed in the
preceding paragraph, the Company is unable to pay the judgment and has filed a
voluntary petition for relief under Chapter 11 of the United States Bankruptcy
Code.

Management's plans with respect to addressing the matters discussed
above are to pursue the relief provided under Chapter 11 of the United States
Bankruptcy Code and to attempt to sell its remaining patents and rights there
under in an orderly manner under the supervision of the Bankruptcy Court. The
distribution of proceeds from any sale of the Company's assets would be subject
to the approval of the Bankruptcy Court; however, management expects that any
such proceeds would be distributed in the following order of priority: first, to
cover certain costs and expenses associated with the bankruptcy proceedings and
the sales of the Company's patents; second, to the extent of any remaining
proceeds, to satisfy the Company's obligations under its convertible notes,
which are secured by the stock of decisioning.com, the Company's wholly owned
subsidiary to which the patents are assigned ; third, to the extent of any
remaining proceeds, to satisfy amounts the Company owes to unsecured creditors;
and, fourth, to the extent of any remaining proceeds, to the benefit of the
Company's stockholders.

The Company can give no assurances that it will be successful in
completing a sale of its patents or that any proceeds from such sale would be
sufficient to satisfy any of its obligations in whole or in part or that there
will be any residual proceeds that would accrue to the benefit of any of the
Company's constituencies, including the Company's secured or unsecured creditors
or its stockholders. Moreover, the Company can give no assurances that it will
have the financial resources to complete the Chapter 11 bankruptcy process and
that it will not be forced to later convert its Chapter 11 proceedings to one
under Chapter 7 of the United States Bankruptcy Code, under which a trustee
would be appointed by the Bankruptcy Court to liquidate the Company.

There is substantial doubt about the Company's ability to continue as a
going concern. Moreover and as more fully explained above, the Company intends
to attempt to sell its patents as part of its Chapter 11 proceedings to satisfy
its liabilities and obligations. Management is unable to estimate the value of
its patents or the net proceeds which may be available to the Company as a
result of a future sale. The amount for which the Company may ultimately
liquidate its existing and recorded liabilities is dependent on the proceeds
from the sale of the Company's patents, is uncertain and may be materially
different from recorded amounts at June 30, 2008. Accordingly, 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 and uncertainty about the
Company's ability to continue as a going concern. 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 or its prospects.

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 does not expect this pronouncement to have a material impact on its
financial statements.

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 does not expect this
pronouncement to have a material impact 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 six month period ended June 30, 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 and six month period
ended June 30, 2008, was $44,592 and $89,184, 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 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 8.5% 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.

On June 30, 2008 the aggregate principal and accrued interest under
these notes was $1,235,666 and $187,144 respectively. On August 8, 2008, the
Company's remaining convertible notes that were issued in August 2006 became
due. The continuation of a default in the payment of principal or interest on
these notes for a period of ten business days constitutes an "Event of Default"
under the terms of these notes that, unless waived in writing by each holder of
such a note, permits the holder to consider the amount of such note immediately
due and payable, without presentment, demand, protest or notice of any kind and
to immediately enforce such holder's rights and remedies under its notes.
Likewise, among other events, the Company's admission in writing of its
inability to pay its debts generally as they mature, its application for or
consent to the appointment of a trustee, liquidator or receiver for its property
or business or a substantial portion thereof and the institution of bankruptcy,
reorganization, insolvency or other proceedings under law for relief from
creditors by the Company also constitute an Event of Default under these notes.
In addition, an unwaived Event of Default under any one of the Company's
convertible notes constitutes an Event of Default under all of the other
convertible notes.

Accordingly, the Company's inability to pay the principal and interest
under the convertible notes due August 8, 2008, subject to the ten business day
grace period under these notes, would constitute an Event of Default under these
notes. Moreover, one or more of the following events described above, in
particular the Company's filing of a voluntary petition for relief under Chapter
11 of the United States Bankruptcy Code with the Bankuptcy Court on August 19,
2008, constituted an Event of Default under all of the Company's convertible
notes. Therefore, subject to the relief from creditors afforded by federal
bankruptcy law upon the filing of the Company's Chapter 11 petition, the full
amount of principal and interest outstanding under all of the Company's
convertible notes may now be considered due and payable by the holders of such
notes. As of August 19, 2008, the full amount of principal and interest due
under the Company's convertible notes, all of which were in default, was
$3,140,666 and $495,465.

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 is obligated for the judgment of $382,148, plus
accrued interest of $238,481. As discussed in Note 1, the Company is unable to
pay the judgment and has filed a voluntary petition for relief under Chapter 11
of the United States Bankruptcy Code.

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. Since 2002, our business
activities have consisted 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 have been wholly dependent on these efforts to
finance and execute a sustainable patent licensing program. As more fully
explained below, the scope of our patents has been significantly and materially
limited by recent court rulings. As a result, we have filed a voluntary petition
for relief under Chapter 11 of the United States Bankruptcy Code and plan to
offer our remaining patents and our rights thereunder for sale.

Recent Developments in Patent Litigation and Financial Condition

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
adverse 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.
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 of certain claim terms in our patents.
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.

We filed a request 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 to grant us a favorable definition of the term "remote interface." In
June 2008, the Federal Appeals Court denied our request. We believe that our
failure to obtain a reversal of the Federal Appeals Court's definition of the
term "remote interface" has significantly and materially limited the scope of
our patents. Our only remaining legal remedy is to request that our case be
heard by the United States Supreme Court. As more fully explained below, because
our capital resources are nearing exhaustion, we do not believe that pursuing an
appeal to the Supreme Court is a realistic or cost effective option.

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, under
the limited definition of the term "remote interface" in U.S. Patent No.
6,105,007 C1 imposed by the Federal Appeals Court, our lawsuits against
Ameritrade and HSBC henceforth encompass only 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. As we publicly announced in
late July 2008, we recently reached a settlement with Ameritrade concerning the
portion of our lawsuit with them that the Federal Appeals Court had remanded
back to the Columbia Federal Court

Our capital resources are nearing exhaustion, and we believe that due
to the significant and material limitation placed on our U.S. Patent No.
6,105,007 C1 it is unlikely that we will be able to access new capital resources
in a manner sufficient to allow us to refinance our existing obligations or
pursue the enforcement of our remaining patents. Moreover, as explained more
fully below in this section under the caption "Other Matters," there is a
judgment against us of $382,148, plus accrued interest of $238,481 and the
plaintiff has commenced active collection efforts. Additionally, we are in
default on all of our convertible notes in the aggregate principal amount of
$3,140,666 plus accrued interest of $461,302. The terms of our convertible notes
are discussed more fully in Note 6 to our consolidated financial statements
included herein in Part I. Item 1, "Financial Statements."

Due to our very limited capital resources and our inability to pay the
judgment and satisfy our obligations under our convertible notes, as discussed
above, we have filed a voluntary petition for relief under Chapter 11 of the
United States Bankruptcy Code in the Bankruptcy Court. In connection with this
proceeding we have filed motions with the Bankruptcy Court requesting permission
to go forward on the basis of a debtor-in-possession for the purpose of
executing a plan of offering our patents for sale under the supervision of the
Bankruptcy Court. The distribution of proceeds from any sale of our patents
would be subject to the approval of the Bankruptcy Court; however, we expect
that the proceeds would be distributed as follows: first, to cover certain costs
and expenses associated with the bankruptcy proceedings and the sales of the
Company's patents; second, to the extent of any remaining proceeds, to satisfy
the Company's obligations under its convertible notes, which are secured by the
stock of decisioning.com, the Company's wholly owned subsidiary to which the
patents are assigned ; third, to the extent of any remaining proceeds, to
satisfy amounts the Company owes to unsecured creditors; and, fourth, to the
extent of any remaining proceeds, to the benefit of the Company's stockholders.

We can give no assurances that we will be successful in completing a
sale of our patents or that any proceeds from such sale would be sufficient to
satisfy any of our obligations in whole or in part or that there will be any
residual from the proceeds that would accrue to the benefit of any of our
constituencies, including our secured or unsecured creditors or our
stockholders. Moreover, we can give no assurances that we will have the
financial resources to complete the Chapter 11 bankruptcy process and that we
will not be forced to convert to a bankruptcy proceeding under Chapter 7 of the
United States Bankruptcy Code, under which a trustee would be appointed by the
Bankruptcy Court to liquidate the Company.

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 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 and Financial Condition," 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 are obligated for the
judgment of $382,148, plus accrued interest of $238,481, and the plaintiff has
commenced active collection efforts. As more fully discussed above under the
caption "Recent Developments in Patent Litigation and Financial Condition" we
are unable to pay the judgment and have filed a voluntary petition for relief
under Chapter 11 of the United States Bankruptcy Code in the Bankruptcy Court.

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, 2008 and December 31, 2007,
we recorded a valuation allowance that reduced our deferred tax assets to zero.
As of June 30, 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 $8,334 and $16,667 for the three
and six month periods ended June 30, 2008, respectively, compared to $8,334 and
$16,667 in the corresponding periods in 2007. 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 and six month periods
ended June 30, 2008 were $834 and $1,667, respectively, compared to $834 and
$1,667 in the corresponding periods in 2007. Cost of revenues consists of
commissions payable to the Company's patent licensing representatives.

General and Administrative Expenses. General and administrative
expenses totaled $220,263 and $392,434 for the three and six month periods ended
June 30, 2008, respectively, as compared to $426,257 and $822,249 for the
corresponding periods in 2007. The decrease for the three and six month periods
ended June 30, 2008, as compared to the corresponding periods of 2007 is
primarily related to a decrease in professional fees related to legal and other
expenses associated with our decreased levels of patent litigation and a
decrease in the amount of stock-based compensation expense.

Interest expense. Interest expense for the three and six month periods
ended June 30, 2008, was $301,295 and $364,108, respectively, compared to
$62,814 and $125,627 for the corresponding periods in 2007. Interest expense
related to the Temple Ligon judgment of $238,481 was determined and recorded by
us in the second quarter of 2008. The remaining interest expense of $62,814 and
$125,327 relates to the Company's convertible notes, which accrue interest at 8%
and remained unchanged during the three and six month periods ended June 30,
2008 compared to the corresponding periods in 2007.

Liquidity and Capital Resources

We have generated net losses of $74,163,367 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 June 30, 2008, the aggregate convertible note principal amount
outstanding was $3,140,666 and interest accrued thereon was $461,302. Of the
total aggregate note principal outstanding, notes in the principal amount of
$1,235,666 became due on August 8, 2008 and notes in the principal amount of
$1,905,000 become contractually due in September 2008. As more fully discussed
in Note 6 and above under the caption Part I, Item 2, "Management's Discussion
and Analysis of Financial Condition and Results of Operations - Recent
Developments in Patent Litigation and Financial Condition" we are in default
under the terms of all of these notes. Absent the relief afforded by federal
bankruptcy law pursuant to our voluntary petition for relief under Chapter 19
filed August 14, 2008 as described more fully above in this Item under the
caption "Recent Developments in Patent Litigation and Financial Condition," the
holders of these notes could consider the entire amounts thereunder due and
payable and seek to enforce their rights and remedies under these notes.

We can give no assurances that we will be successful in completing a
sale of our patents or that any proceeds from such sale would be sufficient to
satisfy any of our obligations in whole or in part or that there will be any
residual from the proceeds that would accrue to the benefit of any of our
constituencies , including our secured or unsecured creditors or our
stockholders. Moreover, we can give no assurances that we will have the
financial resources to complete the Chapter 11 bankruptcy process and that we
will not be forced to convert to a bankruptcy proceeding under Chapter 7 of the
United States Bankruptcy Code, under which a trustee would be appointed by the
Bankruptcy Court to liquidate the Company.

Net cash used by operations during the six months ended June 30, 2008
was $33,356, compared to $654,776 used by operations for the same period in
2007. The decrease in cash used during the six month period ended June 30, 2008
compared to the corresponding period in 2007 was due to several factors. First,
our expenses associated with our patent lawsuits were less during the first six
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 2006. As a
result, we incurred expenses in the first six 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 and generally we have deferred payment of as many of our
expenses as possible during the six month period ended June 30, 2008 compared to
the corresponding period in 2007. At June 30, 2008, cash and liquid investments
were $16,861, as compared to $50,217 at December 31, 2007. At June 30, 2008, our
working capital deficit was $4,909,628 as compared to a deficit of $4,257,741 at
December 31, 2007.

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, 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 - Recent Developments in Patent Litigation
and Financial Condition" and "- Other Matters" 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, which to
the extent applicable will update and supersede the information discussed in
Part I, Item 1A. "Risk Factors" in our Annual Report on Form 10-K for the year
ended December 31, 2007, you should carefully consider the factors discussed in
such "Risk Factors" section , which could materially affect our business,
financial condition or results of operations.

Item 3. Defaults Upon Senior Securities.

The text of Note 6 to the Company's consolidated financial statements
included herein in Part I. Item 1, "Financial Statements," is incorporated by
reference in its entirety in response to this Item.

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

The 2008 Annual Meeting of Stockholders of Affinity Technology
Group, Inc., was held on June 5, 2008 (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, 2008, 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 39,959,205 1,009,096 -
- -------------------------------------------------------------------------------------------------------------------
Robert M. Price 40,114,795 853,506 -
- -------------------------------------------------------------------------------------------------------------------
Peter R. Wilson 40,118,045 850,256 -
- -------------------------------------------------------------------------------------------------------------------

- -------------------------------------------------------------------------------------------------------------------
Ratification of the appointment of Scott McElveen LLP
- -------------------------------------------------------------------------------------------------------------------
Shares Voted In Favor Shares Voted Against Shares Abstaining Broker Non-Votes
- -------------------------------------------------------------------------------------------------------------------
40,640,761 266,281 61,252 -
- -------------------------------------------------------------------------------------------------------------------

Item 5. Other Information.

The text of Note 1 and Note 6 to the Company's consolidated financial
statements included herein in Part I. Item 1, "Financial Statements," is
incorporated by reference in its entirety in response to this Item.

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. 333-1170).
- ---------------------------------------------------------------------------------------------------------------------
4.1 Specimen Certificate of Common Stock, which is hereby incorporated by reference to Exhibit 4.1
to the Registration Statement on Form S-1 of Affinity Technology Group, Inc. (File No.
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 19, 2008

EXHIBIT INDEX

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

Exhibit 32 Section 1350 Certifications