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
        September 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.


                     ADVANCE FINANCIAL, INC. AND SUBSIDIARY


                                TABLE OF CONTENTS


                                                                      Page No.
                                                                      ________

PART I. FINANCIAL INFORMATION


     ITEM 1. - Financial Statements..................................    1-5 

     
     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 I.    FINANCIAL STATEMENTS




































                                    Page - 1

<PAGE>

                                                        Advanced Financial, Inc.


                     ADVANCED FINANCIAL, INC. AND SUBSIDIARY
                      Condensed Consolidated Balance Sheets
                      September 30, 1998 and March 31, 1997


             Assets                September 30, 1998     March 31, 1998
                                   ------------------     --------------  

Cash and investments                  $      60,124         $    58,759
Mortgage servicing advances and
     accounts receivable                      3,264             151,097
Mortgage loans held for
     investment                               5,860               5,997
Property and equipment, net               1,055,447           1,070,553
Other                                         4,045              14,083
                                      -------------         -----------

      Total assets                    $   1,128,741         $ 1,300,490
                                      =============         ===========

      Liabilities

Accounts payable and accrued                 
     expenses                         $      12,760         $    24,292
Notes payable                               717,156             717,357
                                      -------------         -----------

                                            729,916             741,649

      Liabilities Subject to
          Compromise

Accounts payable and accrued              3,061,068           3,024,595
expenses
Notes payable                               644,837             659,837
Notes payable on stock recission            200,000             200,000
Capitalized lease obligations                65,426              65,426
                                      -------------         -----------

                                          3,971,331           3,949,858
                                      -------------         -----------
     Total Liabilities                $   4,701,247         $ 4,691,507


     Stockholders' Equity

Preferred stock, Series B,
     $.005 par value;
     100,000,00 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                                 (13,098,652)        (12,917,163)
                                      -------------         -----------
                                         (3,131,161)         (2,949,672)
Treasury stock, 99,869 shares of
    Common Stock, at cost                  (441,345)           (441,345)
                                      -------------         -----------

      Total stockholders' equity         (3,572,506)         (3,391,017)

      Total liabilities and      
          stockholders' equity        $   1,128,741         $ 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 September 30, 1998 and September 30, 1997


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

Revenues:

Servicing fee income                     $        -          $    1,584
Other fee income                                  -                 515
Gain/(Loss) on sale of mortgage                 
     loans                                      (95)            (30,549)
Interest                                          -               1,729
Other                                        37,125              40,806
                                         ----------            --------

      Total operating revenues           $   37,030              14,085
                                         ----------            --------


Expenses:

Servicing expense                              (586)               (842)
Personal                                     16,425              18,700
General and administrative                  101,851              35,551
Interest                                     27,147              45,948
Depreciation and amortization                 7,553              12,373
Other                                           105             (40,645)
                                        -----------            --------

      Total operating expenses              152,495              71,085
                                        -----------            --------

      Loss before income taxes             (115,465)            (57,000)

Income tax expense                                -                   -
                                        -----------            --------
      Net loss                                      
                                           (115,465)            (57,000)
                                        ===========            ========

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

Loss per common share                   $     (0.03)         $    (0.02)
                                        ===========          ==========


See accompanying notes to condensed consolidated financial statements.


                                    Page - 3

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                                                        Advanced Financial, Inc.


                     ADVANCED FINANCIAL, INC. AND SUBSIDIARY
                 Condensed Consolidated Statement of Operations
    For the six month period ended September 30, 1998 and September 30, 1997


                                               Six Months Ended
                                   September 30, 1998    September 30, 1997
                                   ------------------    ------------------
                                      (Unaudited)            (Unaudited)
Revenues:                            

Servicing fee income                     $        -         $    55,222
Other fee income                                  -              21,141
Gain/(Loss) on sale of mortgage                 
     loans                                      (95)            (45,157)
Gain on sale of servicing rights             25,344                   -      
Interest                                      3,316              10,803
Other                                        79,211              99,204
                                         ----------         -----------

      Total operating revenues              107,776             141,213


Expenses:

Servicing expense                               268              81,147
Personal                                     33,982             136,545
General and administrative                  196,890              91,743
Interest                                     56,045             100,802
Depreciation and amortization                15,107              49,298
Other                                       (15,600)             (1,892)
                                         ----------         -----------

      Total operating expenses              286,692             457,643
                                         ----------         -----------

      Loss before income taxes             (178,916)           (316,430)

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

      Net loss                          $  (178,916)        $  (316,430)
                                        ===========         ===========
                                        

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

Loss per share of Common Stock          $     (0.04)              (0.07)
                                        ===========         ===========


     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 six month period ended September 30, 1998 and September 30, 1997


                                               Six Months Ended
                                   September 30, 1998    September 30, 1997
                                   ------------------    ------------------
                                      (Unaudited)            (Unaudited)


Net cash (used in) provided by        
     operating activities               $    16,428             450,913

Cash flows from investing activities:
     Acquisition of property and                 
          equipment                               -             168,844
     Acquisition/Principal payments
          on mortgage loans held               
          for investment, net                   137                 372
                                        -----------         -----------
     Net cash provided by (used
          in) investing activities              137             169,216
       

Cash flows from financing activities:
     Notes payable, net                     (15,200)           (398,312)
     Checks outstanding in excess              
          of bank balance                         -            (106,676)
     Payments on capitalized lease  
          obligations                             -            (113,460)
                                        -----------         -----------  

     Net cash provided by (used
          in) financing activities          (15,200)           (618,448)
       
     Net increase/(decrease) in cash          1,365              (1,681)

Cash at beginning of period                  58,759                   0
                                        -----------         -----------
Cash at end of period                   $    60,124               1,681
                                        ===========         ===========


Supplemental disclosure of cash flow:
     Cash paid for interest             $    27,147              27,920


     See accompanying notes to condensed consolidated financial statements

                                    Page - 5

<PAGE>

                                                        Advanced Financial, Inc.


                     ADVANCED FINANCIAL, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                    September 30, 1998 and September 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 - 6
<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
September  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 Item 1: "Description of Business" and Item 7: "Note B to the Consolidated
Financial Statement 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 FMIC's 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
September 30, 1998 and the Company's results of operations for the quarter ended
September 30, 1998 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, as described above.

RESULTS OF OPERATIONS
---------------------
Quarter and Six Months Ended September 30, 1998 
-----------------------------------------------
Compared To The Quarter and Six Months Ended September 30, 1997
---------------------------------------------------------------

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

     The Company's  cash and  short-term  investments  increased from $58,759 at
March 31,  1998 to $60,124 at  September  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  September  30,
1998 reflect a net loss of $115,465 as compared to a net loss of $57,000 for the
three months  ended  September  30,  1997.  The increase in losses for the three
months  ended  September  30,  1998  were due to  expenses  associated  with the
preparation  and   solicitation   of  the  Company's  Plan  of   Reorganization.
Consolidated  operating  results  for the six months  ended  September  30, 1998
reflect a net loss of $178,916 as compared to a net loss of $316,430 for the six
months ended  September  30, 1997.  The decrease in losses for the six months 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 its
interest expense, to the limited extent necessary to operate under protection of
Chapter 11


                                    Page - 7

<PAGE>
                                                        Advanced Financial, Inc.


of the  Bankruptcy  Code.  Also see Item 1:  "Description  of  Business"  of the
Company's Annual Report contained in Form 10-KSB for the fiscal year ended March
31, 1998.


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

     During the six months ended September 30, 1998, the Company saw a continued
decrease in the Company's assets and stockholder(s') equity. The Company's total
assets were $1,128,741 at September 30, 1998 compared to $1,300,490 at March 31,
1998.  Stockholder(s') equity was ($3,572,506) at September 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 six months ended
September  30, 1998.  The Company had total  liabilities  of $4,701,247 of which
$3,971,331  are  subject  to  compromise  pursuant  to  the  Company's  Plan  of
Reorganization.

     At September 30, 1998, the Company had a cash position of $60,124  compared
to a cash  position of $58,759 at March 31,  1998.  During the six months  ended
September 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 - 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 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  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        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 such  shareholder'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  September  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, 1998 Item 1: "Description of Business."


                                   Page - 9

<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). (Exhibit 4.3
          to  Advance  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).
          (Exhibit 4.3 to Advance  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  Advance  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 Advance  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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