SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

                    ANNUAL REPORT UNDER SECTION 13 OR 15 (d)
                   OF THE SECURITIES AND EXCHANGE ACT OF 1934

  For the fiscal year ended:                           Commission file number:
        March 31, 2003                                        0-19485

                            ADVANCED FINANCIAL, INC.
                            ------------------------
                 (Name of small business issuer in its charter)

               DELAWARE                                          84-1069416
               --------                                          ----------
     (State or other jurisdiction of                          (I.R.S. Employer
     incorporation or organization)                         Identification No.)

     5425 Martindale, Shawnee, KS                                   66218
     ----------------------------                                   -----
    (Address of principal executive offices)                      (Zip Code)

                    Issuer's telephone number (913) 535-1072
                                               -------------

              Securities registered under Section 12(g) of the Act:

                               Title of Each Class
                          Common Stock $.001 par value

     Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities and Exchange Act during the past 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         No    X
          -----       -----

     Check if there is no disclosure of delinquent files in response to Item 405
of Regulation S-B if not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB.    X
                                       -----

     Issuer's revenues for the fiscal year ended March 31, 2003 were $1,128,441.

     The aggregate market value of the voting stock held by non-affiliates
computed by reference to the average bid and asked prices of such stock on March
31, 2003 and as of the date of filing this Annual Report was $17,000.

     State the number of shares outstanding of each of the issuer's classes of
common equity as of March 31, 2003: 5,866,137.

     Check whether the issuer has filed all documents and reports to be filed by
Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities
under a plan confirmed by a court. Yes   X    No
                                       -----     -----

      Transactional Small Business Disclosure Format Yes       No    X
                                                         -----      -----
<PAGE>



                                TABLE OF CONTENTS

ITEM                                                                        PAGE

Part I
------

         Item 1 -       Description of Business                                3

         Item  2 -      Description of Property                                9

         Item  3 -      Legal Proceedings                                     10

         Item  4 -      Submission of Matters to a Vote of Security Holders   10

Part II
-------

         Item  5 -      Market for Common Equity and
                          Related Stockholder Matters                         11

         Item  6 -      Management's Discussion and Analysis or
                          Plan of Operation                                   11

         Item  7 -      Financial Statements                                  17

Part III
--------

         Item  9 -      Directors, Executive Officers, Promoters
                         and Control Persons; Compliance With
                         Section 16(a) Of The Exchange Act                    34

         Item 10 -      Executive Compensation                                35

         Item 11 -      Security Ownership of Certain Beneficial Owners
                         and Management                                       35

         Item 12 -      Certain Relationships and Related Transactions        36

Part IV
-------

         Item 13 -      Exhibits and Reports                                  37

Signatures                                                                    39
----------


                                       2
<PAGE>


                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS
        -----------------------

History of the Company and Subsidiaries
---------------------------------------

Advanced Financial, Inc. (the "Company" or "AFI") is a Delaware corporation
formed in September 1986. The Company acquired Creative Financing, Inc. in March
1991, changed the subsidiary's name to Continental Mortgage, Inc. in 1992 and
changed the name again in 1994 to AFI Mortgage, Corp. ("AFIM"). From the time it
was acquired by the Company until operations were suspended in April 1997, AFIM
focused on the origination, refinancing and servicing of 1 to 4 family
residential mortgages. On February 3, 1997, AFIM entered into an agreement to
sell its remaining loan production.

In April 1997, the Company and its wholly-owned subsidiary, AFIM, decided that
it would be in the best interest of the Company to temporarily suspend its
active mortgage operations. On November 7, 1997, AFIM filed for relief under
Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy
Court, District of Kansas, Topeka Division, Case No. 97-43122. On May 8, 1998,
the Company also filed for relief under Chapter 11 of the Bankruptcy Code in the
United States Bankruptcy Court, District of Kansas, Topeka Division, Case No.
98-41228. The two cases were consolidated on July 2, 1998. On November 13, 1998,
the United States Bankruptcy Court for the District of Kansas entered an order
confirming the First Amended Joint Plan of Reorganization dated January 29, 1998
of the Company and AFIM ("Plan of Reorganization).

Pursuant to the Plan of Reorganization, on February 19, 1999 (the "Effective
Date") the Company completed a recapitalization. On the Effective Date, the
authorized common stock was decreased from 25,000,000 shares to 10,000,000
shares of $0.001 par value per share and the authorized preferred stock was
decreased from 10,000,000 shares to 1,000,000 shares of $0.005 par value per
share. All 5,836,476 shares of common stock and all 363,000 shares of preferred
stock outstanding immediately prior to the Effective Date were canceled and
3,000,000 shares of new common stock were issued to shareholders of record
immediately prior to the Effective Date and to creditors. In addition, warrants
to purchase 900,000 shares of common stock, at a warrant exercise price of $1.25
per share, were issued to creditors. The warrants which were callable by the
Company at 130% of the strike price expired on March 31, 2002. Of the 3,000,000
new shares of common stock issued in the recapitalization, 300,000 shares were
issued to holders of record of the preferred and common stock immediately prior
to the Effective Date. Such shareholders received .0546 share of a new common
stock for each canceled share of old common stock and old preferred stock. The
Company also issued 900,000 shares of new common stock to various creditors of
the Company. Argus Investment Group, Inc. ("ARGUS ") formerly known as First
Mortgage Investment Co. ("FMIC"), a creditor with secured claims against the
Company, received 1,800,000 shares of the new common stock and an option to
acquire an additional 3,000,000 shares at $.50 per share. In addition, on the
Effective Date, ARGUS purchased the land and building owned by AFIM located at
5425 Martindale, Shawnee, Kansas, for a purchase price of $1,030,000. AFIM used
the net proceeds to satisfy the claims of creditors in accordance with the Plan
of Reorganization. (See ITEM 2. DESCRIPTION OF PROPERTY)

In November 1998, the Company determined that business opportunity existed in
the purchasing of delinquent consumer receivables. Effective February 19, 1999,
the Company acquired 100% of the outstanding stock of Cannon Financial Company
("CFC"). CFC provides accounts receivable management services to various health
care providers, financial institutions, and retail firms on a contingency basis.
These services include delinquent debt recovery, management of litigation and
skip tracing services to locate debtors and assets. CFC was formed in July 1998
to acquire the collection operations from a firm located in Kansas City, MO. The
operations acquired by CFC had been in existence for more than 30 years. CFC is
using the existing collection operations as a foundation to acquire charged off
credit card debt and collect such debt for its own account.

                                       3

<PAGE>


On November 15, 1999, pursuant to an Asset Purchase Agreement between AIH
Services, Inc. ("AIH") and CFC, CFC acquired certain assets for use in the
operation and conduct of the businesses of AIH known as AIH Receivable
Management Services and AIH Early Recovery Services. AIH is engaged in the
business of collecting non-performing receivables on behalf of third parties.
The funds used to purchase the AIH assets were loaned to CFC from the
Registrant's largest shareholder, ARGUS. ARGUS is controlled by Philip J.
Holtgraves a director of the Registrant. The assets acquired included furniture,
fixtures, equipment, client lists, the FACS system trade names and telephone
numbers. CFC and AIH consolidated its operations continuing to use these assets
in conducting its operations. CFC later changed its name to AIH Receivable
Management Services, Inc.

On December 30, 1999, ARGUS converted the balance of its note receivable for
$875,000.00 and $38,202.73 of accrued interest to 1,826,405 shares of common
stock of the Company by the partial exercise of its option to acquire 3,000,000
shares of common stock received from the Company under provisions of the Plan of
Reorganization.. The conversion was equivalent to the option exercise price of
$.50 per share. The balance of the option to acquire 1,173,595 shares of the
Company's common stock expired on February 19, 2001.

During the fiscal year ended March 31, 2001, ARGUS exchanged certain liabilities
for 539,732 shares of common stock of the Company.

Nature of the Company's Business
--------------------------------

Delinquent Debt Recovery
------------------------

The majority of the Company's revenue is currently derived from the collection
of delinquent accounts receivable for its clients. The Company provides its
services to clients that include various health care providers, financial
institutions, and retail firms. All of the Company's clients are based in the
states of Kansas and Missouri with the majority located in the Kansas City metro
area. The Company earns a 25%-50% contingency fee depending on the size, age,
and the Company's assessment of the collectability of the accounts placed for
collection.

Litigation Management
---------------------

The Company realizes that to provide effective and thorough receivable
management services to its clients, it needs to establish other services and
systems to support its core operations. At times the Company will recommend to
its clients the need to take legal action to increase the probability of
recovery of an account receivable. The Company makes this recommendation on
accounts with verified assets and significant balances. The Company has in place
a department to manage all aspects of the litigation. The Company works closely
with a Kansas City law firm in preparing and filing legal actions on collection
accounts and enforcement of judgments. Once a judgment is entered, the Company
will pursue the collection of the judgment by filing liens on the debtor's
assets and the garnishment of wages as applicable. Litigation management
services are available to all of the Company's clients.

Consumer Receivables
--------------------

The Company acquires portfolios of charged off consumer debt and then collects
on it for its own account.

The credit card industry has experienced significant growth. During the last
ten-year period, this growth rate has been approximately 26% annually with
global credit card charge volume growing to $2 trillion. Even though the US
market has been saturated, the industry has significant growth prospects in the
long term given the increased consumer utilization of credit cards to pay
routine bills as well as the opportunities internationally especially in Asia,
Europe, and Latin America. As a result of continued growth prospects for the
credit card industry, the volume of charged off credit card debt should continue
to escalate.

                                       4

<PAGE>


There was an estimated $560 billion in outstanding credit card balances in 1997,
up from $238 billion in 1990. According to industry sources, credit card
balances will rise to over $800 billion in 2003. Delinquencies, while holding
steady as a percent of outstanding balances, are rising on an absolute basis.
The level of charged off credit card debt in the United States has generated a
new "high growth" industry, that being the collection of such debt. Charged off
credit cards, those cards with balances 180 or more days without a payment are
expected to increase from $31 billion in 1997 to $39 billion in 2000 and $52
billion in 2005. The collection business is fragmented with about 6,300
companies. Most of these companies are very small. The Small Business
Administration has estimated that credit reporting and collections will be the
fourth fastest growing small business dominated service industry in the Nation
by 2005.

In the early nineties, banks and financial institutions, primarily credit card
issuers, changed their approach in the management of charged off consumer
receivables. These banks and financial institutions began to sell charged off
consumer receivable portfolios to delinquent debt recovery firms and investment
groups in lieu of third party replacements. The practice has gained acceptance
from the major credit card issuers, such that billions of dollars in charged off
credit card debt has been sold to debt recovery firms. The advantage of selling
charged off debt over maintaining in house recovery departments and collection
agencies is that such firms are not subject to some of the business and credit
related constraints of banks and collection agencies.

CFC is in position to offer a discount to debtors because it acquired the
account at a significant discount. If banks offered significant discounts it
could set a bad precedence if late paying debtors were rewarded with a discount
not available to those whose accounts are current. Collection agencies generally
do not offer similar discounts.

CFC has the flexibility to tailor repayment plans to realistically fit the
debtor's budget. Agency collectors operate within a limited time period in which
to work an account, generally resulting in the implementation of unrealistic and
unproductive payment plans.

Portfolio Acquisitions
----------------------

There is an active secondary market for the purchase of portfolios of charged
off credit card debt. CFC purchases charged off credit card debt at significant
discounts to face value. The age of charged off accounts range from 180 days to
5 years or more. CFC's goal is to target portfolios that are 18 to 30 months
past due. In many instances, the portfolios have been sent out once or twice to
collection agencies. CFC believes that by the time it acquires the account, the
event that may have caused the debtor to default, (a divorce, loss of job, or
medical emergency etc.), may be resolved and the debtor may be recovering
financially. The Company feels it can continue to buy this type of debt for
approximately $.04 to $.06 on the dollar. Typically, the market price for
"fresher", or recently charged off debt is approximately $.08 to $.10 on the
dollar. CFC has purchased portfolios with principal balances between $167,000
and $9,275,000 with accounts in most states, however, the majority of the
current accounts are in the states of Kansas and Missouri.

Portfolios are sold in the secondary market either through a bidding,
negotiated, or contractual ("forward flow") arrangement. To date all of the
Company's purchases have been negotiated sales. The Company is pursuing
additional financing to pursue forward flow arrangements. Such financing would
allow the Company to meet the financial commitments required in a forward flow
agreement.

Collection Process
------------------

Once the Company purchases a portfolio, the accounts are entered into its
Flexible Automated Collection System (FACS). The portfolio is then screened for
deceased and bankrupt customers. If any are found they are returned to the
seller for replacement or a refund. The next step is to verify addresses. On
those accounts with no known addresses, job or phone number, a skip trace is
performed. At this point the Company's experienced collection officers work the
accounts for collection. The Company's policy is to use a gentler and more

                                       5

<PAGE>


pragmatic approach than followed by most traditional collection agencies.
Experience suggests that most debtors get into trouble due to life altering
changes such as divorce, job loss, or medical emergency, and the Company
believes that a positive approach is more productive than a confrontational one.
Accounts that do not respond to collection efforts are referred for legal
action. The Company works closely with a law firm, which prepares and files the
legal actions necessary to obtain a judgment against the debtor. Once a judgment
is entered, the Company pursues the judgement.

Systems
-------

The Company uses the Flexible Automated Collection System (FACS) produced and
maintained by Ontario Systems. The FACS System operates on the Unix local area
network. The Company's current systems are capable of handling the Company's
anticipated growth for the foreseeable future.

Customers
---------

The Company generally has a broad and well-diversified client base that includes
hospitals, medical groups, laboratories, convalescent homes, banks, and credit
unions. Although, the Company has several customers and the loss of any one of
these customers could have a material adverse effect on the Company's
operations, no customer comprises more than 10% of the Company's consolidated
revenues as of March 31, 2003.

Markets and Competition
-----------------------

The Company maintains a full-time sales representative that continuously
solicits business by pursuing leads from existing clients, multiple business and
commerce directories, and promotional material.

The third party accounts receivable management and collection business is highly
competitive. The Company concentrates its efforts in the Kansas City metro area
and competes with a number of national, local, and regional companies with
operations similar to those of the Company. Many of the Company's competitors
have far greater resources than the Company and have access to capital markets,
which may be unavailable to the Company.

The Company believes that the principal competitive factors affecting the
Company's receivable management and collection business are increasingly based
upon collection performance, price, and services provided. These competitive
factors have generally caused a downward adjustment in commission rates. The
Company believes that it can compete effectively by offering its clients
innovative receivable management solutions by continually enhancing its
collection procedures.

There is also substantial competition for the acquisition and management of
non-performing consumer obligations and account receivables. The Company
competes with other purchasers of defaulted consumer receivables and with
third-party collection agencies. Although the amount of non-performing and other
distressed obligations available for sale are quite large, there are numerous
competitors that have more resources than the Company.

Regulation
----------

The Company is regulated by the Fair Debt Collection Practice Act (FDCPA) and
the Telephone Consumer Protection Act (TCPA), which are enforced by the Federal
Trade Commission (FTC). The Company devotes considerable time and effort,
through training of personnel and compliance monitoring, to provide ethical,
innovative, high quality accounts receivable management and collection business
practices which meet the needs of its clients and complies with the law.

The FDCPA and comparable state statutes establish specific guidelines and
procedures, which debt collectors must follow to communicate with consumer
debtors, including the time, place and manner of such communications. It is the

                                       6

<PAGE>

Company's policy to comply with the provisions of the FDCPA and comparable
statutes in all of its collection activities, although it may not be
specifically subject thereto. If the laws apply to some or all of the Company's
collection activities, the Company's failure to comply with such laws could have
a materially adverse effect on the Company. Federal and state consumer
protection and related laws and regulations extensively regulate the
relationship of a customer and a credit card issuer. Because many of the
Company's purchased receivables originated through credit card transactions,
certain of the Company's operations are affected by such laws and regulations.
Significant laws include the FDCPA, the Fair Credit Reporting Act, the Federal
Truth-In-Lending Act, the Fair Credit Billing Act, the Equal Credit Opportunity
Act and the Electronic Funds Transfer Act (and the Federal Reserve Board's
regulations which relate to these Acts), as well as comparable statutes in those
states in which the credit grantors are located. State laws may also limit the
interest rate and fees that a credit card issuer may impose on its customers.
Among other things, the laws and regulations applicable to credit card issuers
impose disclosure requirements when a credit card account is advertised, when it
is applied for and when it is opened, at the end of monthly billing cycles and
at year-end. Federal law requires credit card issuers to disclose to consumers
the interest rate, fees, grace periods and balance calculation methods
associated with their credit card accounts, among other things. In addition,
customers are entitled under current laws to have payments and credits applied
to their credit card accounts promptly, to receive prescribed notices and to
require billing errors to be resolved promptly. In addition, some laws prohibit
certain discriminatory practices in connection with the extension of credit.
Failure by credit grantors to have complied with applicable statutes, rules and
regulations could create claims and rights for the customers that would reduce
or eliminate their obligations under their receivables, and this could have a
materially adverse effect on the Company. Pursuant to agreements under which the
Company purchases receivables, the Company is normally indemnified against
losses caused by failure of the credit grantor to have complied with applicable
statutes, rules and regulations relating to the receivables before they are sold
to the Company.

Certain laws, including the laws described above, may limit the Company's
ability to collect amounts owing with respect to the receivables regardless of
any act or omission on the part of the Company. For example, under the federal
Fair Credit Billing Act, a credit card issuer is subject to all claims (other
than tort claims) and defenses arising out of certain transactions in which a
credit card is used if the obligor has made a good faith attempt to obtain
satisfactory resolution of a disagreement or problem relative to the transaction
and, except in cases where there is a specified relationship between the person
honoring the card and the credit card issuer, the amount of the initial
transaction exceeds $50.00 and the place where the initial transaction occurred
was in the same state as the customer's billing address or within 100 miles of
that address. As a purchaser of defaulted consumer receivables, the Company may
purchase receivables subject to legitimate defenses on the part of the customer.
The statutes further provide that, in certain cases, customers cannot be held
liable for, or their liability is limited with respect to, charges to the credit
card account that were the result of an unauthorized use of the credit card. No
assurance can be given that certain of the receivables were not established as a
result of unauthorized use of a credit card, and, accordingly, the amount of
such receivables could not be collected by the Company. Pursuant to some
agreements under which the Company purchased receivables, the Company is
indemnified against certain losses with respect to such receivables regardless
of any act or omission on the part of the Company or credit grantor.

Although the Company believes that it is currently in compliance with applicable
statutes and regulations, there can be no assurance that the Company will always
be able to maintain such compliance. Additional consumer protection laws may be
enacted that would impose requirements on the enforcement of and collection on
consumer credit card or installment accounts. Any new laws, rules or regulations
that may be adopted as well as existing consumer protection laws, may adversely
affect the ability of the Company to collect the receivables. In addition, the
failure of the Company to comply with such requirements could adversely affect
the Company's ability to enforce the receivables. The Company's policy is to
respond promptly and fully to inquiries from the Federal, State and local
regulators in connection with alleged complaints from customers.

                                       7

<PAGE>


Employees
---------

As of March 31, 2003, the Company and its subsidiary had 19 full time employees.
The Company believes that its relations with its employees are good.


                                Subsequent Events
                                -----------------

On June 7, 2001, the Company executed a Letter of Intent, which Letter of Intent
was amended in February 2002, to acquire, through a wholly owned subsidiary,
100% of the Common Stock of a private company in the energy field services (
primarily natural gas) industry. On April 22, 2002, the Company executed a
definitive Stock Purchase Agreement, the closing of which was subject to several
conditions. As a result of a material adverse change in the operating results
for the company to be acquired ( which results were generally consistent with
other companies in the same industry), the transaction did not close. The
parties, by mutual agreement, continued to leave the definitive agreement open,
and $75,000 of escrow deposits in place in anticipation of a turn around in the
industry. During the second quarter of fiscal year 2003, with the prices of
natural gas at unusual highs along with predicted natural gas production
shortfalls for sometime in the future, the anticipated industry turn occurred.
The Company intends to pursue the closing of the transaction, however the
closing will depend upon the availability of adequate financing at reasonable
rates and a favorable re-valuation of the field services company's fixed assets.

In July, 2001, the Company entered into a four year Agreement with AFI Capital
Corporation ("Capital") a Nebraska corporation. Pursuant to the agreement,
Capital is providing financial, acquisition, and general public company business
consulting services. Compensation for such services is based on a "successful
efforts" basis and will initially primarily consist of the Company's common
equity and cash performance fees as earned.. The above proposed acquisition
transaction discussed above, is subject to this Agreement, wherein AFI Capital
Corporation is serving as the "Sponsor" of the proposed transaction.

 On April 30, 2003, the Company announced the closing of an Agreement with
Gateway Energy Corporation and certain of its subsidiaries of Houston, Texas
("Gateway") under which it provided, through the Company's wholly-owned
subsidiary, Allen Drilling Acquisition Company ("ADAC"), $900,000 of credit
enhancements in the form of Letters of Credit. These credit enhancements enabled
Gateway to obtain additional financing, in the form of a three year Balloon Note
from a Houston bank to complete the construction of certain natural gas pipeline
facilities ("Pipeline Facilities") located in Madison County, Texas, (The
"Madisonville Project"). ADAC secured the Letters of Credit through the private
placement of a new series of preferred stock (the "Series A"), to two investor
groups. The Certificate of Designation for the Series A provides, among other
things, for dividend payments to the named holders thereof, equal to sixty-six
and two thirds, (66.67%) of distributions received by ADAC from Gateway, and an
unanimous vote of the Series A to exercise the Equity Participation Option as
further described below.

The Agreement provides, among other things, that ADAC will receive, during the
term of the additional financing, one-half (50%) of the price upside portion
only, if any, of the monthly fee to be received by Gateway from the Madisonville
Project. The Agreement also provides that ADAC will have the option to either:
(i) receive at the end of the Balloon Note term a lump-sum payment, which when
added to the payments received, if any, for the price upside portion, will
result in a 15% pre-tax internal rate of return on the $900,000, or (ii) to
exercise the Equity Participation Option by paying off the Balloon Note on or
before the end of the Balloon Note term in exchange for a thirty-three and
one-third (33.33%) ownership interest in the Pipeline Facilities from that date
forward. Gateway is obligated to pay the periodic interest payments on the
Balloon Note during the three year term of the Balloon Note. Further, Gateway
has granted liens to ADAC, subordinate to its banks, on its economic interest in
the Madisonville Project and certain other natural gas operating systems and
natural gas operating assets. The Agreement contains cross collateral and cross
default provisions linking it to an additional Gateway term note at the same
bank, the proceeds of which were used by Gateway to fund the Madisonville
Project.

                                       8

<PAGE>


The Madisonville Project is operated under a long-term agreement between
Gateway, Hanover Compression Limited Partnership, and Redwood Energy Production,
L. P. and is designed to treat gas to remove impurities from the gas to enable
the gas to meet pipeline sales quality specifications. The Madisonville Project
employs the state-of-the-art, patented, absorption based technology developed by
Advanced Extraction Technologies, Inc., for which Gateway has the exclusive U.
S. license, to remove nitrogen from the gas.

To implement the provisions, terms and conditions of the various agreements
including the Certificate of Designation for the ADAC Series A Preferred Stock:
(i) Larry J. Horbach and Christopher D. Davis were appointed to the Board of
Directors of the Registrant to fill the vacancies created by the resignation of
two directors following the Registrant's emergence from it's Chapter XI
Reorganization, serving until elected at the next meeting of shareholders; and
(ii) Mr. Horbach resigned as a director of ADAC, with that position then being
filled by Mr. Davis. The Registrant, as the sole shareholder of ADAC, effected
such ADAC director changes and entered into an agreement to amend the ADAC
By-laws to provide that the number of ADAC directors shall be fixed at three as
long as any Series A Preferred Shares remain outstanding. In addition, Mr. Davis
as well as the Registrant's President, Charles Holtgraves, were elected to the
ADAC board of directors.

Mr. Holtgraves and Mr. Horbach are directors of Gateway. Mr. Davis has no
affiliation with Gateway. Mr. Holtgraves owns 14.65% of an entity that owns
55.56% of the ADAC Series A Preferred Stock. Mr. Davis serves as the Trustee of
the Davis Investment Management Trust for the Davis Investments VI LP, which LP
owns 44.44% of the ADAC Series A Preferred Stock. Mr. Horbach owns no ADAC
stock.

The Company, as of the filing of this Annual Report, has also entered into
preliminary negotiations to participate in a similar venture with Gateway, which
project has an anticipated closing first quarter of calendar year 2004.

With the proposed transaction under the April 22, 2002 agreement, the completion
of the Madisonville Project and the pending venture with Gateway, the Company
has determined that the ability to generate long-term value for the common
shareholders could be enhanced if the present Company operations, (as described
under the NATURE OF THE COMPANY'S BUSINESS) were sold. The Company would then
concentrate its growth efforts in the energy industry. Negotiations have been
entered into with an entity controlled by the Company's principal creditor and
majority stockholder, Argus, wherein these operations would be exchanged for the
debt held by Argus. The Board of Directors has engaged an investment banking
firm (Morgan Stanley) to determine the fair market value as of September 30,
2003 of the operations to be sold. The transaction is anticipated to result in a
gain to the Company.

Upon completion of the transaction, the Company intends to amend its Certificate
of Incorporation to effect a 1 for 3 reverse stock split and a name change.

Argus, the holder of over 71% of the presently outstanding common stock of the
Company has indicated its intent to vote in favor of the above transactions.


ITEM 2. DESCRIPTION OF PROPERTY
        -----------------------

Real Estate Owned
-----------------

As of February 18, 1999, AFIM owned fee simple title to a 20,000 square foot
office building and the land located at 5425 Martindale, Shawnee, Kansas (the
"Property"). The Property was subject to a first and second mortgage. The 11.75%
first mortgage had a principal balance due on March 31, 1998 of $717,000 with

                                       9

<PAGE>


accrued interest. The due date was extended until March 31, 1999. In the fourth
quarter of the 1996 fiscal year, a second mortgage, also due March 31, 1998, of
$350,000 was placed on the Property, which due date was also extended. During
fiscal years 1997 and 1998, $200,000 of the second mortgage was repaid from the
sale of servicing rights.



Investment Policies
-------------------

The Company has not adopted any policies which would limit the number or amount
of mortgages which may be placed on any piece of property owned by the Company.
The Company presently has no plans to purchase or invest in real estate. The
Company has no limitations with respect to the percentage of assets of the
Company which may be invested in any one investment or type of investment. Any
investment policy of the Company may be changed without a vote of security
holders.

Investments in Real Estate Mortgages
------------------------------------

During fiscal 2003, the Company did not invest in any real estate mortgages.

Securities of or Interests in Persons Primarily Engaged in Real Estate
Activities
----------------------------------------------------------------------

During fiscal year 2003, the Company did not invest in securities of or
interests in persons primarily engaged in real estate activities.


ITEM 3. LEGAL PROCEEDINGS
        -----------------

The Company is not involved in any lawsuits as of March 31, 2003.


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

No matters were submitted to a vote of security holders during the Company's
fiscal year ended March 31, 2003, either through the solicitation of proxies or
otherwise.

                                       10

<PAGE>

                                     PART II
                                     -------

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
        --------------------------------------------------------

The Company's common stock traded on the OTC Pink Sheets under the symbol AVFI.
The following table sets forth the high and low prices for the common stock as
reported on the Pink Sheets for the four quarters of fiscal 2002 and 2003. The
prices do not include retail mark-ups, markdowns, or other fees or commissions,
and may not represent actual transactions.

               2002                           High                  Low
------------------------------------   ------------------   -------------------
Quarter ended June 30, 2001             No transactions   #  No transactions
Quarter ended September 30, 2001        No transactions   #  No transactions
Quarter ended December 31, 2001         No transactions   #  No transactions
Quarter ended March 31, 2002            No transactions   #  No transactions

                    2003                      High                  Low
------------------------------------   ------------------   -------------------
Quarter ended June 30, 2002             No transactions   #  No transactions
Quarter ended September 30, 2002        No transactions   #  No transactions
Quarter ended December 31, 2002         No transactions   #  No transactions
Quarter ended March 31, 2003                 $0.01                $0.01

At March 31, 2003, and as of the date of filing this Annual Report, no active
market existed for the Company's common stock. On such date, 524 holders of
record held the Company's common stock. The Company estimates that it has
approximately 1,200 beneficial shareholders.


Reference is made to PART I, ITEM 1 for a description of the Company's Plan of
Reorganization and recapitalization and its effects on the common stock and
stockholders of the Company.

At March 31, 2003, and as of the date of filing this Annual Report, the Company
had not paid any cash dividends on its common stock. The Company was not subject
to any restrictive covenants or agreements, which limit its ability to pay
dividends. The Company has no plans to pay cash dividends on its common stock in
the near future.


ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
        ---------------------------------------------------------

GENERAL
-------

As described in ITEM 1 hereof, the Company's Plan of Reorganization was
confirmed by the United States Bankruptcy Court on November 13, 1998 and became
effective on February 19, 1999. In accordance with the American Institute of
Certified Public Accountants Statement Position No. 90-7, Financial Reporting by
Entities in Reorganization Under the Bankruptcy Code, the Company accounted for
the reorganization using "Fresh-Start Reporting," whereby all remaining assets
and liabilities were adjusted to their fair market values as of February 19,
1999.

The following discussion of the financial condition and results of operations of
the Company should be read in conjunction with the consolidated financial
statements and notes thereto included elsewhere in this report.

                                       11

<PAGE>


This discussion contains forward-looking statements that involve risks and
uncertainties. The Company's actual results may differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including, but not limited to, competition, which has and will continue to put
price pressure on the Company's third party collection business, the cost and
availability of capital to finance its portfolio receivables, and overall
macro-economic conditions.


RESULTS OF OPERATIONS
---------------------
Year Ended March 31, 2003
-------------------------

Liquidity and Capital Resources
-------------------------------

The Company had a positive cash balance at March 31, 2003 of $42,196. In March
2001, the Company's majority shareholder (ARGUS) agreed to make available to the
Company an additional line of credit bringing the aggregate credit line to
$1,355,000. The line of credit draws interest at the prime rate, is due on
demand, and is secured by substantially all of the Company's assets, This line
of credit is used to acquire charged off credit card debt and working capital
requirements. The balance due under the line of credit at March 31, 2003 was
$822,931. In addition to the credit line, ARGUS had open advances to the Company
of $495,786 at March 31, 2003

As of March 31, 2003, the Company's total assets were $435,032 and stockholder's
equity was a deficit $1,438,152. During the year, the Company did not acquire
any finance receivables for its own account.

Operations
----------

Consolidated operations for the year ended March 31, 2003 resulted in a net loss
of $441,381 on collection, servicing and fee gross income of $1,091,674 compared
to a net loss of $496,498 on revenues and fee income of $1,088,126 for the prior
fiscal year. Revenues from the collection of the Company's portfolio receivables
are recognized only after the cost of such portfolios has been recovered. During
the period, the Company recovered $262,678 from its portfolio receivables of
which $57,903 was applied to reduce the carrying value of its finance
receivables asset leaving a portfolio carrying value of $30,996. As of March 31,
2003, the remaining outstanding balance of the receivables portfolio was
approximately $14,000,000.

Operating expenses, including general and administrative costs for the year
ended March 31, 2003 were $1,345,091 compared to $1,508,007 for the prior year.
The reduction was primarily a reflection of a cost reduction plan undertaken by
the Company resulting from a re-organization of various employee departments.
Interest expense increased from $66,549 to $70,144 reflecting the additional
amounts advanced by ARGUS and AFI Capital.



RESULTS OF OPERATIONS
---------------------
Year Ended March 31, 2002
-------------------------

Liquidity and Capital Resources
-------------------------------

The Company had a positive cash balance at March 31, 2002 of $37,794. In March
2001, the Company's majority shareholder agreed to make available to the Company
an additional line of credit bringing the aggregate credit line to $1,355.000.

                                       12

<PAGE>


The line of credit draws interest at the prime rate, is due on demand, and is
secured by substantially all of the Company's assets, This line of credit is
used to acquire charged off credit card debt and working capital requirements.
The balance due under the line of credit at March 31, 2002 was $932,932. In
addition to the credit line, ARGUS had open advances to the Company of $205,840
at March 31, 2002.

As of March 31, 2002, the Company's total assets were $562,750 and stockholder's
equity was a deficit $1,026,771. During the year, the Company did not acquire
any finance receivables for its own account.

Operations
----------

Consolidated operations for the year ended March 31, 2002 resulted in a net loss
of $496,498 on collection, servicing and fee gross income of $1,088,126.
Revenues from the collection of the Company's portfolio receivables are
recognized only after the cost of such portfolios has been recovered. During the
period, the Company recovered $267,258 from its portfolio receivables of which
$166,706 was applied to reduce the carrying value of its finance receivables
asset leaving a portfolio carrying value of $88,899. As of March 31, 2002, the
remaining outstanding balance of the receivables portfolio was approximately
$14,000,000.

Operating expenses, including general and administrative costs for the year
ended March 31, 2002 were $1,508007 compared to $1,971,540 for the prior year.
The reduction was primarily a reflection of a reduction in payroll resulting
from a re-organization of various employee departments.

Factors Affecting Future Results
--------------------------------

The Company's ability to generate long-term value for the common stockholders is
dependent in part upon future acquisitions of assets which can generate
profitable operations, and the ability to obtain financing of such acquisitions
from sources other than its majority stockholder at rates that can result in a
reasonable return on those acquisition investments. As described earlier under
ITEM 1. Subsequent Events, the Company entered into a Letter of Intent followed
with an agreement in fiscal year 2003 to acquire, through a wholly-owned
subsidiary, the stock of a private company in the oil and gas industry which
could provide a reasonable return on the investment therein. Funds to effect
this transaction will be provided from outside sources. There is no assurance
that the contemplated transaction can be completed. In addition to the open
agreement, the Company, through a wholly-owned subsidiary, has concluded an
agreement with Gateway Energy Corporation in fiscal year 2004, which could
provide significant cash flows to the Company depending on the price of natural
gas.



ACCOUNTING PRONUNCEMENTS AND
----------------------------
RECENT REGULATORY DEVELOPMENTS
------------------------------

In June 2001, the FASB issued SFAS No. 142, Goodwill and Other Intangible
Assets. Goodwill and other intangible assets having an indefinite useful life
acquired in business combinations completed after June 30, 2001, are no longer
subject to amortization to earnings. Effective April 1, 2002, all goodwill and
other intangible assets having an indefinite useful life are no longer amortized
to earnings. The useful lives of other intangible assets must be reassessed, and
the remaining amortization periods must be adjusted accordingly. Goodwill and
other intangible assets having an indefinite useful life will be tested for
impairment annually, or more frequently if events or changes in circumstances
indicate that the assets might be impaired, using a two-step impairment
assessment. The first step of the goodwill impairment test compares the fair

                                       13

<PAGE>


value of a reporting unit with its carrying amount, including goodwill. If the
fair value of a reporting unit exceeds its carrying amount, goodwill of the
reporting unit is not considered impaired, and the second step of the impairment
test is not necessary. If the carrying amount of a reporting unit exceeds its
fair value, the second step of the goodwill impairment test is performed to
measure the amount of impairment loss, if any. The Company adopted the
provisions of SFAS 142 on April 1, 2002 and completed the first step of the
two-step impairment on September 30, 2002 resulting in an impairment charge of
$22,371 for the fiscal year ended March 31, 2003.

Also in June 2001, the FASB issued SFAS 143, Accounting for Asset Retirement
Obligations, which requires that the fair value of the liability for asset
retirement costs be recognized in an entity's balance sheet, as both a liability
and an increase in the carrying value of such assets, in the periods in which
such liabilities can be reasonably estimated. It also requires allocation of
such asset retirement cost to expense over its useful life. This Statement is
effective for fiscal years beginning after June 15, 2002. The Company has not
determined the impact of this Statement on its consolidated financial position
or results of operations.

In August 2001, the FASB issued SFAS 144, Accounting for the Impairment or
Disposal of Long-Lived Assets. SFAS 144 addresses financial accounting and
reporting for the impairment or disposal of long-lived assets. SFAS 144
supersedes SFAS 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of and related literature and establishes a
single accounting model, based on the framework established in SFAS 121, for
long-lived assets to be disposed of by sale. The Company implemented the
provisions of SFAS 144 as required on January 1, 2002.

In April 2002, the FASB issued SFAS No. 145, "Recission of FASB Statements No.
4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections",
to eliminate an inconsistency between the required accounting for sale-leaseback
transactions and the required accounting for certain lease modifications that
are similar to sale-leaseback transactions. The statement also amends other
existing pronouncements. This statement is effective for fiscal years beginning
after May 15, 2002. The impact of adopting this statement on the consolidated
financial position or results of operations will not be material.

In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities", which addresses accounting and reporting for
costs associated with exit and disposal activities and replaces Emerging Issues
Task Force Issue No. 94-3, "Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in a Restructuring)". This Statement is effective for exit or
disposal activities that are initiated after December 31, 2002. The impact of
adopting this statement on the consolidated financial position or results of
operations will not be material.

Effective July 30, 2002, the Sarbarnes-Oxley Act of 2002 (the "Act") was signed
into law. The Act encompasses a broad range of new legislation designed to
increase accountability of public companies and investor confidence. The Act
establishes a new regulatory body, the "Public Company Accounting Oversight
Board", under the auspices of the Securities and Exchange Commission (the "SEC")
to oversee audits of companies offering equity or debt securities to the public,
and further regulates and redefines the relationship between a registered public
accounting firm and its audit clients. The Act establishes new disclosure
requirement for public companies, financial certification standards for public
company CEOs and CFOs restriction on the ability of officers and directors to
engage in certain types of transactions, accelerated reporting of certain types
of transactions and new rules of analysts. In addition, the Act enhances a
number of criminal penalties and enforcement measures available for securities
related offenses. The SEC was directed to study and issue final rules to
implement a number of directives contained in the Act, and some of the ensuing
rules are discussed below.

In August 2002, among other matters, the SEC adopted amendments to accelerate
filing deadlines for certain public reports, and adopted new rules to implement
Section 302 of the Act pertaining to financial statement certification and
clarify disclosure controls and procedures. The Company is not subject to the

                                       14

<PAGE>


accelerated filing deadlines at this time due to its size, however, it is
subject to the financial statement certification and disclosure control rules.
The Company intends to fully comply with all applicable new rules as they become
effective.

In December 2002, the FASB issued SFAS No. 148. "Accounting for Stock-Based
Compensation" to provide alternative methods of transition for a voluntary
change to the fair value based method of accounting for stock-based employee
compensation. In addition, this statement amends the disclosure requirements of
SFAS No. 123 of the same name to require prominent disclosure in both annual and
interim financial statements about the method of accounting for stock-based
employee compensation and the effect of the method used on reported results.
This statement is effective for fiscal years and interim periods ending after
December 15, 2002 and the Company has implemented it effective with this filing.
The Company intends to continue using the intrinsic method of accounting for
stock-based compensation first allowed under APB Option No. 25, "Accounting for
Stock Issued to Employees". Therefore, the impact of adopting SFAS No. 148 on
the consolidated financial statements of the Company is limited to the expanded
disclosure requirements of the statement.

In January 2003, the SEC adopted rules implementing Sections 406 and 407 of the
Act. Section 406 of the Act requires public companies to annually disclose
whether the company has adopted a code of ethics for its principal executive and
financial officers, and if it has not, to explain why it has not. Additionally,
the rules will required disclosure on a Form 8-K filing any amendments to or
waivers from the code of ethics relating to those officers. Section 407 of the
Act required public companies to disclose annually whether it has at least one
"audit committee financial expert", as defined in the rules, on the Company's
audit committee, and if so, the name of the audit committee financial expert and
whether the expert is independent of management. A company that does not have an
audit committee financial expert will be required to disclose this fact and
explain why it has no such expert. Both rules are effective for small business
issuers' annual reports for fiscal years ending on or after December 15, 2003.
The Company intends to comply with these rules on a timely basis.

Also in January 2003, the SEC adopted rules implementing section 401(a) of the
Act, which required public companies to disclose "all material off-balance sheet
financing transactions, arrangements, obligations (including contingent
obligations), and other relationships of the issuer with consolidated entities
or other persons, that may have a material current or future effect on financial
condition, changes in financial condition, results of operations, liquidity,
capital expenditures, capital resources, or significant components of revenues
or expenses." The rules require an additional section in Management's Discussion
and Analysis for the presentation of this new disclosure, and there are
additional rules for companies that are not small business issuers. The rules
are effective for interim and annual filings for periods ending on or after June
15, 2003. The impact of adopting this statement on the consolidated financial
position or results of operations will not be material.


ITEM 7. FINANCIAL STATEMENTS
        --------------------

Financial statements for the years ended March 31, 2003, and March 31, 2002 are
presented on the following pages.


                                       15

<PAGE>




                                  CONSOLIDATED
                              FINANCIAL STATEMENTS
                                       AND
                              REPORT OF INDEPENDENT
                          CERTIFIED PUBLIC ACCOUNTANTS

                            ADVANCED FINANCIAL, INC.
                                AND SUBSIDIARIES

                             March 31, 2003 and 2002






                                       16

<PAGE>


               Report of Independent Certified Public Accountants

Stockholders and Directors
Advanced Financial, Inc. and Subsidiaries

We have audited the accompanying consolidated balance sheet of Advanced
Financial, Inc. and Subsidiaries as of March 31, 2003 and 2002 the related
consolidated statements of operations, shareholders' deficit, and cash flows for
the years then ended. These financial statements are the responsibility of the
management of the Company. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing standards
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatements. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Advanced Financial, Inc and
Subsidiaries as of March 31, 2003 and 2002 and the results of their operations
and their cash flows for the years then ended, in conformity with generally
accepted accounting principles in the United States.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note N to the
financial statements, the Company has suffered recurring losses from operations
and is dependent upon the continued sale of its securities or obtaining debt
financing for funds to meet its cash requirements. These factors raise
substantial doubt about the Company's ability to continue as a going concern.
Management's plans with regard to these matters are also described in Note N.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.



Weaver & Martin, LLC
Kansas City, Missouri
October 27, 2003

                                       17
<PAGE>
<TABLE>
<CAPTION>


                                       ADVANCED FINANCIAL, INC. AND SUBSIDIARIES
                                              CONSOLIDATED BALANCE SHEETS

                                                                          March 31,               March 31,
                                                                            2002                    2003
                                                                         -----------             -----------
                             ASSETS

<S>                                                                       <C>                     <C>
Cash                                                                     $    37,794             $    42,196
Collection fees receivable (note E)                                           83,468                  47,119
Finance receivables (notes A and D)                                           88,899                  30,996
Other                                                                         11,749                  17,590
Property, furniture and equipment, net (notes A,  F, and I)                  116,227                  72,518
Customer lists, net of amortization of $127,236
  at March 31, 2002 and 2003, respectively (notes A7 and C)                  224,613                 224,613
Escrow deposit, net of $75,000 reserve in 2003                                  --
                                                                         -----------             -----------
    Total  assets                                                        $   562,750             $   435,032
                                                                         ===========             ===========



    LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)

LIABILITIES
  Accounts payable and accrued expenses                                  $   317,154             $   357,483
  Accounts payable - related party (note L)                                  205,840                 495,786
  Notes payable (note E)                                                   1,066,527               1,019,915

                                                                         -----------             -----------
    Total liabilities                                                      1,589,521               1,873,184
                                                                         -----------             -----------


STOCKHOLDERS' EQUITY (DEFICIENCY) (notes B and G)
  Preferred stock, Series B,
    $.005 par value; 1,000,000 shares authorized,
    none issued and outstanding                                                 --                      --
  Common stock, $.001 par value; 10,000,000 shares
    authorized, 5,866,137 and 5,866,137 shares issued
    and outstanding in 2002 and 2003, respectively                             5,866                   5,866
  Paid-in capital                                                          1,253,261               1,253,261
  Accumulated deficit                                                     (2,285,898)             (2,697,279)

                                                                         -----------             -----------
    Total stockholders' equity (deficiency)                               (1,026,771)             (1,438,152)
                                                                         -----------             -----------


                                                                         -----------             -----------
                                                                         $   562,750             $   435,032
                                                                         ===========             ===========

                         The accompanying notes are an integral part of these statements.

                                                      18

<PAGE>


                             ADVANCED FINANCIAL, INC. AND SUBSIDIARIES
                               CONSOLIDATED STATEMENTS OF OPERATIONS




                                                   Year ended                  Year ended
                                                 March 31, 2002              March 31, 2003
                                                 --------------              --------------

Collection, servicing, and other fees              $ 1,088,126                 $ 1,091,674
Other                                                   63,644                      36,586
Interest                                                   401                         181

                                                   -----------                 -----------
    Total revenues                                   1,152,171                   1,128,441
                                                   -----------                 -----------

Operating expenses, including general and
  administrative costs                               1,508,007                   1,346,565
Interest                                                66,549                      70,144
Depreciation and amortization                           74,113                      48,113
Escrow reserve                                                                      75,000

                                                   -----------                 -----------
    Total expenses                                   1,648,669                   1,539,822
                                                   -----------                 -----------

                                                   -----------                 -----------
                                                   $  (496,498)                $  (411,381)
                                                   ===========                 ===========

                                                     5,866,137                   5,866,137
                                                   ===========                 ===========

                                                   $     (0.08)                $     (0.07)
                                                   ===========                 ===========

                The accompanying notes are an integral part of this statement.

                                                19
<PAGE>


                                          ADVANCED FINANCIAL, INC. AND SUBSIDIARIES
                               CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)



                               Preferred          Common          Paid-in       Accumulated       Treasury
                                stock             stock           capital         deficit          stock            Total
                               ---------       ----------       -----------     ------------     -----------     -----------


Balance, March 31, 2001              --              5,866        1,253,261      (1,789,399)            --          (530,272)
                                                                                                                 -----------

    Rounding                                                                             (1)                              (1)

Net loss for year ended
    March 31, 2002                   --               --               --          (496,498)            --          (496,498)
                              -----------      -----------      -----------     -----------      -----------     -----------

Balance, March 31, 2002              --              5,866        1,253,261      (2,285,898)            --        (1,026,771)

Net loss for year ended
    March 31, 2003                                                                 (411,381)                        (411,381)

                              -----------      -----------      -----------     -----------      -----------     -----------
Balance, March 31, 2003       $         0      $     5,866      $ 1,253,261     $(2,697,279)     $      --       $(1,438,152)
                              ===========      ===========      ===========     ===========      ===========     ===========



                             The accompanying notes are an integral part of this statement.

                                                            20


<PAGE>


                                ADVANCED FINANCIAL, INC. AND SUBSIDIARIES
                                  CONSOLIDATED STATEMENTS OF CASH FLOWS


                                                                     Year ended           Year ended
                                                                   March 31, 2002       March 31, 2003
                                                                   --------------       --------------
Cash flows from operating activities
  Net loss                                                           $(496,498)            $(411,381)
  Adjustments to reconcile net loss to net
    cash used in operating activities
    Depreciation and amortization                                       74,113                49,587
    Escrow reserve                                                        --                  75,000
    Changes in assets and liabilities
        Collection fees receivable                                     (10,644)               36,349
        Other assets                                                     2,926                (5,841)
        Accounts payable and accrued expenses                         (100,319)               40,329
                                                                     ---------             ---------
           Net cash used in operating activities                      (530,422)             (215,957)
                                                                     ---------             ---------

Cash flows from investing activities
  Collections applied to finance receivables                           166,706                57,903
  Acquisition escrow deposit                                           (75,000)
  Acquisitions of property, furniture, and equipment                   (15,710)               (5,878)
                                                                     ---------             ---------
           Net cash provided by (used in) investing activities         150,996               (22,975)
                                                                     ---------             ---------

Cash flows from financing activities
  Change in checks issued in excess of cash balances                   (23,689)                 --
  Payments on notes payable                                               --                 (46,612)
  Advances from related party                                          289,946
  Proceeds from notes payable                                          506,527                  --
  Payments on capitalized lease obligations                            (65,618)                 --
                                                                     ---------             ---------
           Net cash provided by financing activities                   417,220               243,334
                                                                     ---------             ---------

Net increase (decrease) in cash                                         37,794                 4,402
Cash, beginning of year                                                      0                37,794
                                                                     ---------             ---------
Cash, end of year                                                    $  37,794             $  42,196
                                                                     =========             =========

Supplementary disclosures of cash flow information
  Cash paid for interest                                             $   5,397             $  12,355

                   The accompanying notes are an integral part of these statements.

                                                 21

</TABLE>


<PAGE>


                            Advanced Financial, Inc.
                                and Subsidiaries
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             March 31, 2003 and 2002

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A summary of the significant accounting policies applied in the preparation of
the accompanying financial statements follows.

1. Organization and Principles of Consolidation

Advanced Financial, Inc. (the Company) owns 100% of AFI Mortgage Corp. (AFI), a
mortgage lender with no current operations and 100% of Cannon Financial Company
(Cannon). Subsequent to March 31, 2001, AFI changed its name to Allen Drilling
Acquisition Company ("ADAC"). See Note M. Cannon collects debts for others for a
fee and purchases charged-off credit card debt to collect at a profit from
debtors located throughout the United States. On November 15, 1999, pursuant to
an Asset Purchase Agreement between AIH Services, Inc. and Cannon, Cannon
acquired certain assets for use in the operation and conduct of the businesses
of AIH Services, Inc. known as AIH Receivable Management Services and AIH Early
Recovery Systems. AIH Receivable Management Services and AIH Early Recovery
Systems are engaged in the business of collecting nonperforming receivables on
behalf of third parties. Cannon and AIH Services, Inc. combined operating assets
and operations, and Cannon changed its name to AIH Receivable Management
Services, Inc. (AIH) effective December 1, 1999.

The consolidated financial statements include the accounts of the Company, ADAC
and AIH. All significant intercompany accounts and transactions have been
eliminated.

2. Finance Receivables And Revenue Recognition

The Company accounts for its investment in finance receivables under the
guidance of the American Institute of Certified Public Accountants Practice
Bulletin 6, Amortization of Discounts on Certain Acquired Loans (PB6) using
unique and exclusive static pools. The pools are established with underlying
accounts having similar attributes, based on acquisition timing and by seller.
Once a static pool is established, the accounts in the pool are not changed.
Each pool is initially recorded at cost. Until it is determined that the amount
and timing of collections are reasonably estimable and collection is probable,
PB6 requires the receivable be accounted for under the cost-recovery method. All
of the Company's pools are accounted for under the cost-recovery method.
Application of the cost-recovery method requires that any amounts received be
applied first against the recorded amount of the pool; when that amount has been
reduced to zero, any additional amounts received are recognized as income. The
discount between the cost of each pool of receivables purchased and the
contractual receivable of the accounts in the pool is not recorded since the
Company expects to collect a relatively small percentage of each pool's
contractual receivable balance.

3. Property and Equipment

Property, furniture, and equipment are stated at cost. Depreciation is
calculated on the straight-line method over the estimated useful lives of the
assets; the lives have been determined by management to be five years.

4. Income Taxes

The Company accounts for income taxes under the asset and liability method where
deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates

                                       22

<PAGE>


applied to taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date. Deferred tax assets are recognized to the extent
management believes that it is more likely than not that they will be realized.

5. Loss Per Common Share

Loss per common share is based on the weighted average number of common shares
outstanding during the periods presented. Because the effect of the inclusion of
stock options and warrants is anti-dilutive, diluted per share information is
not presented.

6. Stock-Based Compensation

The Company has elected to follow Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees (APB 25) and related interpretations in
accounting for its employee stock options. Under APB 25, because the exercise
price of employee stock options exceeds the market price of the underlying stock
on the date of grant, no compensation expense is recorded. The Company has
adopted the disclosure-only provisions of Statement of Financial Accounting
Standards No. 123, Accounting for Stock-Based Compensation (SFAS 123).

7. Customer Lists

Intangible assets consist of customer lists obtained in acquisitions and are
being amortized over 15 years.

During the year ended March 23, 2000, the Company estimated that the value and
future benefits of certain of these customer lists, based on discounted cash
flows, indicated the unamortized costs should be reduced. Accordingly, an
impairment charge of $45,070 was recorded.

8. Accounting Pronouncements and Recent Regulatory Developments

In June 2001, the FASB issued SFAS No. 142, Goodwill and Other Intangible
Assets. Goodwill and other intangible assets having an indefinite useful life
acquired in business combinations completed after June 30, 2001, are no longer
subject to amortization to earnings. Effective April 1, 2002, all goodwill and
other intangible assets having an indefinite useful life are no longer amortized
to earnings. The useful lives of other intangible assets must be reassessed, and
the remaining amortization periods must be adjusted accordingly. Goodwill and
other intangible assets having an indefinite useful life will be tested for
impairment annually, or more frequently if events or changes in circumstances
indicate that the assets might be impaired, using a two-step impairment
assessment. The first step of the goodwill impairment test compares the fair
value of a reporting unit with its carrying amount, including goodwill. If the
fair value of a reporting unit exceeds its carrying amount, goodwill of the
reporting unit is not considered impaired, and the second step of the impairment
test is not necessary. If the carrying amount of a reporting unit exceeds its
fair value, the second step of the goodwill impairment test is performed to
measure the amount of impairment loss, if any. The Company adopted the
provisions of SFAS 142 on April 1, 2002 and completed the first step of the
two-step impairment test. There was no impairment charge upon completion of the
impairment review. The Company's consolidated results of operations will be
impacted with the adoption of SFAS 142, when approximately $23,000 in annual
amortization will cease.

Also in June 2001, the FASB issued SFAS 143, Accounting for Asset Retirement
Obligations, which requires that the fair value of the liability for asset
retirement costs be recognized in an entity's balance sheet, as both a liability
and an increase in the carrying value of such assets, in the periods in which
such liabilities can be reasonably estimated. It also requires allocation of
such asset retirement cost to expense over its useful life. This Statement is
effective for fiscal years beginning after June 15, 2002. The Company has
determined the impact of this Statement on its consolidated financial position
or results of operations is not material.

                                       23

<PAGE>


In August 2001, the FASB issued SFAS 144, Accounting for the Impairment or
Disposal of Long-Lived Assets. SFAS 144 addresses financial accounting and
reporting for the impairment or disposal of long-lived assets. SFAS 144
supersedes SFAS 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of and related literature and establishes a
single accounting model, based on the framework established in SFAS 121, for
long-lived assets to be disposed of by sale. The Company implemented the
provisions of SFAS 144 as required on January 1, 2002. The adoption did not have
a material effect on the Company's consolidated financial position or
consolidated results of operations.

In April 2002, the FASB issued SFAS No. 145, "Recission of FASB Statements No.
4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections",
to eliminate an inconsistency between the required accounting for sale-leaseback
transactions and the required accounting for certain lease modifications that
are similar to sale-leaseback transactions. The statement also amends other
existing pronouncements. This statement is effective for fiscal years beginning
after May 15, 2002. The impact of adopting this statement on the consolidated
financial position or results of operations will not be material.

In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities", which addresses accounting and reporting for
costs associated with exit and disposal activities and replaces Emerging Issues
Task Force Issue No. 94-3, "Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in a Restructuring)". This Statement is effective for exit or
disposal activities that are initiated after December 31, 2002. The impact of
adopting this statement on the consolidated financial position or results of
operations will not be material.

Effective July 30, 2002, the Sarbarnes-Oxley Act of 2002 (the "Act") was signed
into law. The Act encompasses a broad range of new legislation designed to
increase accountability of public companies and investor confidence. The Act
establishes a new regulatory body, the "Public Company Accounting Oversight
Board", under the auspices of the Securities and Exchange Commission (the "SEC")
to oversee audits of companies offering equity or debt securities to the public,
and further regulates and redefines the relationship between a registered public
accounting firm and its audit clients. The Act establishes new disclosure
requirement for public companies, financial certification standards for public
company CEOs and CFOs restriction on the ability of officers and directors to
engage in certain types of transactions, accelerated reporting of certain types
of transactions and new rules of analysts. In addition, the Act enhances a
number of criminal penalties and enforcement measures available for securities
related offenses. The SEC was directed to study and issue final rules to
implement a number of directives contained in the Act, and some of the ensuing
rules are discussed below.

In August 2002, among other matters, the SEC adopted amendments to accelerate
filing deadlines for certain public reports, and adopted new rules to implement
Section 302 of the Act pertaining to financial statement certification and
clarify disclosure controls and procedures. The Company is not subject to the
accelerated filing deadlines at this time due to its size, however, it is
subject to the financial statement certification and disclosure control rules.
The Company intends to fully comply with all applicable new rules as they become
effective.

In December 2002, the FASB issued SFAS No. 148. "Accounting for Stock-Based
Compensation" to provide alternative methods of transition for a voluntary
change to the fair value based method of accounting for stock-based employee
compensation. In addition, this statement amends the disclosure requirements of
SFAS No. 123 of the same name to require prominent disclosure in both annual and
interim financial statements about the method of accounting for stock-based
employee compensation and the effect of the method used on reported results.
This statement is effective for fiscal years and interim periods ending after
December 15, 2002 and the Company has implemented it effective with this filing.
The Company intends to continue using the intrinsic method of accounting for
stock-based compensation first allowed under APB Option No. 25, "Accounting for
Stock Issued to Employees". Therefore, the impact of adopting SFAS No. 148 on
the consolidated financial statements of the Company is limited to the expanded
disclosure requirements of the statement.

                                       24

<PAGE>


In January 2003, the SEC adopted rules implementing Sections 406 and 407 of the
Act. Section 406 of the Act requires public companies to annually disclose
whether the company has adopted a code of ethics for its principal executive and
financial officers, and if it has not, to explain why it has not. Additionally,
the rules will required disclosure on a Form 8-K filing any amendments to or
waivers from the code of ethics relating to those officers. Section 407 of the
Act required public companies to disclose annually whether it has at least one
"audit committee financial expert", as defined in the rules, on the Company's
audit committee, and if so, the name of the audit committee financial expert and
whether the expert is independent of management. A company that does not have an
audit committee financial expert will be required to disclose this fact and
explain why it has no such expert. Both rules are effective for small business
issuers' annual reports for fiscal years ending on or after December 15, 2003.
The Company intends to comply with these rules on a timely basis.

Also in January 2003, the SEC adopted rules implementing section 401(a) of the
Act, which required public companies to disclose "all material off-balance sheet
financing transactions, arrangements, obligations (including contingent
obligations), and other relationships of the issuer with consolidated entities
or other persons, that may have a material current or future effect on financial
condition, changes in financial condition, results of operations, liquidity,
capital expenditures, capital resources, or significant components of revenues
or expenses." The rules require an additional section in Management's Discussion
and Analysis for the presentation of this new disclosure, and there are
additional rules for companies that are not small business issuers. The rules
are effective for interim and annual filings for periods ending on or after June
15, 2003. The impact of adopting this statement on the consolidated financial
position or results of operations will not be material

8. Use of Estimates

In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the consolidated financial
statements and revenues and expenses during the reporting period. Actual results
could differ from those estimates.


NOTE B - BANKRUPTCY AND REORGANIZATION

As a result of numerous events, on November 7, 1997 (the Filing Date), the
Predecessor Company filed a voluntary petition for reorganization in the United
States Bankruptcy Court for the District of Kansas (Bankruptcy Court) under
Chapter 11 of the United States Bankruptcy Code (Bankruptcy Code). On November
13, 1998, the Bankruptcy Court confirmed the Company's First Amended Joint Plan
of Reorganization (the Plan) dated July 29, 1998. Until February 19, 1999, the
Company operated its business as debtor in possession. On February 19, 1999 (the
effective date), all material conditions precedent to the Plan becoming binding
were resolved, the Plan became effective, and the following provisions of the
Plan commenced:

Argus Investment Group, Inc. (Argus) formerly First Mortgage Investment Co.
(FMIC), a creditor of the Company, released its secured claims against, and
acquired certain assets in exchange for 1,800,000 shares of Company common stock
of the Company; these shares initially constituted 60% of the 3,000,000 new
shares issued as part of the Company's recapitalization and reorganization and
an option to acquire an additional 3,000,000 shares at $.50 per share or
$1,500,000. Argus is controlled by Phillip J. Holtgraves, a member of the Board
of Directors of the Company and the father of Charles A. Holtgraves, the
Company's Chairman and President.

The Company issued shares of common stock and warrants and made partial payments
to certain other creditors in exchange for a release of their claims. The
creditors received 900,000 shares of Company common stock; these shares
constituted 30% of the 3,000,000 new shares issued as a part of the Company's
recapitalization and reorganization. The creditors also received 900,000

                                       25

<PAGE>


warrants each of which allowed the holder to purchase one share of common stock
per warrant at a price of $1.25. The warrants were callable by the Company at
130% of the strike price and expired on March 31, 2002.

Shares held by preferred and common stockholders of the Predecessor Company were
canceled; these stockholders received 300,000 shares of new Company common
stock, constituting 10% of the 3,000,000 new shares issued as part of the
Company's recapitalization and reorganization.


NOTE C - ACQUISITIONS AND AGREEMENTS

1. AIH Services, Inc.

On November 15, 1999, Cannon purchased certain assets of AIH Services, Inc.
Cannon paid a negotiated purchase price of $210,000, less cash received of
$38,154, which purchase price was paid in three non-interest-bearing
installments during the year ended March 31, 2000. The funds used to purchase
the AIH assets were loaned to Cannon by Argus. The assets included principally
furniture, equipment, and customer lists. Based on management's estimate of
relative fair market values, $100,000 of the purchase price was allocated to
furniture and equipment; the remainder was allocated to customer lists.

2. AFI Capital Corporation Agreement

In July 2001, the Company entered into a four-year agreement with AFI Capital
Corporation (Capital), a Nebraska corporation. Pursuant to the agreement,
Capital will provide financial, acquisition, and general public company business
consulting services. Compensation for such services will be based on a
successful-efforts basis and will consist primarily of the Company's common
equity. The proposed acquisition transaction discussed in the following
paragraph is subject to the terms and conditions of this agreement, wherein
Capital will be compensated for the successful completion of the acquisition.
Larry J. Horbach, who was appointed assistant secretary of the Company, and
elected to fill a vacant Company director position in March 2003, is the
president and a director of AFI Capital Corporation. Mr. Holtgraves is a
founding director.

3. Allen Drilling Acquisition Company Agreement

On June 7, 2001, the Company executed a Letter of Intent, which Letter of Intent
was amended in February 2002, to acquire, through a wholly owned subsidiary,
100% of the Common Stock of a private company in the energy field services (
primarily natural gas) industry. On April 22, 2002, the Company executed a
definitive Stock Purchase Agreement, the closing of which was subject to several
conditions. As a result of a material adverse change in the operating results
for the company to be acquired ( which results were generally consistent with
other companies in the same industry), the transaction did not close. The
parties, by mutual agreement, continued to leave the definitive agreement open,
and $75,000 of escrow deposits in place in anticipation of a turn around in the
industry. During the second quarter of fiscal year 2003, with the prices of
natural gas at unusual highs along with predicted natural gas production
shortfalls for sometime in the future, the anticipated industry turn occurred.
The Company intends to pursue the closing of the transaction, however the
closing will depend upon the availability of adequate financing at reasonable
rates and a favorable re-valuation of the field services company's fixed assets.

With the proposed transaction under the April 22, 2002 agreement, the completion
of the Madisonville Project as described in NOTE M- SUBSEQUENT EVENTS and the
pending venture with Gateway, the Company has determined that the ability to
generate long-term value for the common shareholders could be enhanced if the
present Company operations, (as described under the NATURE OF THE COMPANY'S
BUSINESS) were sold. The Company would then concentrate its growth efforts in
the energy industry. Negotiations have been entered into with an entity
controlled by the Company's principal creditor and majority stockholder, Argus,
wherein these operations would be exchanged for the debt held by Argus. The
Board of Directors has engaged an investment banking firm to determine the fair
market value as of September 30, 2003, of the operations to be sold. The
transaction is anticipated to result in a gain to the Company.

                                       26

<PAGE>


Upon completion of the transaction, the Company intends to amend its Certificate
of Incorporation to effect a 1 for three reverse stock split and a name change.

Argus, the holder of over 71% of the presently outstanding common stock of the
Company has indicated its intent to vote in favor of the above.

NOTE D - FINANCE RECEIVABLES

AIH purchases defaulted consumer receivables at a discount from the actual
principal balance. The following summarizes the change in finance receivables
for the years ended March 31, 2003 and 2002 respectively:

                                                          2003          2002
                                                       ---------      ---------
Beginning balance, acquisition                         $  88,899      $ 255,605

Purchase of finance receivables
Collections applied to principal on finance
  receivables                                            (57,903)      (166,706)
                                                       ---------      ---------
Balance, March 31                                      $  30,996      $  88,899
                                                       =========      =========

To the extent that the carrying amount of a pool of receivables exceeds its fair
value, a valuation allowance would be recognized in the amount of such
impairment. As of March 31, 2003, no provision for loss has been recorded.


NOTE E - NOTES PAYABLE

The following summarizes the Company's notes payable at:

                                                       March  31       March 31
                                                         2002            2003
                                                       ---------      ----------
Unsecured borrowings under a $1,355,000
  line of credit from ARGUS, interest
  at prime, secured by substantially
  all of the Company's assets                          $  923,932     $  822,923

Due AFI Capital Corporation,
  interest at 8%,
  non secured                                              42,815        127,815

Borrowings under bank line of credit,
  interest at two over prime, unsecured,
  guaranteed by a director                                 99,780         69,168
                                                       ----------     ----------
                                                       $1,066,527     $1,019,915
                                                       ----------     ----------
NOTE F - LEASES

The Company leased its office space from its majority stockholder, ARGUS, under
an operating lease at a lease cost of $8,800 per month through February 2002,
under a non-cancelable lease agreement. The Company subsequent thereto entered
into a month to month lease with Argus through July 31, 2002. On August 1, 2002,
the Company entered into a two year lease with a non-related third party.

                                       27

<PAGE>


The Company leased equipment under a capital lease for a period of five years.
During the fiscal year ended March 31, 2002, the Company paid off the lease.
Property recorded under the capital lease had an original cost of $121,311 and a
net book value of $10,368.00 at March 31, 2003.

Operating lease expense was approximately $62,368 and $123,701 for fiscal years
2003 and 2002 respectively.

The following is a schedule of future minimum rental payments required under the
above leases as of March 31, 2003:


        Year ending                 Capital               Operating
          March 31,                  Lease                  Lease
        -----------             ---------------         --------------


           2004                         -                     99,792
           2005                         -                     34,304
                                                          ----------
                                                           $ 134,096
                                                          ==========

NOTE G - EMPLOYEE STOCK OPTIONS

On February 19, 1999, the Company issued 50,000 shares of common stock at $0.50
per share, to a non-employee for service provided in connection with an
acquisition. The options are immediately exercisable and will expire ten years
from the date of issuance.

Options to purchase 299,999 shares of the Company's common stock have been
issued to an officer of the Company. One hundred forty-nine thousand nine
hundred ninety-nine (149,999) of the options were exercisable at $0.25 per share
on or after November 13, 2000 through the expiration date of November 13, 2010,
if the Company's common stock has attained and maintained bid prices of $1, $2,
$3, and $4 for twenty consecutive trading days, respectively, one-fourth
(37,500) of the options are exercisable.

In January, 2001, in connection with the resignation of the officer, the terms
of the option were changed resulting in an immediate vesting of all options and
a fixed exercise price of $.25 per share exercisable to February 19, 2011.

The stock options are accounted for as a variable plan under APB 25 and related
Interpretations. No compensation cost has been recognized for the options. Had
compensation cost for the options been determined based on the fair value of the
options at the grant dates consistent with the method of SFAS 123, and to
reflect the changes in January 2001, the Company's net loss and loss per common
share would have been increased to the pro forma amounts indicated below for the
year ended March 31, 2003 and 2002 respectively.

                                       28

<PAGE>


                                                     2003              2002
                                                 -----------------------------
Net loss                      As reported        $ (331,881)        $ (496,497)
                                Pro forma          (331,881)          (496,497)

Loss per common share         As reported           $ (0.06)           $ (0.08)
                                Pro forma             (0.06)             (0.08)


The fair value of each option grant is estimated on the date of grant using the
Black-Scholes options-pricing model with the following weighted-average
assumptions used for grants: dividend yield of 0.0%; expected volatility of
289.1%; risk-free interest rates of 5.54%; and expected lives of 10 years.

The following summary sets forth the activity under the Plan:
<TABLE>
<CAPTION>


                                                                    Options                         Options
                                                                  exercisable                    exercisable
                                                                   at $.50                        at $.25
                                                             ---------------------     ---------------------------------
                                                               Time       Vested        Time       Vested
                                                             vesting      on grant     vesting     on grant       Total
                                                             -------      --------     -------     --------      -------

<S>                                                          <C>          <C>                      <C>          <C>
Outstanding at March 31, 2001                                 25,000       50,000         --        299,999      374,999
     Granted during fiscal year ended March 31, 2002            --           --                        --           --
     Canceled during fiscal year ended March 31, 2002           --           --                        --           --
     Exercised during fiscal year ended March 31, 2002          --           --                        --           --
                                                             -------      -------      -------      -------      -------

Outstanding at March 31, 2002                                 25,000       50,000         --        299,999      374,999
     Granted during fiscal year ended March 31, 2003            --           --           --           --           --
     Canceled during fiscal year ended March 31, 2003           --           --           --           --           --
     Exercised during fiscal year ended March 31, 2003          --           --           --           --           --
                                                             -------      -------      -------      -------      -------

                                                              25,000       50,000         --        299,999      374,999
                                                             =======      =======      =======      =======      =======

Options vested                                                  --         50,000         --        299,999      349,999
                                                             =======      =======      =======      =======      =======



                                       29

<PAGE>


The following tables summarizes information about options outstanding at March
31, 2003 and 2002:

                                         2003 compensatory stock options
                     ---------------------------------------------------------------------------

                              Options outstanding                                      Options exercisable
-----------------------------------------------------------------------------  ---------------------------------------
                                         Weighted-average
    Range of              Number           remaining         Weighted-average       Number         Weighted-average
 exercise prices       outstanding      contractual life     exercise price       exercisable      exercisable price
------------------   -----------------  -----------------   -----------------  -----------------  ------------------
$0.25 to $0.50           374,999            8.1 years             $ 0.30            349,999            $ 0.29


                                         2002 compensatory stock options
                     ---------------------------------------------------------------------------

                              Options outstanding                                      Options exercisable
-----------------------------------------------------------------------------  ---------------------------------------
                                                  Weighted-average
    Range of              Number           remaining         Weighted-average       Number         Weighted-average
 exercise prices       outstanding      contractual life     exercise price       exercisable      exercisable price
------------------   -----------------  -----------------   -----------------  -----------------  --------------------
$0.25 to $0.50           374,999            7.1 years             $ 0.29             50,000             $ 0.50

</TABLE>


NOTE H - INCOME TAXES

The difference between actual income tax expense (benefit) and expected income
tax expense (benefit) at the statutory federal income tax rate (34%) computed as
follows at March 31,

                                                        2003             2002
                                                     ---------        ---------
Expected income tax benefit
     at statutory rate                               $(112,840)       $(168,809)
State income taxes, net                                (10,711)         (16,024)
Change in valuation allowance                          121,028          180,901
Other                                                    2,523            3,932
                                                     ---------        ---------
        Actual income tax expense                    $    --          $    --
                                                     =========        =========

The following is the tax effect of temporary differences that gave rise to the
significant portions of deferred tax assets and liabilities at March 31:

                                                      2003             2002
                                                   -----------      -----------
Deferred tax assets
     Net operating loss carryforward               $ 4,268,628      $ 4,147,600

Valuation allowance                                 (4,268,628)      (4,147,600)
                                                   -----------      -----------

        Net deferred tax asset                     $      --        $      --
                                                   ===========      ===========

                                       30

<PAGE>


The Company has estimated net operating loss carryforwards of approximately
$10.7 million as of March 31, 2003. These net operating losses will expire in
the years ended March 31, 2009 through March 31, 2024.

Total deferred taxes consist primarily of the benefit of the net operating loss
carryforward. Management has established a valuation allowance to reduce the
total deferred tax asset to $0. As of March 31, 2003, the Company has no
recoverable income taxes previously paid.



NOTE I - PROPERTY AND EQUIPMENT

Property and equipment consisted of the following at:

                                                      2003               2002
                                                   ---------          ---------
Land                                               $    --            $    --
Building                                                --                 --
Furniture and fixtures                               297,977            292,099
                                                   ---------          ---------
                                                     297,977            292,099

Accumulated depreciation                            (225,459)          (175,872)
                                                   ---------          ---------
                                                   $  72,518          $ 116,227
                                                   =========          =========

NOTE J - FAIR VALUE OF FINANCIAL INSTRUMENTS

Financial Accounting Standards Board Statement No. 107, Disclosure About Fair
Value of Financial Instruments, and Financial Accounting Standards Board
Statement No. 119, Disclosure About Derivative Financial Instruments and Fair
Value of Financial Instruments, require that the Company disclose estimated fair
values for its financial instruments. Fair value estimates have been made as of
March 31, 2003 and March 31, 2002 based on the current economic conditions, risk
characteristics of the various financial instruments, and other subjective
factors.

The following methods and assumptions were used to estimate the fair value of
each class of financial instrument for which it is practicable to estimate that
value:

Cash:  The carrying amounts approximated fair value.

Finance receivables: The Company records finance receivables at cost, which is
discounted from the actual principal balance. This cost is reduced as
collections are made. The carrying value of finance receivables approximates
fair value at March 31, 2003 and 2002.

Notes payable: The fair values of the notes payable are estimated based on
discounted values of contractual cash flows using rates currently available for
similar loan types.

The estimated fair value and carrying value of the Company's financial
instruments are as follows at March 31, 2003 and 2002:

                                       31

<PAGE>
<TABLE>
<CAPTION>


                                   __________2003__________                __________2002__________
                             Carrying value          Fair value      Carrying value           Fair value
                            ------------------   -------------------------------------   -------------------
<S>                             <C>                 <C>                 <C>                  <C>
Financial assets:
     Cash                      $   42,196           $   42,196           $   37,794           $   37,994
     Finance receivable            30,996               30,996               88,899               88,899
Financial liabilities:
     Notes payable              1,019,915            1,019,915              813,932              813,932

</TABLE>


NOTE L - ACCOUNTS PAYABLE - RELATED PARTY

Accounts payable - related party consisted of amounts advanced to the Company by
ARGUS. No interest or repayment terms exist.


NOTE M - SUBSEQUENT EVENTS

On April 30, 2003, the Company announced the closing of an Agreement with
Gateway Energy Corporation and certain of its subsidiaries of Houston, Texas
("Gateway") under which it provided, through the Company's wholly-owned
subsidiary, Allen Drilling Acquisition Company ("ADAC"), $900,000 of credit
enhancements in the form of Letters of Credit. These credit enhancements enabled
Gateway to obtain additional financing, in the form of a three year Balloon Note
from a Houston bank to complete the construction of certain natural gas pipeline
facilities ("Pipeline Facilities") located in Madison County, Texas, (The
"Madisonville Project"). ADAC secured the Letters of Credit through the private
placement of a new series of preferred stock (the "Series A"), to two investor
groups. The Certificate of Designation for the Series A provides, among other
things, for dividend payments to the named holders thereof, equal to sixty-six
and two thirds, (66.67%) of distributions received by ADAC from Gateway, and an
unanimous vote of the Series A to exercise the Equity Participation Option as
further described below.

The Agreement provides, among other things, that ADAC will receive, during the
term of the additional financing, one-half (50%) of the price upside portion
only, if any, of the monthly fee to be received by Gateway from the Madisonville
Project. The Agreement also provides that ADAC will have the option to either:
(i) receive at the end of the Balloon Note term a lump-sum payment, which when
added to the payments received, if any, for the price upside portion, will
result in a 15% pre-tax internal rate of return on the $900,000, or (ii) to
exercise the Equity Participation Option by paying off the Balloon Note on or
before the end of the Balloon Note term in exchange for a thirty-three and
one-third (33.33%) ownership interest in the Pipeline Facilities from that date
forward. Gateway is obligated to pay the periodic interest payments on the
Balloon Note during the three year term of the Balloon Note. Further, Gateway
has granted liens to ADAC, subordinate to its banks, on its economic interest in
the Madisonville Project and certain other natural gas operating systems and
natural gas operating assets. The Agreement contains cross collateral and cross
default provisions linking it to an additional Gateway term note at the same
bank, the proceeds of which were used by Gateway to fund the Madisonville
Project.

The Madisonville Project is operated under a long-term agreement between
Gateway, Hanover Compression Limited Partnership, and Redwood Energy Production,
L. P. and is designed to treat gas to remove impurities from the gas to enable
the gas to meet pipeline sales quality specifications. The Madisonville Project
employs the state-of-the-art, patented, absorption based technology developed by
Advanced Extraction Technologies, Inc., for which Gateway has the exclusive U.
S. license, to remove nitrogen from the gas.

                                       32

<PAGE>


NOTE N - GOING CONCERN

The accompanying consolidated financial statements have been prepared on going
concern basis, which contemplates the Company's continuity of operations,
realization of assets, and liquidation of liabilities in the ordinary course of
business. These statements do not reflect adjustments that might result if the
Company is unable to continue as a going concern. As a result of continued poor
operating performance such matters are subject to significant uncertainty. As
set forth in NOTE M-SUBSEQUENT EVENTS, the Company, in fiscal year 2004, has
closed an initial investment in the oil and gas industry with Gateway Energy
Corporation of Houston, Texas (the Madisonville Project). The Company intends to
continue investing in the oil and gas industry through a field services
acquisition, as is described in Note B. In addition, the Company, as of the
filing of this Annual Report, has entered into negotiations to participate in an
additional venture with Gateway Energy Corporation, which project has an
anticipated closing late in early calendar year 2004. Management believes this
industry and the future acquisitions and project ventures with Gateway Energy
could bring profits and capital to sustain future growth and operations.


NOTE O - RELATED PARTIES

Reference is made to NOTE M- SUBSEQUENT EVENTS and NOTE C- ACQUISITIONS AND
AGREEMENTS for additional information concerning the following:

Larry J. Horbach who was appointed to fill a vacant director's position in May
2003, and Charles A. Holtgraves, the Chairman of the Board and President of the
Registrant are also directors of Gateway Energy Corporation.

Mr. Horbach is the President and Chairman of the Board of AFI Capital
Corporation. Mr. Holtgraves is a director of AFI Capital Corporation,

Argus Investment Group, Inc. ("ARGUS ") formerly known as First Mortgage
Investment Co. is a family owned corporation involved in venture capital lending
and financing. The stock of ARGUS is 100% owned by the Philip J. Holtgraves
Irrevocable Trust DTD 9/20/93. Philip J. Holtgraves is the Chairman of ARGUS , a
Director of the Registrant and the father of Charles A. Holtgraves. Charles A.
Holtgraves is the President of ARGUS and Chairman, President and Director of the
Registrant.

Mr. Holtgraves is the President and the 100% owner of Balance In Full, Inc.
("BIF") BIF. places delinquent charged of credit card accounts with AIH
Receivable Management Services, Inc. ,a wholly owned subsidiary of the
Registrant, ("AIH") for collection services. The fees paid by BIF for regular
collections are 36% and 50% for legal accounts, which fees are comparable for
non related party accounts. During the fiscal year ended March 31, 2003, gross
collections were approximately $149,300.

AIH leased office space from ARGUS for $8,800 per month to February 2002 and
then $4,400 per month through July 2002. The property was then sold by ARGUS to
a non related party, and AIH is currently paying $7,795 per month.

                                       33

<PAGE>


                                    PART III
                                    --------

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
         PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
         ----------------------------------------------------------

Directors and Executive Officers.

As of March 31, 2003, the following persons served as directors and executive
officers of the Company.

         NAME                  AGE                          POSITION
         ----                  ---                          --------

Charles A. Holtgraves           38                Chairman/ President/Treasurer/
                                                  Director

Philip J. Holtgraves            78                Director and Secretary


Charles A. Holtgraves. From November 1998 to current, Mr. Holtgraves has been
Chairman, President, Treasurer and Director of the Company and its
subsidiaries.. Mr. Holtgraves is the President of Argus Investment Group, Inc.
("Argus") a family owned corporation involved in venture capital lending and
financing. Mr. Holtgraves was the Chief Financial Officer and Vice President of
First Mortgage Investment, Co., a full service mortgage banking operation, which
he co-founded in 1988 until its sale of assets in August 1998. Mr. Holtgraves
has been an officer and director of Gateway Energy Corporation, a publicly
traded natural gas company, since 1988. Mr. Holtgraves graduated from McPherson
College in 1988 with a dual degree in Finance and Accounting. Charles Holtgraves
is the son of Philip J. Holtgraves.


Philip J. Holtgraves. From November 1998 to current, Mr. Holtgraves has been a
Director of the Company and also serves as the Secretary of the Company. Mr.
Holtgraves is the Chairman of Argus a family owned corporation involved in
venture capital lending and financing. Mr. Holtgraves was the principal owner of
First Mortgage Investment, Co., a full service mortgage banking operation, which
he co-founded in 1988. Mr. Holtgraves was president and Chief Operating Officer
of Missouri Valley Investment, Co. from 1954 through 1987, becoming the sole
shareholder in 1965. Mr. Holtgraves sold Missouri Valley Investment, Co. in 1987
to a Texas Savings Association. From 1950 to 1954, Mr. Holtgraves was employed
by the Mid Continent regional office of the Prudential Insurance Co. in Kansas
City. In addition Mr. Holtgraves was the principal owner of and President of
Construction materials Inc., a chain lumber dealer in eastern Kansas. He sold
his interest in the operation in 1976. Mr. Holtgraves was admitted to the
Missouri Bar Association in 1951 and practiced law in the Kansas City area until
1952. Mr. Holtgraves has served on the board of directors of several banks
including First National Bank of Chanute and Mark Twain Plaza Bank in Kansas
City. Mr. Holtgraves was an agent for Rail Road Savings & Loan in the Olathe,
Kansas area for over twenty-five years. Mr. Holtgraves also holds a Missouri
Real Estate Broker's License. He is the father of Charles Holtgraves.

Section 16(a) Beneficial Ownership Reporting Compliance
-------------------------------------------------------

Section 16(a) of the Securities Exchange Act of 1934 and the related regulations
require the Company's directors, executive officers and persons who own more
than ten percent of the Company's Common Stock to file with the Securities and
Exchange Commission initial reports of their beneficial ownership of the
Company's Common Stock and other equity securities of the Company. In addition,
such persons are required to furnish the Company with copies of all such
filings.

                                       34

<PAGE>


To the Company's knowledge, based solely upon a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required during the fiscal year ended March 31, 2003, all Section
16(a) filing requirements applicable to its directors, executive officers and
ten percent beneficial owners were complied with.


ITEM 10. EXECUTIVE COMPENSATION
         ----------------------

     No executive officer of the Company received compensation from the Company
during the 2001, 2002 and 2003 fiscal years.


                      OPTION/SAR GRANTS IN LAST FISCAL YEAR

                                      None


          AGGREGATED OPTION/SAR EXERCISED IN YEAR ENDED MARCH 31, 2003
                                      None




                     OPTION/SAR VALUES AS OF MARCH 31, 2003
<TABLE>
<CAPTION>


          (a)                   (b)              (c)                 (d)                        (e)
                                                                                            Values
                                                                                            of
                                                                                            Unexercised
                                                              Number of                     In-the-Money
                                                              Unexercised                   Options/SARs at
                               Shares                         Options/SARs at               FY-End($)
                            Acquired on          Value        FY-End (#) Exercisable/       Exercisable/
         Name               Exercise (#)      Realized ($)    Unexercisable                 Unexercisable
         -------------------------------------------------  ---------------------------------------------

<S>               <C>             <C>               <C>           <C>                         <C>
William B. Morris (1)            -0-               -0-            0/299,999                   $-0-
</TABLE>


(1)  Mr. Morris resigned as an officer and director in January 2001, but was
     allowed, as a part of his severance package to retain his options.

Compensation of Directors

The Company paid no director's fees.


Employment Contracts and Termination of Employment and Change-in-Control
Arrangements

The Company has not entered into any employment contract with any executive
officer or any other contract with respect to the resignation, retirement or any
other termination of such executive officer's employment with the Company or its
subsidiary or resulting from a change-in-control of the Company or a change in
any executive officer's responsibility following a change-in-control.


ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
         --------------------------------------------------------------

The following table sets forth certain information regarding the ownership of
the Company's common stock as of March 31, 2003: (i) each director; (ii) each
executive officer named in the Summary Compensation Table; (iii) all executive
officers and directors of the Company as a group; and (iv) all those known by

                                       35

<PAGE>


the Company to be beneficial owners of more than five percent of its common
stock. The percentage of ownership is based on 5,866,137 shares outstanding on
March 31, 2003.
                                       Beneficial Ownership (1)     Percent of
Beneficial Owner                          Number of Shares             Total
----------------                          ----------------             -----

    Charles A. Holtgraves
    5425 Martindale
    Shawnee, KS 66218                       4,166,135(2)               71.0%

    Philip J. Holtgraves
    5425 Martindale
    Shawnee, KS 66218                       4,166,135 (3)              71.0%

    Argus Investment Group, Inc.
    5425 Martindale
    Shawnee KS, 66218                       4,166,135                  71.0%


    All Executive officers
    and directors as a group
    (2 persons)                             4,166,135(4)               71.0%

(1)  Unless otherwise indicated in the footnotes to this table and subject to
     community property laws where applicable, each of the stockholders named in
     this table has sole voting and investment power with respect to the shares
     indicated as beneficially owned.

(2)  Includes 4,166,135 shares controlled by Argus Investment Group, Inc.
     ("Argus"). Charles A. Holtgraves is the President of Argus. Argus is 100%
     owned by the Philip J. Holtgraves Irrevocable Trust DTD 9/20/93. Charles A.
     Holtgraves is the son of Philip J. Holtgraves.

(3)  Includes 4,166,135 shares controlled by Argus. Philip J. Holtgraves is the
     Chairman of Argus.

(4)  Includes only shares actually issued and outstanding.


ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
         ----------------------------------------------

     Argus Investment Group, Inc. ("ARGUS ") formerly known as First Mortgage
Investment Co. ("FMIC") is a family owned corporation involved in venture
capital lending and financing. The stock of ARGUS is 100% owned by the Philip J.
Holtgraves Irrevocable Trust DTD 9/20/93. Philip J. Holtgraves is the Chairman
of ARGUS , a Director of the Company and the father of Charles A. Holtgraves.
Charles A. Holtgraves is the President of ARGUS and Chairman, President and
Director of the Company.

     Reference is made to ITEM 1. Description of Business - History of the
Company and Subsidiary and Subsequent Events for additional information with
respect to this ITEM 12. Such items discuss various related party transactions
as a result of the implementation of the February 19, 1999 Plan of
Reorganization and recapitalization of the Company.

                                       36

<PAGE>

                                     PART IV
                                     -------

ITEM 13. EXHIBITS AND REPORTS
         --------------------

(a) Exhibits
------------

*2.1 First Amended Joint Plan of Reorganization dated July 29, 1998 of Advanced
Financial, Inc. and AFI Mortgage Corp. (Exhibit 2.1 of the Current Report on
Form 8-K filed with the Securities and Exchange Commission on November 25,
1998).

*3.1 Articles of incorporation and by-laws (Exhibit 3.2 to Registration
Statement on Form S-2 of Advanced Financial, Inc. filed with the Securities and
Exchange Commission on January 31, 1993 (No. 33-45406)).

*4.1 Instruments Defining Rights of Holders (Exhibit 4.0 to Registration
Statement on Form S-2 of Advanced Financial, Inc. filed with the Securities and
Exchange Commission on January 31, 1993 (No. 33-45406)).

*4.2 Variable Rate Commercial Note Secured With Loan Servicing Rights dated July
27, 1994 made by AFI Mortgage Corp., successor to Continental Mortgage, Inc.
("AFIM"), to order of Commercial Federal Bank, successor to Rail Road Savings
Bank, FSB ("Lender") and agreement dated October 11, 1996 between Advanced
Financial, Inc. and AFIM, as Borrower, and Lender and Matrix Financial Services
Corporation (Exhibit 4.2 to Advanced Financial, Inc.'s Annual Report on Form
10-KSB for the fiscal year ended March 31, 1997 filed with the Securities and
Exchange Commission on February 16, 1999).

*4.3 Variable Rate Commercial Balloon Note For Purchase of Loan Servicing Rights
dated December 31, 1993 made by AFI Mortgage Corp., successor to Continental
Mortgage, Inc. ("Borrower"), to the order of Argo Federal Savings Bank, FSB
("Lender") and Security Agreement For Sale of Mortgage Loan Servicing Rights
dated December 31, 1993 between Borrower and Lender (Exhibit 4.3 to Advanced
Financial, Inc.'s Annual Report on Form 10-KSB for the fiscal year ended March
31, 1997 filed with the Securities and Exchange Commission on February 16,
1999).

*10.1 Commercial Real Estate Contract with Standard Builders (Exhibit 10.1 to
Registration Statement on Form S-2 of Advanced Financial, Inc. filed with the
Securities and Exchange Commission on February 11, 1993 (No. 33-58186)).

*10.2 Contract for Services between the Company and Rollie C. Johnson (Exhibit
10.1 to Registration Statement on Form S-2 of Advanced Financial, Inc. filed
with the Securities and Exchange Commission on February 11, 1993 (No.
33-58186)).

*10.3 Real Estate Mortgage to Secure a Loan from Citizen's National Bank of Fort
Scott ("Bank") dated February 3, 1997 made by AFI Mortgage, Corp., as Mortgagee,
to Bank and accompanying notes as amended (Exhibit 10.3 to Advanced Financial,
Inc.'s Annual Report on Form 10-KSB for the fiscal year ended March 31, 1997
filed with the Securities and Exchange Commission on February 16, 1999).

*10.4 Second Mortgage dated March 29, 1996 made by Advanced Financial, Inc. and
AFI Mortgage, Corp., as Mortgagor, to First Mortgage Investment Co., as
Mortgagee (Exhibit 10.4 to Advanced Financial, Inc.'s Annual Report on Form
10-KSB for the fiscal year ended March 31, 1997 filed with the Securities and
Exchange Commission on February 16, 1999).

*10.5    AFI Capital Agreement.

                                       37

<PAGE>


*10.6 Agreement by and between Gateway Energy Corporation and its wholly-owned
subsidiaries and Allen Drilling Acquisition Company, filed as Exhibit A in
Registrant's Form 8-K dated May 9, 2003.

*10.7 The Certificate of Designation, Preferences and Rights of the Senior
Series A Preferred Stock, Stated Value of $1,000 of Allen Drilling Acquisition
Company, filed as Exhibit B in Registrant's Form 8-K dated May 9, 2003.

*10.8 Agreement between Advanced Financial, Inc., Charles A. Holtgraves, Davis
Investments VI LP, and Allen Drilling Acquisition Company, filed as Exhibit C in
Registrant's Form 8-K dated May 9, 2003.

*16 Letter regarding change in certifying accountant, filed as Exhibit 16 to
Registrant's Form 8-K-A/1 dated May 13, 2003.

21 Subsidiaries of Registrant, filed herewith.

31 Certification Pursuant to Rule 13a-14 or 15d-14 of the Securities Exchange
Act of 1934, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002, filed herewith

32 Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith

99.C6 Opinion of Weaver & Martin, LLC, Certified Public Accountants, March 31,
2003, and dated October 27, 2003, filed herewith



(b) Reports on Form 8-K


             * Report dated May 9, 2003 -Items 4, 5, and 7.


Asterisk indicates exhibits and reports on Form 8-K incorporated by reference as
indicated; all other exhibits and reports are filed herewith.


                                       38

<PAGE>

                                   SIGNATURES


     In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                             ADVANCED FINANCIAL, INC.
                                                  (Registrant)


Dated:  11-21-03                            By:  /s/ Charles A. Holtgraves
       ----------                              --------------------------------
                                                     Charles A. Holtgraves
                                                     Chairman, President, and
                                                     Treasurer


     In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the Registrant and in the capacities and on
the dates indicated.


         Signatures                 Title                             Date
----------------------------    ------------                     ------------



/s/ Charles A. Holtgraves        Director                          11-21-03
----------------------------                                     ------------
    Charles A. Holtgraves


/s/ Phillip J. Holtgraves        Director                          11-21-03
----------------------------                                     ------------
    Phillip J. Holtgraves

                                       39