Conformed
            _________________________________________________________
                              ---------------------
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                              ---------------------


                                   FORM 10-QSB


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



      For the Quarter ended:                             Commission file number
        December 31, 1998                                     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 Identification No.)
      incorporation or organization)


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


                                 (913) 441-2466
                            Issuer's telephone number
                               -------------------


      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

      State the number of shares  outstanding  of each of the issuer's  classes
of common equity as of January 25, 1999: 5,836,476

      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___ No___

           Transactional Small Business Disclosure Format Yes___ No X





<PAGE>
                                                        Advanced Financial, Inc.


              KINDER MORGAN ENERGY PARTNERS, L.P. AND SUBSIDIARIES


                                TABLE OF CONTENTS


                                                                      Page No.
                                                                      ________

PART I. FINANCIAL INFORMATION


     ITEM 1. - Financial Statements..................................      1

     
     ITEM 2. - Management's Discussion and Analysis or
               Plan of Operation.....................................      7


PART II. OTHER INFORMATION


     ITEM 1. - Legal Proceedings.....................................      9


     ITEM 2. - Changes in Securities and Use of Proceeds.............      9


     ITEM 3. - Default Upon Senior Securities........................      9


     ITEM 4. - Submission of Matters to a Vote of Security Holders...      9


     ITEM 5. - Other Information.....................................      9 


     ITEM 6. - Exhibits and Reports on Form 8-K......................     10







                                    i
<PAGE>


                                                       Advanced Financial, Inc.


                         PART I - FINANCIAL INFORMATION

ITEM 1.   FINANCIAL STATEMENTS




                                    Page - 1
 
<PAGE>


                                                       Advanced Financial, Inc.

                     ADVANCED FINANCIAL, INC. AND SUBSIDIARY
                      Condensed Consolidated Balance Sheets
                      December 31, 1997 and March 31, 1997


        Assets                     December 31, 1998      March 31, 1998
                                   -----------------      --------------
                                        (Unaudited)

Cash and investments                  $      72,775         $    58,759
Mortgage servicing advances and
    accounts receivable                           -             151,097
Mortgage loans held for investment            5,860               5,997
Property and equipment, net               1,047,893           1,070,553
Prepaid expenses                              1,805                   -
Other                                            35              14,083
                                      -------------         -----------

        Total assets                  $   1,128,369         $ 1,300,490
                                      =============         ===========


        Liabilities

Accounts payable and accrued expenses $      15,352         $    24,292
Notes payable                               711,970             717,357
                                      -------------         -----------

                                            727,322             741,649

        Liabilities Subject to Compromise

Accounts payable and accrued
     expenses                             3,044,508           3,024,595
Notes payable                               647,837             659,837
Notes payable stock recission               200,000             200,000
Capitalized lease obligations                65,426              65,426
                                      -------------         -----------
                                          3,957,771           3,949,858
                                      -------------         -----------

        Total liabilities             $   4,685,093         $ 4,691,507

        Stockholder(s') Equity

Preferred stock, Series B, $.005
      par value 100,000,000 shares
      authorized; 363,000
      issued and outstanding                  1,815               1,815
Common Stock, $.001 par value
      25,000,000 shares
      authorized; 5,836,476 
      issued and outstanding                  5,836               5,836
Paid-in capital                           9,959,840           9,959,840
Deficit                                 (13,082,870)        (12,917,163)
                                      --------------        ------------
                                         (3,115,379)         (2,949,672)

Treasury stock, 99,869 shares of
      Common Stock, at cost                (441,345)           (441,345)
                                      --------------        ------------

      Total stockholder(s') equity       (3,556,724)         (3,391,017)
                                      --------------        ------------

Total liabilities and stockholder(s')
      equity                          $   1,128,369         $ 1,300,490
                                      ==============        ============


See accompanying notes to condensed consolidated financial statements.


                                    Page - 2

<PAGE>
                                                        Advanced Financial, Inc.



                     ADVANCED FINANCIAL, INC. AND SUBSIDIARY
          Condensed Consolidated Statement of Operations For the three
           month period ended December 31, 1998 and December 31, 1997

                                             Three Months Ended
                                    December 31, 1998    December 31, 1997
                                    -----------------    -----------------
                                      (Unaudited)          (Unaudited)

Revenues:

Servicing fee income                  $           -         $     1,694
Other fee income                                  -               1,170
Gain/(Loss) on sale of mortgage loans             -                (104)
Interest                                          -                 134
Other                                        89,574              37,125
                                      -------------         -----------

        Total operating revenues      $      89,574         $    40,019
                                      -------------         -----------


Expenses:

Servicing expense                     $      (1,778)        $      (776)
Personnel                                    17,493              15,943
General and administrative                   24,777              23,006
Interest                                     26,945              35,021
Depreciation and amortization                 7,553               7,553
Other                                        (1,200)            (19,257)
                                      -------------         -----------

        Total operating expenses      $      73,790         $    61,490
                                      -------------         -----------

        Loss before income taxes      $      15,784         $   (21,471)

Income tax expense                                -                   -
                                      -------------         -----------

        Net loss                      $      15,784         $   (21,471)
                                      =============         ===========

Weighted average shares outstanding       5,736,607           5,736,607

Loss per share of Common Stock        $       (0.00)        $     (0.01)
                                      =============         ===========


See accompanying notes to condensed consolidated financial statements.


                                    Page - 3

<PAGE>
                                                        Advanced Financial, Inc.


                     ADVANCED FINANCIAL, INC. AND SUBSIDIARY
           Condensed Consolidated Statement of Operations 
    For the nine month period ended December 31, 1998 and December 31, 1997

                                             Nine Months Ended
                                 December 31, 1998          December 31, 1997
                                   (Unaudited)                 (Unaudited)

Revenues:

Servicing fee income                  $           -         $    56,916
Other fee income                                  -              22,311
Gain/(Loss) on sale of mortgage loans           (95)            (45,261)
Gain on sale of servicing rights             25,344                   -
Interest                                      3,316              10,937
Other                                       168,785             136,329
                                       ------------         -----------

        Total operating revenues            197,350             181,232
                                       ------------         -----------


Expenses:

Servicing expense                     $      (1,510)        $    80,371
Personnel                                    51,476             152,487
General and administrative                  221,667             114,749
Interest                                     82,991             135,823
Depreciation and amortization                22,660              56,852
Other                                       (16,801)            (21,150)
                                      -------------         -----------

        Total operating expenses            360,483             519,132
                                      -------------         -----------

        Loss before income taxes           (163,133)          (337,900)

Income tax expense                                -                   -
                                      -------------         -----------

        Net loss                      $    (163,133)        $  (337,900)
                                      =============         ===========

Weighted average shares outstanding       5,736,607           5,736,607

Loss per share of Common Stock        $       (0.05)        $     (0.08)
                                      =============         ===========


See accompanying notes to condensed consolidated financial statements.


                                    Page - 4

<PAGE>

                                                        Advanced Financial, Inc.


                     ADVANCED FINANCIAL, INC. AND SUBSIDIARY
                 Condensed Consolidated Statements of Cash Flows
        For the nine month period December 31, 1998 and December 31, 1997

                                               Nine Months Ended
                                   December 31, 1998      December 31, 1997
                                      (Unaudited)            (Unaudited)

Net cash (used in) provided by
     operating activities             $      31,266             438,585

Cash flows from investing activities:
  Acquisition of property and equipment           -             168,844
  Acquisition/Principal payments
     on mortgage loans
     held for investment, net                   137                 754
                                      -------------         -----------

  Net cash provided by (used in) 
     investing activities                       137             169,598

Cash flows from financing activities:
  Notes payable, net                        (17,387)           (394,393)
  Checks outstanding in excess
     of bank balance                              -            (106,676)
  Payments on capitalized lease obligations       -            (101,085)

  Net cash provided by (used in)
     financing activities                   (17,387)           (602,154)

  Net increase/(decrease) in cash            14,016               6,029

Cash at beginning of period                  58,759                   0
                                      -------------         -----------
Cash at end of period                 $      72,775               6,029
                                      =============         ===========

Supplemental disclosure of cash flow:
  Cash paid for interest              $      26,774              27,059


See accompanying notes to condensed consolidated financial statements.


                                    Page - 5

<PAGE>
                                                        Advanced Financial, Inc.


                     ADVANCED FINANCIAL, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                     December 31, 1998 and December 31, 1997

(1)   Organization and Summary of Significant Accounting Policies
      -----------------------------------------------------------

     The  Company's  financial  statements  include  the  accounts  of  Advanced
Financial,  Inc. (the  "Company" or "AFI") and its  wholly-owned  subsidiary AFI
Mortgage, Corp. ("AFIM").

     The  condensed  consolidated  financial  statements  have been  prepared in
accordance with the instructions to Form 10-QSB.  To the extent that information
and footnotes required by generally accepted accounting  principles for complete
financial  statements are contained in or consistent with the audited  financial
statements  incorporated  by reference in the  Company's  Annual  Report on Form
10-KSB for the year ended March 31, 1998,  such  information  and footnotes have
not been  duplicated  herein.  In the  opinion of  management,  all  adjustments
considered  necessary for fair  presentation  of financial  statements have been
reflected herein.  The March 31, 1998 condensed  consolidated  balance sheet has
been derived from the audited balance sheet as of that date.


                                    Page - 6
<PAGE>

                                                        Advanced Financial, Inc.

ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
           ---------------------------------------------------------

          GENERAL
          -------

      The Company and AFIM  continue to suffer  losses for the nine months ended
December  31,  1997 and 1998.  In April 1997,  the Company and its  wholly-owned
subsidiary,  AFI Mortgage, Corp. ("AFIM"),  decided that it would be in the best
interest of the continuity of the Company's  business  enterprise to temporarily
suspend its active  mortgage  operations.  On  November 7, 1997,  AFIM filed for
relief under Chapter 11 of the United States Bankruptcy Code ("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 (the  "Confirmation  Order")  confirming the
First Amended Joint Plan of Reorganization dated July 29,1998 of the Company and
AFIM ("Plan of Reorganization").  The confirmation of the Plan of Reorganization
was  reported  in a Current  Report on Form 8-K filed  with the  Securities  and
Exchange  Commission  on  November  25,  1998.  A copy of the Plan was  filed as
Exhibit  2.1 to the Form 8-K and a copy of the  Confirmation  Order was filed as
Exhibit 99.1 to the Form 8-K.  See also the  Company's  Annual  Report on Form
10-KSB Item 1:  "Description of Business" and Item 7: Note B to the Consolidated
Financial Statements of the Company

     Under the Plan of  Reorganization,  and subject to the terms and conditions
set  forth in the Plan of  Reorganization,  the  Company  will  sell its  office
building to First  Mortgage  Investment  Co.  ("FMIC") for $1,030,000 and FMIC's
release  of its  second  mortgage.  The net  proceeds  will  satisfy  the  first
mortgage.  The remaining  net proceeds  received by AFIM will be used to satisfy
the claims of creditors in accordance with the Plan of Reorganization.

     The  following  discussion  of  the  Company's  financial  condition  as of
December 31, 1998 and the Company's  results of operations for the quarter ended
December 31, 1998 should be read in  conjunction  with the  discussion of events
subsequent  to June 30, 1997 set forth in Item 1:  "Description  Of Business" of
the  Company's  Annual Report on Form 10-KSB for the fiscal year ended March 31,
1998 and set forth in the Current  Report on Form 8-K filed  November  25, 1998,
described above.

RESULTS OF OPERATIONS
---------------------
Quarter and Nine Months Ended December 31, 1998 
-----------------------------------------------
Compared To The Quarter and Nine Months Ended December 31, 1997
---------------------------------------------------------------

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

     The Company's  cash and  short-term  investments  increased from $58,759 at
March 31,  1998 to  $72,775 at  December  31,  1998.  The  increase  in cash and
short-term  investments is attributable  to the fact that the Company  suspended
its active  mortgage  operations  and reduced  its staff to the  limited  extent
necessary to operate under protection of Chapter 11 of the Bankruptcy Code, sold
its remaining  assets,  other than its office  building,  and collected  various
receivables  due the  Company.  Also  see  Item  1:  "Description  of  Business"
contained  in the  Company's  Annual  Report on Form  10-KSB for the fiscal year
ended March 31, 1998.

      Losses
      ------

     Consolidated operating results for the three months ended December 31, 1998
reflect a net gain of $15,784 as compared to a net loss of $21,471 for the three
months ended December 31, 1998. A gain for the three months was attributable the
sale of  assets  in  accordance  with  the  Company's  Plan  of  Reorganization.
Consolidated  operating  results for the nine  months  ended  December  31, 1998
reflect a net loss of $163,133  as  compared  to a net loss of $337,900  for the
nine months ended December 31, 1997. The decrease in losses was  attributable to
the  Company's  suspension  of its active  mortgage  operations  and sale of its
remaining assets, other than its office building, thereby reducing the quarterly
depreciation,  and the Company's  reduction of staff from 20 full time employees
to 1 full time employee and debt,  thereby  reducing  interest  expense,  to the
limited  extent  necessary  to  operate  under  protection  of Chapter 11 of the
Bankruptcy  Code. Also see Item 1:  "Description  of Business"  contained in the
Company's Annual Report on Form 10-KSB for the fiscal year ended March 31, 1998.


                                    Page - 7
<PAGE>

                                                        Advanced Financial, Inc.

FINANCIAL POSITION
------------------

     During the nine months ended December 31, 1998, the Company saw a continued
decrease in the Company's assets and stockholder(s') equity. The Company's total
assets were  $1,128,369 at December 31, 1998 compared to $1,300,490 at March 31,
1998.  Stockholder(s')  equity was ($3,556,724) at December 31, 1998 compared to
($3,391,017)  at March 31, 1998.  These  decrease  were due to the fact that the
Company  suspended  its active  mortgage  operations  and had limited  revenues,
causing  the  Company to  continue  to operate at a loss  during the nine months
ended December 31, 1998. At December 31, 1998, the Company had total liabilities
of $4,685,093  of which  $3,957,771  are subject to  compromise  pursuant to the
Company's Plan of Reorganization.

     At December 31, 1998, the Company had a cash position of $132,974  compared
to a cash  position of $58,759 at March 31,  1998.  During the nine months ended
December 31, 1998,  the Company  continued to operate  under the  protection  of
Chapter 11 of the  Bankruptcy  code and was able to fund its limited  operations
from the sale of various assets and the collection of various receivables.

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
----------------------------------------------

           None


                                    Page - 8
<PAGE>
                                                        Advanced Financial, Inc.

                                     PART II
                                     -------

ITEM - 1 Legal Proceedings

        Various  lenders  initiated  lawsuits  against the Company and AFIM as a
result of the Company's  inability to make required payments on various debt. As
a result of AFIM and the  Company  filing  for  relief  under  Chapter 11 of the
Bankruptcy Code, all pending  litigation was suspended pending the final outcome
of the Chapter 11 proceeding.  See Item 2: "Management's Discussion and Analysis
or Plan of Operation-General." Pursuant to the Plan of Reorganization, Claims of
Creditors, including persons asserting claims against the Company in litigation,
will be  deemed  satisfied  and upon  discharge  of the  Company  and AFIM  from
bankruptcy, all litigation will have been dismissed.

ITEM - 2 Change in Securities.

         See Item 3 (b) Below

ITEM - 3 Defaults upon Senior Securities.

     (a) The following table sets forth any indebtedness which exceeds 5% of the
Company's  assets,  for  which the  Company  is in  default  at the time of this
filing.  Interest accrued on such indebtedness  until November 7, 1997, the date
on which AFIM filed for protection under Chapter 11 of the Bankruptcy Code.

                               Default             Default             Default
     Lender                   Principal           Principal           Principal
     ------                   ---------           ---------           ---------

Commercial Federal Bank       $364,393            $41,653             $406,046
Argo Federal Savings          $ 75,148            $ 8,022             $ 83,170 

     (b) The Company suspended payment of its regular quarterly  dividend on its
Series "B" Cumulative  Convertible  Preferred  Stock in January 1996. The unpaid
cumulative  dividends at the time of this filing were $499,275.  Pursuant to the
Plan of Reorganization  all preferred stock will be converted to common and each
shareholder  shall receive their prorata share of new common stock as defined in
the Plan of  Reorganization.  No unpaid  dividends  will be paid pursuant to the
Plan of Reorganization.

ITEM - 4 Submission of Matters to a Vote of Securities Holders.

     No matters were submitted to a vote of security  holders during the quarter
ended  December  31,  1998,  either  through  the  solicitation  of  proxies  or
otherwise.

ITEM - 5 Other Information.

        See  Item  2:   "Management's   Discussion   and  Analysis  or  Plan  of
Operation-General" and the Company's Annual Report on Form 10-KSB for the fiscal
year ended March 31, 1997 Item 1: "Description of Business."


                                   Page - 9
<PAGE>


ITEM - 6 Exhibits and Reports on Form 8-K.

(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  to 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    Exchang   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 the order of  Commercial  Federal Bank,
          successor to Railroad Savings Bank, FSB ("Lender") and Agreement dated
          October  11,  1996  between  Advanced  Financial,  Inc.  and AFIM,  as
          Borrower,  and  Lender  and  Matrix  Financial  Servicers  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 Advance  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).

27.1      Financial Data Schedule

*         Asterisk  indicates  exhibits incorporated by reference as  indicated,
          all other exhibits are filed herewith.

(b) Reports on Form 8-K
-----------------------

          None


                                   Page - 10
<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:  February 16, 1999         By:   /s/ William B. Morris
                                        ---------------------
                                        William B. Morris
                                        Chairman


      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.

      Signature                     Title                     Date
      ---------                     -----                     ----


/s/ William B. Morris               Chairman, Secretary,    February 16, 1999
---------------------               Principal Accounting
William B. Morris                   Officer
                               








                                   Page - 11

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