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
           June 30, 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.
                              TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

     Item 1.  Financial Statements ................................. 1
     Item 2.  Management's Discussion and Analysis ................. 6
              or Plan of Operation

PART II - OTHER INFORMATION

     Item 1.  Legal Proceedings .................................... 8
     Item 2.  Changes in Securities and Use of Proceeds ............ 8
     Item 3.  Defaults Upon Senior Securities ...................... 8
     Item 4.  Submission of Matters to a Vote of Security Holders .. 8
     Item 5.  Other Information .................................... 8 
     Item 6.  Exhibits and Reports on Forms 8-K .................... 9 

Signatures..........................................................10

<PAGE>
                                                        Advanced Financial, Inc.

                         PART I - FINANCIAL INFORMATION

ITEM I.    FINANCIAL STATEMENTS





























                                    Page - 1

<PAGE>
                                                        Advanced Financial, Inc.

                     ADVANCED FINANCIAL, INC. AND SUBSIDIARY
                      Condensed Consolidated Balance Sheets
                        June 30, 1998 and March 31, 1998


        Assets                     June 30, 1998            March 31, 1998
                                   -------------            --------------
                                   (Unaudited)

Cash and investments               $      132,974           $       58,759
Mortgage servicing advances and
    accounts receivable                     3,264                  151,097
Mortgage loans held for investment          5,997                    5,997
Property and equipment, net             1,063,000                1,070,553
Other                                       4,047                   14,083
                                   --------------           --------------

        Total assets               $    1,209,283           $    1,300,490
                                   ==============           ==============


        Liabilities

Accounts payable and accrued 
     expenses                      $        4,216           $      24,292
Notes payable                             721,962                 717,357
                                   --------------           --------------

                                          726,178                 741,649

        Liabilities Subject to Compromise

Accounts payable and accrued 
     expenses                           3,029,883               3,024,595
Notes payable                             644,837                 659,837
Notes payable on stock recission          200,000                 200,000
Capitalized lease obligations              65,426                  65,246
                                   --------------          --------------

                                        3,940,146               3,949,858
                                   --------------          --------------
     
        Total liabilities          $    4,666,324          $    4,691,507

        Stockholders' 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                               (12,983,187)             (12,917,163)
                                    --------------          --------------

                                       (3,015,696)              (2,949,672)

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

    Total stockholders' equity      $  (3,457,041)          $   (3,391,017)
                                    -------------           --------------

    Total liabilities and 
     stockholders' equity           $   1,209,283           $    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 June 30, 1998 and June 30, 1997

                                              Three Months Ended
                                    June 30, 1998           June 30, 1997
                                    -------------           --------------
                                     (Unaudited)             (Unaudited)
   
Revenues:

Servicing fee income               $           -            $       53,638
Other fee income                               -                    20,626
Gain/(Loss) on sale of mortgage
     loans                                     -                   (14,608)
Gain on sale of mortgage
     servicing                            25,344                         -
Interest                                   3,316                     9,074
Other                                     42,085                    58,398
                                   -------------            --------------

        Total operating revenues          70,745                   127,128
                                   -------------            --------------


Expenses:

Servicing expense                  $         854             $      81,989
Personnel                                 17,557                   117,845
General and administrative                95,039                    56,192
Interest                                  28,898                    54,855
Depreciation and amortization              7,553                    36,926
Other                                    (15,705)                   38,752
                                   -------------            --------------

       Total operating expenses          134,196                   386,559
                                   -------------            --------------

       Loss before income taxes          (63,451)                 (259,431)

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

        Net loss                   $     (63,451)           $     (259,431)
                                   =============            ==============

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

Loss per share of Common Stock     $       (0.02)           $        (0.05)
                                   =============            ==============


     See accompanying notes to condensed consolidated financial statements.

                                    Page - 3


<PAGE>
                                                        Advanced Financial, Inc.


                     ADVANCED FINANCIAL, INC. AND SUBSIDIARY
                 Condensed Consolidated Statements of Cash Flows
        For the three month period ended June 30, 1998 and June 30, 1997

                                               Three Months Ended
                                      June 30, 1998           June 30, 1997
                                      -------------           --------------
                                       (Unaudited)             (Unaudited)


Net cash (used in) provided
     by operating activities          $    84,610                463,486

Cash flows from investing activities:
     Acquisition of property
          and equipment                         -                173,662
                                      -----------              ---------
                                        
  Net cash provided by (used in)
     investing activities                       -                173,662
                                      -----------              ---------

Cash flows from financing activities:
  Notes payable, net                      (10,395)              (394,280)
  Checks outstanding in excess
     of bank balance                            -               (106,676)
  Payments on capitalized lease
     obligations                                -               (113,460)
                                      ------------             ---------
  Net cash provided by 
     (used in) financing activities        (10,395)             (614,416)

  Net increase/(decrease) in cash           74,215                22,732

Cash at beginning of period                 58,759                     0
                                      ------------             ---------
Cash at end of period                 $    132,974                22,732
                                      ============             =========


Supplemental disclosure of cash flow:
  Cash paid for interest              $     19,938                26,284


     See accompanying notes to condensed consolidated financial statements.

                                    Page - 4

<PAGE>
                                                        Advanced Financial, Inc.


                     ADVANCED FINANCIAL, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                         June 30, 1998 and June 30, 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 - 5
<PAGE>
                                                        Advanced Financial, Inc.

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

GENERAL
-------

     The Company and AFIM continued to suffer losses for the quarters ended June
30, 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 for fiscal
year ended March 31, 1998 Item 1:  "Description  of Business" and Item 7: Note B
to the Consolidated Financial Statements.

     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 June
30, 1997 and the Company's  results of operations for the quarter ended June 30,
1997 should be read in conjunction  with the discussion of events  subsequent to
June 30, 1997 set forth in Item 1:  "Description  of Business"  contained in 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 Ended June 30, 1998 Compared To The Quarter Ended June 30, 1997
-----------------------------------------------------------------------

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

     The Company's  cash and  short-term  investments  increased from $58,759 at
March  31,  1998,  to  $132,732  at June  30,  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 June 30, 1998
reflect a net loss of  $63,451 as  compared  to a net loss of  $259,431  for the
three months ended June 30, 1997. The decrease in losses is  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  expense  and the  Company's  reduction  of staff from 20 full time
employees to 1 full time employee and debt,  thereby reducing interest expenses,
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 - 6

<PAGE>

                                                        Advanced Financial, Inc.

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

     During the three months  ended June 30,  1998,  the Company saw a continued
decrease in the Company's assets and stockholders'  equity.  The Company's total
assets were  $1,209,283  at June 30, 1998  compared to  $1,300,490  at March 31,
1998.  Stockholders'  equity  was  ($3,457,041)  at June 30,  1998  compared  to
($3,391,017)  at March 31, 1998.  These  decreases 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 three  months
ended June 30, 1998.  At June 30,  1998,  the Company had total  liabilities  of
$4,666,324  of which  $3,940,146  are  subject  to  compromise  pursuant  to the
Company's Plan of Reorganization.

     At June 30, 1998, the Company had a cash position of $132,974 compared to a
cash  position of $58,759 at March 31, 1998.  During the three months ended June
30, 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 - 7

<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 Decision and Analysis or
Plan of Operations -- 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 was 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             Total
     Lender                 Principal           Interest            Arrearage
     ------                 ---------           --------            ---------

  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
shareholders  shall receive such shareholde's pro rata 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 June 30, 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 - 8
<PAGE>

                                                        Advanced Financial, Inc.
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  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 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 - 9

<PAGE>

                                                        Advanced Financial, Inc.

                                   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
     -----------------
     William B. Morris              Principal Accounting
                                    Officer

                                   Page - 10