UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

                  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

            For the Fiscal Year Ended Commission File No: 001-12629
                               September 30, 2003

                      OLYMPIC CASCADE FINANCIAL CORPORATION
             (Exact Name of Registrant as specified in its charter)

              Delaware                                           36-4128138
(State or other jurisdiction of                                (I.R.S.Employer
 incorporation or organization)                              Identification No.)

               875 North Michigan Avenue, Suite 1560, Chicago, IL
       60611 (Address, including zip code, of principal executive offices)
       Registrant's telephone number, including area code: (312) 751-8833

Securities registered pursuant to Section 12(b) of the Act: None

Securities  registered  pursuant to Section 12(g) of the Act: Common -Stock $.02
par value

                                                                (Title of class)

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  Registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. YES |X|  NO |_|

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of  Regulation  S-K of this  chapter is not  contained  herein,  and will not 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-K
or any amendment to this Form 10-K. |_|

Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in Exchange Act Rule 12b-2). YES |X|  NO |_|

As of December 22, 2003,  the  aggregate  market value of voting and  non-voting
common equity held by  non-affiliates  of the  registrant,  based on the closing
sales price for the registrant's common stock, as reported by The American Stock
Exchange was  approximately  $4,580,000  (calculated  by excluding  shares owned
beneficially  by  directors  and  officers).  As of December 22, 2003 there were
3,367,558 shares of the registrant's common stock outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Company's Proxy Statement filed with the Securities and Exchange
Commission  (the  "SEC") in  connection  with the  Company's  Annual  Meeting of
Shareholders  to be held on or about March 16, 2004 (the  "Company's  2004 Proxy
Statement") are incorporated by reference into Part III hereof.


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                                     PART I

Item 1. BUSINESS

Statements  made in this report that relate to future plans,  events,  financial
results or  performance  are  forward-looking  statements  as defined  under the
Private  Securities  Litigation  Reform Act of 1995.  These statements are based
upon current information and expectations.  Actual results may differ materially
from those  anticipated  as a result of  certain  risks and  uncertainties.  For
details concerning these and other risks and uncertainties,  see Part I, Item 1,
"Risk Factors" of this report,  as well as the Company's other periodic  reports
on Forms 10-K, 10-Q and 8-K  subsequently  filed with the SEC from time to time.
Readers  are  cautioned  not to place undue  reliance  on these  forward-looking
statements,  which speak only as of the date hereof.  The Company  undertakes no
obligation to republish revised forward-looking  statements to reflect events or
circumstances   after  the  date  hereof  or  to  reflect  the   occurrence   of
unanticipated events.

General

Olympic Cascade Financial Corporation,  a Delaware corporation organized in 1996
("Olympic" or the "Company"),  is a financial  services  organization  operating
through  its  wholly  owned  subsidiary,   National  Securities  Corporation,  a
Washington  corporation  organized  in 1947  ("National").  National  conducts a
national  securities  brokerage  business  through its main  offices in Seattle,
Washington and New York,  New York, as well as 53 other branch  offices  located
throughout the country.  National's business includes  securities  brokerage for
individual and institutional  clients,  market-making trading activities,  asset
management and corporate finance services.

National provides a broad range of securities  brokerage and investment services
to a diverse retail and  institutional  clientele,  as well as corporate finance
and investment  banking  services to  corporations  and  businesses.  National's
brokers  operate as independent  contractors.  A registered  representative  who
becomes an affiliate of National  establishes  his own office and is responsible
for the payment of all expenses  associated  with the  operation of such office,
including rent, utilities,  furniture,  equipment,  stock quotation machines and
general office supplies. In return, the registered representative is entitled to
retain a higher  percentage  of the  commissions  generated  by his sales than a
registered  representative at a traditional  employee-based brokerage firm. This
arrangement  allows National to operate with a reduced amount of fixed costs and
lowers the risk of operational losses for non-production.

Significant Developments

In fiscal year 2002, the Company completed a series of transactions  under which
certain new investors  (collectively,  the  "Investors")  obtained a significant
ownership in the Company  through a $1,572,500  investment in the Company and by
purchasing  a majority of shares  held by Steven A.  Rothstein  and family,  the
former  Chairman,  Chief  Executive  Officer and  principal  shareholder  of the
Company (the "Investment  Transaction").  The Investors included Triage Partners
LLC ("Triage"), an affiliate of Sands Brothers & Co., Ltd., a NASD firm, and One
Clark LLC ("One  Clark"),  an affiliate of Mark  Goldwasser,  the current  Chief
Executive  Officer and  President of the  Company.  The  Investors  purchased an
aggregate  of  $1,572,500  of  shares  of the  Company's  Series  A  Convertible
Preferred Stock,  $.01 par value per share (the "Series A Preferred Stock") from
the Company,  which is  convertible  into shares of the Company's  common stock,
$.02 par value per share (the "Common Stock") at a price of $1.50 per share. The
Company incurred $100,000 of legal costs related to these capital  transactions.


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In connection  with the Investment  Transaction,  Triage also purchased  285,000
shares of Common Stock from Mr. Rothstein and his affiliates at a price of $1.50
per share.  In addition,  Mr.  Rothstein  and his  affiliates  granted  Triage a
three-year  voting proxy on the balance of their Common Stock  (274,660  shares)
expiring on December 28, 2004.

Concurrent with the Investment Transaction, two unrelated individual noteholders
holding $2.0 million of the Company's debt converted one-half of their debt into
the same  class of  Series A  Preferred  Stock  that was sold in the  Investment
Transaction.  The  noteholders  also had  100,000 of their  200,000  warrants to
acquire  shares of common  stock  repriced  from an exercise  price of $5.00 per
share to $1.75 per share. The two noteholders have agreed to extend the maturity
date on the  remaining  $1.0  million  from  January 25, 2004 to July 31,  2005.
Effective  February 1, 2004, the interest rate on the notes will be increased to
12% from 9% per  annum.  Additionally,  the other  100,000  warrants  to acquire
shares of common  stock will be  repriced  from an  exercise  price of $5.00 per
share to $1.25 per share,  and the expiration date for all 200,000 warrants will
be extended to July 31, 2005.

In the fourth  quarter of fiscal year 2002,  the Company  raised an aggregate of
$210,000 pursuant to the sale of Series A Preferred Stock (on the same terms and
conditions as the equity sold to the Investors) to Mr. Rothstein.

In  February  2001,  National  executed  a  $1.0  million  secured  demand  note
collateral  agreement  with Mr.  Peter  Rettman,  an employee  of  National  and
Director of the Company,  to borrow  securities  that can be used by the Company
for collateral agreements.  The note bears interest at 5% per annum that is paid
monthly,  and  matures on February  1, 2004.  The note  holder  also  received a
warrant to purchase  75,000  share of the  Company's  Common Stock at a price of
$5.00 per share that expires on February 1, 2004. In November 2003, National and
the note  holder  agreed  that  upon  maturity,  the $1.0  million  note will be
replaced with a note in a principal  amount equal to at least $500,000 that will
mature  on  February  28,  2005.  Additionally,  upon  completion  of  the  note
replacement,  the warrant will be repriced to $1.25 per share and will expire on
July 31, 2005.

In the first  quarter of fiscal  year 2003,  the Company  consummated  a private
placement of its  securities  (the "Private  Offering")  to a limited  number of
accredited  investors  pursuant  to Rule  501 of  Regulation  D under  the  1933
Securities  Act, as amended  (the  "Securities  Act").  Each unit in the Private
Offering sold for $0.65 and consisted of one share of the Company's Common Stock
and one three-year  warrant to purchase one share of the Company's  Common Stock
at a per share price of $1.25 (the "Warrants").  Net proceeds of $554,500 closed
in the first quarter of fiscal year 2003, and the Company correspondingly issued
1,016,186  shares of Common Stock and 1,016,186  Warrants.  In January 2003, the
Company  issued  76,923  shares of  Common  Stock and a  three-year  warrant  to
purchase  76,923  shares of Common Stock at $1.25 per share to Seyfarth Shaw LLP
(formerly  D'Ancona & Pflaum LLC), as payment of $50,000 of legal fees that were
accrued as of September 30, 2002.  The Warrants  issued in  connection  with the
Private Offering and the Warrants issued to Seyfarth Shaw LLP have been included
along with the  proceeds  of the  shares of Common  Stock  issued as  additional
paid-in capital.

In March 2003, the Company filed a Registration  Statement on Form S-3 under the
Securities  Act for the resale of the  shares of Common  Stock and the shares of
Common Stock  issuable  upon  exercise of the  Warrants.  In October  2003,  the
Company filed a Form RW withdrawing the filing of the Registration  Statement on
Form S-3. Currently the Company is eligible to file a Registration  Statement on


                                      -3-
<PAGE>

Form S-3, and management  believes it will file such  registration  statement in
the near term,  that will  include the shares of Common  Stock and the shares of
Common  Stock  issuable  upon  exercise  of the  Warrants  issued in the Private
Offering.

In August  2001,  the Company  entered  into an  agreement  with First  Clearing
Corporation   ("First   Clearing"),   a  wholly  owned  subsidiary  of  Wachovia
Corporation,  under which First Clearing  provides clearing and related services
for National (the  "Clearing  Agreement").  The Clearing  Agreement  expands the
products and  services  capabilities  for  National's  retail and  institutional
business,  and enables National to consolidate its existing clearing  operations
and to reduce the fixed overhead associated with its self-clearing activities.

The  conversion  to First  Clearing  began in December 2001 and was completed in
March 2002. In connection with the Clearing  Agreement,  the Company  executed a
ten-year  promissory  note in favor of First  Clearing  under  which the Company
immediately  borrowed  $1,000,000.  The funds were contributed by the Company to
National, and are being used as a deposit to secure National's performance under
the  Clearing  Agreement.  The  Clearing  Agreement  also  provided  for another
$1,000,000 loan that was extended to the Company upon substantial  completion of
the  conversion on December 31, 2001,  which funds were also  contributed by the
Company  to  National.  The  amount  of the  note  that  is  repayable  on  each
anniversary date is the principal and interest then  outstanding  divided by the
remaining  life of the note,  in excess of the amount  forgiven.  Principal  and
interest under the promissory  note are  forgivable  based on achieving  certain
business  performance  and trading  volumes of the Company  over the life of the
loan that the Company has satisfied through fiscal year 2003.

In connection with the Clearing Agreement,  additional borrowings were available
to  the  Company  upon  the   attainment  by  National  of  certain  volume  and
profitability  goals.  In finalizing the  conversion,  a dispute arose among the
Company,  US Clearing  (one of its former  clearing  firms) and First  Clearing,
regarding the responsibility for debit balances in certain trading accounts. The
three  parties  agreed  to share  the  debit  balance  write-offs  equally.  The
Company's  share of this  settlement,  $548,000,  was advanced to the Company by
First  Clearing  and  added  to the  existing  promissory  note.  As part of the
settlement, the minimum level of stockholders' equity the Company is required to
maintain under the promissory note was reduced from $2,000,000 to $1,000,000 and
no further  borrowings  became  available under the promissory note, as amended.
Additionally,  National  received its  clearing  deposit,  net of  miscellaneous
expenses, of $975,000 from US Clearing, and subsequently terminated its clearing
agreement with US Clearing.

In the first quarter of fiscal year 2003,  First Clearing  loaned the Company an
additional  $375,000 in the form of clearing fee rebates.  The loan is due to be
repaid  in  January   2004.   Additionally,   First   Clearing  has  waived  its
stockholders' equity covenant as of September 30, 2003 and December 31, 2003.

In December  2003,  the  Company  engaged in various  discussions  with the NASD
relating to the Security Agreement between National and First Clearing,  and its
effect  on the  computation  of  National's  net  capital.  As a result of these
discussions,  on December 15,  2003,  the Company and First  Clearing  agreed in
principle to the  following:  (1) National's  clearing  deposit was reduced from
$1,000,000 to $500,000,  (2) the excess  $500,000 was paid to First  Clearing to
reduce the Company's outstanding loan balance on its promissory note and (3) the
Security   Agreement   between  National  and  First  Clearing  was  terminated.
Furthermore,  First  Clearing has waived payment of the $375,000 that was due to


                                      -4-
<PAGE>

be paid in January 2004. Additionally, the Company is engaged in discussions and
negotiations  with First  Clearing  regarding  the  clearing  relationship,  and
payment of the remaining outstanding balance on the promissory note.

Financial Information about Industry Segments

The Company realized approximately 92% of its total revenues in fiscal year 2003
from  brokerage  services,  principal and agency  transactions,  and  investment
banking.  Brokerage  services,  that consists of retail  brokerage  commissions,
represents  68% of total  revenues,  principal  and  agency  transactions,  that
consists of net dealer  inventory gains,  represents 23% of total revenues,  and
investment  banking,  that consists of corporate  finance  commissions and fees,
represents 1% of total revenues.  For a more detailed analysis of our results by
segment, see Item 7, "Management  Discussion and Analysis of Financial Condition
and Results of Operation."

Brokerage Services

Brokerage  services to retail clients are provided  through the Company's  sales
force of  investment  executives  at  National  and,  until  December  2001,  at
WestAmerica Investment Group ("WestAmerica").

National Securities Corporation

National is  registered  as a  broker-dealer  with the SEC and is licensed in 50
states,  the District of Columbia and Puerto Rico.  National is also a member of
the National  Association of Securities  Dealers,  Inc. ("NASD"),  the Municipal
Securities  Rulemaking  Board  ("MSRB") and the Securities  Investor  Protection
Corporation ("SIPC").

National's  goal is to meet the  needs of its  investment  executives  and their
clients. To foster individual service, flexibility and efficiency, and to reduce
fixed costs,  investment  executives at National act as independent  contractors
responsible  for  providing  their  own  office  facilities,  sales  assistants,
telephone and quote  service,  supplies and other items of overhead.  Investment
executives  are given broad  discretion to structure  their own practices and to
specialize in different  areas of the  securities  market subject to supervisory
procedures.  In addition,  investment  executives have direct access to research
materials, management, traders, and all levels of support personnel.

The brokerage services provided by the investment executives at National include
execution of purchases and sales of stocks,  bonds, mutual funds,  annuities and
various other securities for individual and institutional  customers.  In fiscal
year 2003, stocks represent  approximately 67% of the Company's business,  bonds
represent  approximately  27% of the  Company's  business,  and mutual funds and
annuities make up the remaining 6% of the Company's business.  The percentage of
each type of business  varies  over time as the  investment  preferences  of the
Company's customers change based on market conditions.

It is not  National's  normal  policy  to  recommend  particular  securities  to
customers.  Recommendations to customers are determined by individual investment
executives  based upon their own research and  analysis,  subject to  applicable
NASD  customer  suitability   standards.   Most  investment  executives  perform
fundamental  (as  opposed  to  technical)  analysis.  Solicitations  may  be  by
telephone, seminars or newsletters. Investment executives may request trading to
acquire an inventory  position to facilitate sales to customers  (subject to the
investment executive's own risk).  Supervisory personnel review trading activity


                                      -5-
<PAGE>

from  inventory  positions to ensure  compliance  with  applicable  standards of
conduct.

Investment executives in the brokerage industry are traditionally compensated on
the basis of set percentages of total commissions and mark-ups  generated.  Most
brokerage firms bear  substantially  all of the costs of maintaining their sales
forces,  including  providing office space, sales assistants,  telephone service
and  supplies.  The average  commission  paid to  investment  executives  in the
brokerage  industry  generally  ranges  from  30% to 50%  of  total  commissions
generated.

Since National  requires most of its  investment  executives to absorb their own
overhead and expenses,  it pays a higher  percentage of the net  commissions and
mark-ups  generated by its  investment  executives,  as compared to  traditional
investment  executives in the brokerage industry.  This arrangement also reduces
fixed  costs and  lowers  the risk of  operational  losses  for  non-production.
National's  operations include execution of orders,  processing of transactions,
internal   financial   controls  and  compliance   with   regulatory  and  legal
requirements.

As a result of the slowdown in the financial  markets and the  Company's  change
from a  self-clearing  brokerage  firm to an  introducing  brokerage  firm,  the
Company has scaled back its  employee  staff.  As of  September  30,  2003,  the
Company had approximately 94 employees and 289 independent contractors. Of these
totals,  approximately  343 were  registered  representatives.  Persons who have
entered into independent  contractor agreements are not considered employees for
purposes  of  determining  the  Company's  obligations  for  federal  and  state
withholding,  unemployment and social security taxes. The Company's  independent
contractor  arrangements conform with accepted industry practice, and therefore,
the  Company  does  not  believe   there  is  a  material  risk  of  an  adverse
determination  from the tax authorities that would have a significant  effect on
the Company's  ability to recruit and retain  investment  executives,  or on the
Company's current  operations and financial results of operations.  No employees
are covered by collective  bargaining  agreements,  and the Company believes its
relations are good with both its employees and independent contractors.

The Company's  business plan includes the growth of its retail and institutional
brokerage  business.  In response to the slowdown in the financial  markets that
continued  through the second  quarter of fiscal year 2003,  the Company  scaled
back certain business activities,  including: proprietary trading, market-making
trading,  and online investing services.  Management believes that consolidation
within the industry is inevitable.  Concerns attributable to the weakened market
and increased  competition  help explain the  increasing  number of  acquisition
opportunities  continuously introduced to the Company. The Company is focused on
maximizing the profitability of its existing  operations,  while it continues to
seek additional selective strategic acquisitions.

In the  fiscal  year  2001,  National  cleared  approximately  60%  of  its  own
securities  transactions  and  posted  its books  and  records  daily,  with the
remaining  40% of the  transactions  clearing  through Bear  Stearns  Securities
Corporation,  US Clearing  Corporation  and Pershing  LLC. In August  2001,  the
Company entered into an agreement with First Clearing, a wholly owned subsidiary
of Wachovia  Corporation,  under  which First  Clearing  provides  clearing  and
related services for National.  In December 2001, the Company commenced clearing
with First Clearing.  The Clearing Agreement  significantly expands the products
and services  capabilities for National's retail and  institutional  business by
providing National's registered  representatives with access to information from
First Clearing, including various daily market analysis reports, equity research
reports,  software to analyze customer  portfolios,  as well as asset management
products and various other equity, debt and mutual fund offerings. Additionally,


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<PAGE>

the Clearing  Agreement  enables  National to consolidate its existing  clearing
operations  and  reduces  fixed  overhead   associated  with  its  self-clearing
activities.

Periodic reviews of controls are conducted,  and  administrative  and operations
personnel  meet  frequently  with  management  to review  operating  conditions.
Compliance and operations  personnel  monitor  compliance with applicable  laws,
rules and regulations.

The Company is engaged in a highly competitive business.  With respect to one or
more aspects of its business,  its competitors  include member  organizations of
the NYSE and other  registered  securities  exchanges  in the United  States and
Canada, and members of the NASD. Many of these  organizations have substantially
greater  personnel  and  financial  resources  and more sales  offices  than the
Company.  Discount  brokerage firms  affiliated  with  commercial  banks provide
additional  competition,  as well as companies that provide  electronic  on-line
trading. In many instances,  the Company is also competing directly for customer
funds with investment opportunities offered by real estate, insurance,  banking,
and savings and loans industries.  For a further  discussion of risks facing the
Company, please see "Risk Factors."

WestAmerica Investment Group

In December  2001, the Company's  former  subsidiary,  WestAmerica,  voluntarily
withdrew  its  membership  with the NASD and  ceased  conducting  business  as a
broker-dealer,  and filed for Chapter 7 Bankruptcy protection in accordance with
the U.S.  Bankruptcy Code. Until December 2001,  WestAmerica was registered as a
broker-dealer  with  the SEC and  licensed  in 44  states,  Puerto  Rico and the
District of Columbia.  WestAmerica  was also a member of the NASD,  the MSRB and
the SIPC.  WestAmerica  offered traditional  securities  brokerage and financial
planning  business and fee-based  investment  management  business to its retail
clients.  WestAmerica  had been  operating as a separate  legal entity,  and the
Company  believes  it will  not  have  any  ongoing  liability  for  any  unpaid
obligations of WestAmerica.

Canterbury Securities Corporation

The   Company's   former   subsidiary,    Canterbury   Securities    Corporation
("Canterbury")  was registered as a broker-dealer  with the SEC and was licensed
in  Illinois.  Canterbury  was acquired in June 2000 for cash of $30,000 and the
issuance of  five-year  warrants to acquire  5,000 shares of common stock of the
Company at a price of $6.375 per share. Canterbury was a member of the NASD, the
MSRB  and  the  SIPC.   Canterbury   formerly   engaged  in  private   placement
transactions.  Canterbury had no retail customer  accounts and operated pursuant
to the exemptive provisions of SEC Rule 15c3-3(k)(2)(i).  Since its acquisition,
Canterbury  had  no  activity.  In  May  2002,  pursuant  to an  agreement  made
simultaneous  with the Investment  Transaction,  the Company sold Canterbury for
its book value to Steven A.  Rothstein,  the former  Chairman,  Chief  Executive
Officer and principal shareholder of the Company.

Principal and Agency Transactions

The  Company  buys  and  maintains   inventories  in  equity   securities  as  a
"market-maker"  for sale of those  securities  to other dealers and to customers
through  National.  The  Company may also  maintain  inventories  in  corporate,
government and municipal debt securities for sale to customers.


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<PAGE>

In October  2000,  the  Company  opened a branch  office of National in New York
City. This office specializes in broker-to-broker  fixed income transactions and
equity  market  making  activities.  At National,  a staff of 21 traders and six
assistants in its New York and Seattle offices manage an inventory of securities
and conduct  market-making  activities.  In February 2001, National expanded its
New York market-making trade activities.  By July 2001, National made markets in
approximately 2,000 securities comprised mainly of equities traded on the NASDAQ
and OTC Bulletin Board. As a result of the losses attributable to a slow-down in
the broader market,  National  subsequently  reduced its  market-making  trading
activities during fiscal year 2002. As of September 2003, National makes markets
in  approximately  550  securities.  This includes  companies for which National
managed or co-managed a public offering.

The  Company's  trading  departments  require  a  commitment  of  capital.  Most
principal  transactions  place the Company's capital at risk. Profits and losses
are dependent upon the skill of the traders,  price movements,  trading activity
and the size of inventories. Since the Company's trading activities occasionally
may involve speculative and thinly capitalized stocks, including stabilizing the
market for securities  which it has  underwritten,  the Company imposes position
limits to reduce its potential for loss.

In  executing  customer  orders to buy or sell a security  in which the  Company
makes a market, the Company may sell to, or purchase from,  customers at a price
that is  substantially  equal to the current  inter-dealer  market price plus or
minus a mark-up or  mark-down.  The  Company may also act as agent and execute a
customer's purchase or sale order with another broker-dealer market-maker at the
best  inter-dealer  market price available and charge a commission.  The Company
believes its mark-ups,  mark-downs and commissions are competitive  based on the
services it provides to its customers.

In  executing  customer  orders  to  buy or  sell  listed  and  over-the-counter
securities in which it does not make a market,  the Company generally acts as an
agent and charges  commissions that the Company believes are competitive,  based
on the services the Company provides to its customers.

Investment Banking

National provides corporate finance and investment  banking services,  including
underwriting  the sale of securities to the public and arranging for the private
placement of securities with investors.  National's corporate finance operations
provide a broad range of financial and corporate  advisory  services,  including
mergers and  acquisitions,  project  financing,  capital  structure and specific
financing  opportunities.  National has also underwritten both equity securities
and convertible corporate bonds as initial or secondary public offerings.

Supervision

The Securities  Exchange Act of 1934, as amended (the "Exchange  Act"),  and the
NASD Conduct Rules require the Company's  subsidiary to supervise the activities
of its investment  executives.  As part of providing such supervision,  National
maintains Written  Supervisory  Procedures and a Compliance  Manual.  Compliance
personnel  conduct   inspections  of  branch  offices   periodically  to  review
compliance  with the  Company's  procedures.  A  registered  principal  provides
continuous  supervision  at each of the  Company's  larger  offices.  The  other
offices  (averaging  two  investment  executives per office) are not required by
NASD rules to have a registered  principal on site and are therefore  supervised
by registered  principals of National.  Designated  principals  review  customer


                                      -8-
<PAGE>

trades  to ensure  compliance  with the NASD  Conduct  Rules  including  mark-up
guidelines.

In May 2001,  without  admitting  or denying  the alleged  violations,  National
accepted  and  consented  to  the  entry  of  the  following  findings  by  NASD
Regulation:  At various  times in 1999 and 2000,  the firm violated NASD Conduct
Rules  2860(b)(5);  Rule  3360;  Rule  3370;  Rule 2110 and  3010;  and SEC Rule
11Ac1-4.  The firm was censured and fined $35,000 in a settlement  dated May 21,
2001.

In May 2002,  without  admitting  or denying  the alleged  violations,  National
accepted  and  consented  to  the  entry  of  the  following  findings  by  NASD
Regulation:  at various times in 2001,  the firm  violated SEC Rule 17-A-4,  SEC
Rule 17-A-3, NASD Rule 3010, NASD Rule 3110, and NASD rule 6620(A). The firm was
censured and fined $7,500 in a settlement dated May 2, 2002.

In July 2002,  without  admitting  or denying the alleged  violations,  National
accepted  and  consented  to  the  entry  of  the  following  findings  by  NASD
Regulation:  at various  times in 2000 and 2001,  the firm violated NASD Conduct
Rule 11870.  The firm was censured  and fined $1,000 in a settlement  dated July
2002.

In September 2002, without admitting or denying the alleged violations, National
accepted  and  consented  to  the  entry  of  the  following  findings  by  NASD
Regulation: at various times in 2001, the firm violated NASD Conduct Rules 2110,
Rule 6240(a)(3), and Rule S6240(b)(3). The firm was censured and fined $7,500 in
a settlement dated September 27, 2002.

In July 2003,  without  admitting  or denying the alleged  violations,  National
accepted  and  consented  to  the  entry  of  the  following  findings  by  NASD
Regulation:  at various times in 2001,  the firm violated SEC Rule 11Ac1-4.  The
firm was censured and fined $7,500 in a settlement dated July 24, 2003.

In September 2003, without admitting or denying the alleged violations, National
accepted  and  consented to the entry of the  following  findings by the Florida
Office of  Financial  Regulation:  at various  times in 2001 and 2002,  the firm
violated  certain record  keeping  rules.  The firm agreed to update its Written
Supervisory Procedures, and the firm was fined $15,000 in a final administrative
order dated September 5, 2003.

Venture Capital

In March 2001, the Company had its initial  closing of Robotic  Ventures Fund I,
L.P. (the "Fund"),  a venture  capital fund  dedicated to investing in companies
engaged in the business of robotics and artificial intelligence. The Fund raised
a total of $5.2 million,  $265,000 of which was capital directly invested by the
Company into the Fund,  representing a 5.1% limited partnership  interest in the
Fund. The Company serves as the managing  member of Robotic  Ventures Group LLC,
the general  partner of the Fund. As the managing  member of the Fund's  general
partner,  the  Company  is  entitled  to a 2%  management  fee paid by the Fund.
Additionally,  the  Company  invested  $1,000,  and owns a 24.5%  of the  Fund's
general partner,  which is entitled to 20% of the profits  generated by the Fund
after the investors receive the return of their invested capital, representing a
4.9% indirect  interest in the profits of the Fund.  The Company keeps the books
and records of the Fund and oversees the Fund's investments.  From time to time,
employees of National will work with and advise the Fund's investee companies on
its business plan,  capital structure and future goals. The Company has not been
compensated  or engaged to provide any  management  or advisory  services to the


                                      -9-
<PAGE>

investee  companies.  In  February  2002,  due  to a  dramatic  slowdown  in the
technology  venture  markets,  the Fund  returned a majority  of the  uninvested
capital to the investors,  representing  approximately  50% of the funds raised,
and no further management fees are to be paid.

The carrying  amount of the  Company's  investment  in the Fund was $107,000 and
$136,000 at  September  30,  2003 and  September  30,  2002,  respectively.  The
Company's  investment in the Fund is accounted for in accordance with the equity
method of  accounting.  The  Company  recognized  a loss on this  investment  of
$29,000 and $434 during  fiscal  years 2003 and 2002,  respectively.  During the
formation of the Fund, the Company incurred various start-up  expenses that were
subsequently reimbursed by the Fund.

RISK FACTORS

The  financial  statements  contained in this report and the related  discussion
describe and analyze the Company's  financial  performance and condition for the
periods  indicated.  For the most part,  this  information  is  historical.  The
Company's  prior  results,  however,  are  not  necessarily  indicative  of  the
Company's future performance or financial  condition.  The Company therefore has
included  the  following  discussion  of certain  factors  that could affect the
Company's future performance or financial  condition.  These factors could cause
the Company's  future  performance or financial  condition to differ  materially
from  its  prior  performance  or  financial   condition  or  from  management's
expectations  or  estimates of the  Company's  future  performance  or financial
condition.  These factors,  among others,  should be considered in assessing the
Company's  future  prospects  and prior to making an  investment  decision  with
respect to the Company's  stock. The risks described below are not the only ones
facing  us.  Additional  risks not  presently  known to us or that we  currently
believe are immaterial may also impair our business operations.

Operating results have resulted in reporting losses; Additional financing may be
required.

Although the Company was profitable in the third quarter of fiscal year 2003, it
has reported losses of approximately  $843,000, $3.4 million and $7.9 million in
fiscal years 2003, 2002 and 2001,  respectively.  There is no assurance that the
Company will be profitable in the near term. The Company's  losses are primarily
attributable  to the market  slow-down and volatility.  The Company  anticipates
that with the improved  market  conditions  and increased  revenues it may again
become  profitable,  however,  there can be no assurance  that current levels of
revenue will continue and profitability will ever be realized.

In order  for the  Company  to have  the  opportunity  for  future  success  and
profitability,  it periodically may need to obtain additional financing,  either
through  borrowings,  public  offerings,  private  offerings,  or  some  type of
business  combination  (e.g.,  merger,  buyout,  etc.). The Company has actively
pursued a variety  of  funding  sources,  and has  entered  into the  Investment
Transaction and Private Offering in order to address the capital requirements of
the Company. If the Company continues to experience operating losses, additional
financing  will be  necessary,  and  there can be no  assurance  that it will be
successful  in such  pursuits.  The issuance of new  securities to raise capital
will cause the dilution of shares held by current stockholders.


                                      -10-
<PAGE>

The Company's  Common Stock may be subject to "low price stock" rules,  limiting
the market for the Company's Common Stock.

If the Company's  Common Stock  becomes  subject to the SEC's penny stock rules,
broker-dealers may experience difficulty in completing customer transactions and
trading activity in the Company's  securities may be adversely  affected.  If at
any time the  Company  has net  tangible  assets of  $5,000,000  or less and the
Company's  Common  Stock  has a  market  price  per  share of less  than  $5.00,
transactions  in the Company's  Common Stock may be subject to the "penny stock"
rules promulgated under the Exchange Act. Under these rules,  broker-dealers who
recommend  such  securities  to  persons  other  than  institutional  accredited
investors:

      o     must  make a  special  written  suitability  determination  for  the
            purchaser;

      o     receive the purchaser's  written agreement to a transaction prior to
            sale;

      o     provide the purchaser with risk disclosure  documents which identify
            certain risks  associated with investing in "penny stocks" and which
            describe  the  market  for  these  "penny   stocks"  as  well  as  a
            purchaser's legal remedies; and

      o     obtain  a  signed  and  dated   acknowledgment  from  the  purchaser
            demonstrating  that the purchaser has actually received the required
            risk disclosure document before a transaction in a "penny stock" can
            be completed.

If the Company's Common Stock becomes subject to these rules, broker-dealers may
find it difficult to effectuate  customer  transactions  and trading activity in
the Company's  securities  may be adversely  affected.  As a result,  the market
price of the Company's securities may be depressed, and stockholders may find it
more difficult to sell the Company's securities.

The  Company's  business  is  affected  by market  fluctuations,  liquidity  and
volatility.

The  Company's  revenue and  profitability  may be adversely  affected by market
fluctuations,  market  liquidity  and  declines  in  the  volume  of  securities
transactions.  National acts as a market maker in publicly traded common stocks.
In market making transactions,  the Company undertakes the risk of price changes
or being unable to resell the common stock the Company  holds or being unable to
purchase the common stock the Company has sold.  These risks are  heightened  by
the  illiquidity  of many of the common stocks the Company trades and/or makes a
market.  Any losses from the Company's trading  activities could have a material
adverse effect on its business,  financial  condition,  results of operations or
cash flows. In addition,  the Company  maintains  trading  positions that can be
adversely affected by the level of volatility in the financial markets.

The  Company's  business  could be  adversely  affected  by a  breakdown  in the
financial markets.

As a securities  broker-dealer,  National's  business is materially  affected by
conditions in the financial markets and economic conditions  generally,  both in
the United States and elsewhere  around the world.  Many factors or events could
lead to a breakdown in the financial markets including war,  terrorism,  natural
catastrophes  and other types of  disasters.  These types of events  could cause
people to begin to lose confidence in the financial markets and their ability to
function effectively. If the financial markets are unable to effectively prepare


                                      -11-
<PAGE>

for these  types of  events  and ease  public  concern  over  their  ability  to
function,  the  Company's  revenues  are  likely to  decline  and the  Company's
operations will be adversely affected.

Market fluctuations may reduce the Company's revenues and profitability.

The Company's revenue and profitability may be adversely affected by declines in
the volume of securities transactions and in market liquidity. Additionally, the
Company's  profitability may be adversely affected by losses from the trading or
underwriting  of  securities  or failure of third  parties to meet  commitments.
National  acts as a market maker in publicly  traded  common  stocks.  In market
making  transactions,  the Company undertakes the risk of price changes or being
unable to resell  the  common  stock it holds or being  unable to  purchase  the
common stock it has sold.  These risks are heightened by the illiquidity of many
of the common stocks the Company  trades and/or makes a market.  Any losses from
the Company trading activities, including as a result of unauthorized trading by
the Company's  employees,  could have a material adverse effect on the Company's
business, financial condition, results of operations or cash flows.

Lower   securities  price  levels  may  also  result  in  a  reduced  volume  of
transactions,  as well as losses  from  declines  in the market  value of common
stocks  held for  trading  purposes.  During  periods  of  declining  volume and
revenue,  the Company's  profitability would be adversely affected.  Declines in
market  values of common  stocks and the failure of issuers and third parties to
perform their  obligations  can result in illiquid  markets in which the Company
may incur losses in its principal trading and market-making activities.

Competition  with  larger  financial  firms  may have a  negative  effect on the
Company's business.

The  Company   competes   directly  with  national  and  regional   full-service
broker-dealers  and a broad range of other  financial  service firms,  including
banks and insurance  companies.  Competition has increased as smaller securities
firms have either ceased doing  business or have been acquired by or merged into
other firms.  Mergers and  acquisitions  have increased  competition  from these
firms, many of which have significantly greater financial,  technical, marketing
and other  resources  than the  Company  has.  Many of these  firms  offer their
customers  more  products and research  than  currently  offered by the Company.
These  competitors  may be able  to  respond  more  quickly  to new or  changing
opportunities,  technologies  and client  requirements.  The Company  also faces
competition  from  companies  offering  discount  and/or  electronic   brokerage
services,  including  brokerage  services provided over the Internet,  which the
Company  is  currently  not  offering  and  does  not  intend  to  offer  in the
foreseeable  future.  These  competitors  may have lower  costs or provide  more
services,  and may offer their  customers  more favorable  commissions,  fees or
other terms than those  offered by the  Company.  To the extent that issuers and
purchasers  of  securities  transact  business  without  the  assistance  of the
Company, the Company's operating results could be adversely affected.

The failure to meet the listing  criteria of The  American  Stock  Exchange  may
result in the delisting of the Company's Common Stock.

The  Company's  Common  Stock is  listed on The  American  Stock  Exchange  (the
"AMEX").  The AMEX has  certain  guidelines  under which it  considers  removing
securities  from listing on the AMEX. In February 2003,  the Company  received a
letter  from the AMEX  indicating  that it was not in  compliance  with  certain


                                      -12-
<PAGE>

listing standards relating to (1) shareholders' equity of less than $2.0 million
and losses from continuing  operations and/or net losses in two out of our three
most recent fiscal years,  and (2) the requirement to have and maintain an audit
committee  comprised  of at  least  three  independent  directors.  The  Company
submitted a plan to the AMEX indicating  compliance with item (1) above within a
maximum  of 18  months,  and that  the  Company  was  actively  seeking  another
independent  director to satisfy item (2) above.  In May 2003, the AMEX notified
the Company that it had accepted its plan of compliance  and granted the Company
an  extension  of time to August  5, 2004 to  satisfy  the  financial  standards
requirement,  and an  extension  of time to July  28,  2003 to  comply  with the
independent audit committee  requirement.  The Company satisfied the requirement
to have and maintain an audit committee  comprised of at least three independent
directors in July 2003.  In the event that the Company  fails to comply with the
listing  standards,  or the AMEX determines  that the compliance  program is not
satisfactory,  the Company's common stock may be removed from the AMEX and could
trade  on the OTC  Bulletin  Board or in the  "pink  sheets"  maintained  by the
National Quotation Bureau, Inc. Such alternatives are generally considered to be
less efficient markets,  and the Company's stock price, as well as the liquidity
of the Company's Common Stock, may be adversely impacted as a result.

The Company is currently  subject to  extensive  securities  regulation  and the
failure to comply with these  regulations could subject the Company to penalties
or sanctions.

The  securities  industry  and the  Company's  business are subject to extensive
regulation  by the SEC,  state  securities  regulators  and  other  governmental
regulatory   authorities.   The   Company   is  also   regulated   by   industry
self-regulatory organizations, including the NASD and the MSRB. The company is a
registered broker-dealer with the SEC and member firms of the NASD.

Broker-dealers  are  subject  to  regulations  which  cover all  aspects  of the
securities business, including sales methods and supervision,  trading practices
among  broker-dealers,  use and safekeeping of customers'  funds and securities,
capital  structure  of  securities  firms,  record  keeping,  and the conduct of
directors, officers and employees. The regulatory environment is also subject to
change.

Compliance  with many of the  regulations  applicable to the Company  involves a
number of risks,  particularly  in areas  where  applicable  regulations  may be
subject to varying  interpretation.  These  regulations often serve to limit the
Company's  activities,  including through net capital,  customer  protection and
market  conduct  requirements.  If the  Company  is  found to have  violated  an
applicable  regulation,  administrative or judicial proceedings may be initiated
against  the  Company  that may  result in a  censure,  fine,  civil  penalties,
issuance of  cease-and-desist  orders,  the  deregistration or suspension of the
Company's  broker-dealer  activities,  the suspension or disqualification of the
Company's officers or employees,  or other adverse consequences.  The imposition
of any of these or other penalties  could have a material  adverse effect on the
Company's operating results and financial condition.

The Company  relies on clearing  brokers and an  unilateral  termination  of the
agreements with these clearing brokers could disrupt the Company's business.

The  Company  changed  from a  self-clearing  brokerage  firm to an  introducing
brokerage  firm,  using third party  clearing  brokers to process its securities
transactions and maintain customer accounts on a fee basis for the Company.  The
clearing  brokers also provide billing  services,  extend credit and provide for


                                      -13-
<PAGE>

control  and  receipt,  custody  and  delivery  of  securities.   The  Company's
broker-dealers  depend on the  operational  capacity and ability of the clearing
brokers for the orderly processing of transactions. In addition, by engaging the
processing  services of a clearing firm, the Company is exempt from some capital
reserve  requirements and other regulatory  requirements  imposed by federal and
state  securities laws. If the clearing  agreements are unilaterally  terminated
for any reason,  the Company would be forced to find alternative  clearing firms
without  adequate  time to negotiate  the terms of a new clearing  agreement and
without adequate time to plan for such change. There can be no assurance that if
there were a unilateral  termination of its clearing  agreement that the Company
would be able to find an alternative  clearing firm on acceptable  terms to them
or at all.

The Company permits its clients to purchase securities on a margin basis or sell
securities  short,  which means that the  clearing  firm  extends  credit to the
client secured by cash and securities in the client's account. During periods of
volatile markets, the value of the collateral held by the clearing brokers could
fall below the amount  borrowed by the client.  If margin  requirements  are not
sufficient  to cover  losses,  the clearing  brokers sell or buy  securities  at
prevailing  market prices,  and may incur losses to satisfy client  obligations.
The Company's has agreed to indemnify the clearing brokers for losses they incur
while extending credit to the Company's clients.

Credit risk exposes the Company to losses caused by financial or other  problems
experienced by third parties.

The  Company  is  exposed  to the risk  that  third  parties  that owe it money,
securities  or other assets will not perform  their  obligations.  These parties
include: trading counterparts,  customers,  clearing agents, exchanges, clearing
houses,  and other financial  intermediaries as well as issuers whose securities
the Company holds.  These parties may default on their  obligations  owed to the
Company  due to  bankruptcy,  lack of  liquidity,  operational  failure or other
reasons.  This risk may arise,  for example,  from holding  securities  of third
parties,  executing  securities  trades that fail to settle at the required time
due to non-delivery by the  counterparty or systems failure by clearing  agents,
exchanges,  clearing  houses or other  financial  intermediaries,  and extending
credit  to  clients  through  bridge  or  margin  loans or  other  arrangements.
Significant  failures by third parties to perform their  obligations owed to the
Company could adversely affect the Company's  revenues and perhaps the Company's
ability to borrow in the credit markets.

Adverse  results of current  litigation  and potential  securities law liability
would result in financial losses and divert management's attention to business.

Many aspects of the Company's  business involve  substantial risks of liability.
There has been an increase in litigation and  arbitration  within the securities
industry in recent  years,  including  class  action suits  seeking  substantial
damages.  The Company is subject to potential claims by dissatisfied  customers,
including  claims alleging they were damaged by improper sales practices such as
unauthorized trading, sale of unsuitable securities,  use of false or misleading
statements  in the sale of  securities,  mismanagement  and breach of  fiduciary
duty.  National may be liable for the unauthorized acts of its retail brokers if
it fails to adequately  supervise their conduct. As an underwriter,  the Company
may be subject to substantial  potential  liability  under federal and state law
and  court  decisions,   including  liability  for  material  misstatements  and
omissions in securities offerings.  The Company may be required to contribute to
a  settlement,  defense  costs  or a final  judgment  in  legal  proceedings  or
arbitrations  involving a past underwriting and in actions that may arise in the


                                      -14-
<PAGE>

future.  National  carries  "Errors and Omissions"  insurance to protect against
arbitrations;  however,  the policy is limited in items and amounts  covered and
there can be no assurance that it will cover a complaint. The adverse resolution
of any legal  proceedings  involving the Company  could have a material  adverse
effect on the Company's business,  financial condition, results of operations or
cash flows.

The Company depends on key personnel.

The  Company  depends  on  the  continued   services  of  its  management  team,
particularly  Mark  Goldwasser,  the  Company's  President  and Chief  Executive
Officer, as well as its ability to hire additional members of management, and to
retain and motivate its other officers and key employees.  In November 2001, Mr.
Goldwasser  voluntarily  terminated his employment agreement with the Company in
exchange for a profit  participation  in  National's  branch  office in New York
City.  Subsequently,  in July 2003 the compensation committee of the Company and
Mr. Goldwasser agreed to terminate his profit participation in National's branch
office  in New York City in  exchange  for an annual  salary  of  $300,000.  The
Company's  future success also depends on its continuing  ability to attract and
retain highly qualified personnel.

The price of the Company's Common Stock is volatile.

The price of the Company's Common Stock has fluctuated substantially.  (See Part
II,  Item 5).  The  market  price of the  Company's  Common  Stock may be highly
volatile  as a result of factors  specific  to the  Company  and the  securities
markets in general.  Factors affecting  volatility may include variations in the
Company's  annual or quarterly  financial  results or those of its  competitors;
conditions  in the  economy  in  general;  and  changes  in  applicable  laws or
regulations,  or their judicial or administrative  interpretations affecting the
Company or its subsidiary or the securities industry. In addition, volatility of
the market price of the Company's Common Stock is further affected by its thinly
traded nature.

Item 2. PROPERTIES

The Company owns no real property.  Its corporate  headquarters  are shared with
National  in leased  space in  Chicago,  Illinois  and New York,  New York.  The
Company leases office space in Boca Raton,  Florida and  Princeton,  New Jersey,
and through its  subsidiary,  the Company  leases  office space in Chicago,  New
York, Seattle, Washington and Los Angeles,  California.  Independent contractors
individually  lease the branch  offices that are  operated by those  independent
contractors.

Leases expire at various times through June 2012. The Company  believes the rent
at each of its  locations  is at current  market  rates.  At current  production
levels, the Company believes that certain of its leased space in Chicago and New
York is  excessive,  and has  sublet a  portion  of this  excess  space to third
parties.

Item 3. LEGAL PROCEEDINGS

1.    Complete Management, Inc. - National was named, together with others, as a
      defendant  in  several  class  action  lawsuits  filed  against   Complete
      Management,  Inc. in the United  States  District  Court for the  Southern
      District of New York, Case No. 99 Civ. 1454 (NRB). Plaintiffs in the class
      action sought  approximately $80.0 million from all named parties. In June


                                      -15-
<PAGE>

      2000,  National filed a motion to dismiss this action.  In March 2001, the
      United States District Court for the Southern  District of New York denied
      National's motion to dismiss.  In May 2001,  National submitted its answer
      to the  complaint in which it set forth its  defenses.  In November  2001,
      plaintiffs  filed a motion to  certify  the class.  Plaintiffs  thereafter
      withdrew  their  motion  and the  case  was  referred  to  mediation.  The
      mediation  process resulted in a global  settlement of the matter.  During
      the fiscal year ended September 30, 2003,  National settled its portion of
      this litigation for $100,000, which was paid by its insurance company.

2.    Fastpoint - In June 2002,  National was named,  together with others, as a
      defendant  in a class  action  lawsuit  relating  to a series  of  private
      placements of securities in Fastpoint Communications, Inc. in the Superior
      Court for the State of California for the County of San Diego, Case No GIC
      791372. In August 2002, the plaintiffs filed an amended complaint alleging
      violations  of state  statutory and common law as well as of Section 12 of
      the  Securities  Act of 1933,  15 U.S.C.ss.  77l.  Plaintiffs  are seeking
      approximately  $14.0 million,  but no specific  amount of damages has been
      sought against National in the complaint.  The complaint asserts claims in
      connection  with National's role as placement agent in a series of private
      placements of securities in Fastpoint.  Plaintiffs allege that the private
      placement memoranda  contained false and misleading  statements or omitted
      facts necessary to make statements not misleading.  Subsequently, National
      filed its answer.  The Company  believes it has  meritorious  defenses and
      intends to vigorously contest class  certification and defend this action,
      although the ultimate  outcome of the matter  cannot be determined at this
      time.  Accordingly,  the  Company is unable to predict the outcome of this
      matter,  and no adjustments have been made in the  consolidated  financial
      statements in response to this matter.

3.    Gould - In April 2002, a former executive officer of the Company, Craig M.
      Gould,  commenced an action  against the Company,  in the matter Gould vs.
      Olympic Cascade  Financial  Corporation,  et al., NASD No.  02-03542.  Mr.
      Gould is  claiming  a breach of his  employment  contract,  and is seeking
      approximately $850,000 in damages. The arbitration commenced in July 2003,
      and continued in December  2003. The Company  believes it has  meritorious
      defenses  and intends to  vigorously  defend  this  action,  although  the
      ultimate  outcome of the matter cannot be  determined at this time.  Since
      the  Company  is  unable  to  predict  the  outcome  of  this  matter,  no
      adjustments  have been made in the  consolidated  financial  statements in
      response to this matter.

The Company is also a defendant in various other arbitrations and administrative
proceedings, lawsuits and claims, seeking damages aggregating approximately $3.0
million  (exclusive of specified punitive damages of approximately $4.0 million,
unspecified  punitive  damages related to certain claims and expected  insurance
coverage).  The Company has filed a counterclaim for  approximately  $200,000 in
one such  proceeding.  These matters arise out of the normal course of business.
The Company  intends to vigorously  defend itself in these actions,  however the
ultimate  outcome of these matters cannot be determined at this time. The amount
related to such matters that are reasonably estimable and which has been accrued
at September 30, 2003 and 2002, is $366,000 and $343,000, respectively.


                                      -16-
<PAGE>

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There  were no matters  submitted  to a vote of  security  holders in the fourth
quarter of fiscal year ended September 30, 2003.

                                     PART II

Item 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

The  Company's  Common  Stock  trades under the symbol "OLY" on the AMEX and the
Chicago Stock Exchange.  As of September 30, 2003, the Company had approximately
1,000  shareholders,  including those shareholders  holding stock in street name
and trust accounts.

Delaware  law  authorizes  the  Company's  Board of Directors to declare and pay
dividends  with respect to the Company's  common stock either out of its surplus
(as  defined  in the  Delaware  Corporation  Law) or,  in case  there is no such
surplus,  out of its net profits  for the fiscal  year in which the  dividend is
declared and/or the preceding fiscal year; provided,  however,  that no dividend
may be  paid  out of net  profits  unless  the  Company's  capital  exceeds  the
aggregate amount  represented by the issued and outstanding stock of all classes
having a preference in the distribution of assets.  Prior to the issuance of the
preferred stock in the Investment Transaction,  no shareholder held preferential
rights in  liquidation.  The Company has never declared a cash dividend and does
not presently foresee declaring one in the coming fiscal year.

Item 12 of Part III contains information  concerning  securities  authorized for
issuance under our equity compensation plans.

The high and low sales  prices  for the  Company's  Common  Stock for the period
September 29, 2001 to September 30, 2003, as listed on the AMEX, are as follows:

Period                                             High          Low
------                                             ----          ---

September 29, 2001/December 31, 2001               $2.73        $1.10
January 1, 2002/March 31, 2002                     $1.65        $0.55
April 1, 2002/June 30, 2002                        $0.95        $0.59
July 1, 2002/September 30, 2002                    $0.90        $0.57

October 1, 2002/December 31, 2002                  $0.60        $0.25
January 1, 2003/March 31, 2003                     $0.45        $0.25
April 1, 2003/June 30, 2003                        $1.00        $0.20
July 1, 2003/September 30, 2003                    $1.73        $0.85

The closing  price of the  Company's  Common  Stock on  December  22,  2003,  as
reported on the AMEX, was $1.51 per share.


                                      -17-
<PAGE>

Item 6. SELECTED FINANCIAL DATA

Set forth below is the historical financial data with respect to the Company for
the fiscal years ended 2003,  2002,  2001, 2000 and 1999.  This  information has
been derived from, and should be read in conjunction with, the audited financial
statements,  which appear  elsewhere in this report.  The financial data for the
fiscal years ended 2002,  2001,  2000 and 1999 have been restated to reflect the
discontinued  operations of the Company's former  subsidiary,  WestAmerica.  The
information  for the fiscal year 2002 has been revised to reflect the cumulative
dividends on the Company's  preferred  stock.  All  information  is expressed in
thousands of dollars except for per share information.

<TABLE>
<CAPTION>
                                                2003           2002          2001           2000          1999
                                             -------------------------------------------------------------------
<S>                                          <C>            <C>            <C>            <C>           <C>
Net revenues                                 $ 50,158       $ 42,002       $ 50,224       $ 56,213      $ 39,477
Net income (loss) from continuing
  operations before extraordinary items          (843)        (3,745)        (7,338)         1,356             8
Preferred stock dividends                        (250)          (168)            --             --            --
Net income (loss) per common share
  from continuing operations                    (0.34)         (1.73)         (3.33)          0.64          0.01
Total assets                                    8,735          7,948         77,599         92,696        86,113
Long-term obligations                           1,536          3,969          3,000            608         2,150
Stockholders' equity (deficit)                   (329)           (91)           622          8,039         4,039
Cash dividends                                     --             --             --             --            --
</TABLE>

                   REMAINDER OF PAGE INTENTIONALLY LEFT BLANK


                                      -18-
<PAGE>

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND  RESULTS
        OF OPERATIONS

The Private Securities  Litigation Reform Act of 1995 provides a safe harbor for
forward-looking  statements.  This Report may contain  certain  statements  of a
forward-looking nature relating to future events or future business performance.
Any such statements that refer to the Company's  estimated or anticipated future
results  or other  non-historical  facts are  forward-looking  and  reflect  the
Company's  current  perspective  of  existing  trends  and  information.   These
statements   involve  risks  and  uncertainties  that  cannot  be  predicted  or
quantified and,  consequently,  actual results may differ  materially from those
expressed  or  implied  by  such  forward-looking  statements.  Such  risks  and
uncertainties  include, among others, risks and uncertainties detailed in Item 1
above. Any  forward-looking  statements  contained in or incorporated  into this
Report  speak only as of the date of this  Report.  The  Company  undertakes  no
obligation to update publicly any forward-looking statement, whether as a result
of new information, future events or otherwise.

Critical Accounting Estimates

The SEC recently issued proposed guidance for disclosure of critical  accounting
estimates. The SEC defines "critical accounting estimates" as those that require
application of  management's  most difficult,  subjective or complex  judgments,
often as a result of the need to make  estimates  about the  effects  of matters
that are inherently  uncertain and may change in subsequent  periods.  In fiscal
years 2003 and 2002, the Company estimated the collectability of receivables due
from its registered  representatives.  These  receivables are derived from debts
owed to the Company and from money  advanced to the  registered  representatives
that may be forgiven over time based on the  representatives  affiliation  with,
and production at,  National.  The Company also estimated the amount of reserves
necessary to cover existing contingencies.

Results of Operations

Reclassification  of Revenues.  The revenues  generated from principal trades to
institutions  for which the  Company  receives  commission  revenues  previously
classified as net dealer  inventory  gains and other revenues in the fiscal year
ended  September  28,  2001 have been  reclassified  as  commission  revenues to
conform with the  presentation  used in the September 30, 2002 and September 30,
2003 financial statements, without affecting previously reported net losses.

The results  discussed  below for the fiscal year ended  September 28, 2001 have
been  restated to reflect a  discontinuation  of  operations  for the  Company's
former subsidiary, WestAmerica.

Fiscal Year 2003 Compared with Fiscal Year 2002

The  Company's  fiscal year 2003  resulted  in an  increase  in  revenues  and a
comparatively  lesser  increase in expenses  compared with fiscal year 2002. The
increase in revenues is primarily due to the improved  securities markets in the
second six months of fiscal  year 2003  compared  to a year ago.  As a result of
losses  incurred  primarily  in the first six months of fiscal  year  2003,  the
Company  reported a net loss from continuing  operations  before income taxes of
$843,000 compared with a net loss from continuing operations before income taxes
of $3,825,000 for fiscal year 2002, an  improvement of $2,982,000.  The decrease
in net loss is a result of the increase in revenues  combined with  management's
efforts to reduce the fixed costs associated with its business.


                                      -19-
<PAGE>

Total  revenues from  continuing  operations  increased  $8,156,000,  or 19%, in
fiscal year 2003 to  $50,158,000  from  $42,002,000  in fiscal  year 2002.  This
increase  is mainly  due to the  improved  securities  markets in the second six
months  of  fiscal  year  2003  compared  to fiscal  year  2002.  The  number of
commission  tickets  generated,  and the charge per  ticket  affects  commission
revenue and net dealer inventory gains.  During fiscal year 2003, trading volume
increased by approximately 18%, compared to fiscal year 2002. Commission revenue
increased $6,050,000, or 21%, to $34,218,000 from $28,168,000 during fiscal year
2003 compared with fiscal year 2002. Net dealer inventory gains,  which includes
profits on proprietary  trading,  market making activities and customer mark-ups
and mark-downs,  increased  $1,322,000,  or 13%, to $11,564,000 from $10,242,000
during fiscal year 2003 compared with fiscal year 2002. During fiscal year 2003,
revenues from proprietary  trading increased  $1,089,000,  or 12% to $10,249,000
from  $9,160,000 in fiscal year 2002;  revenues  from market  making  activities
increased $224,000, or 25%, to $1,115,000 from $891,000 in fiscal year 2002; and
revenues from  customer  mark-ups and  mark-downs  increased  $9,000,  or 4%, to
$200,000 from $191,000 in fiscal year 2002.  The increase in commission  revenue
and net dealer inventory gains is due to the improved  securities markets in the
second six months of fiscal year 2003.

Investment banking revenue increased $172,000, or 68%, to $425,000 from $253,000
in fiscal year 2003 compared  with fiscal year 2002.  The increase in investment
banking revenues is primarily  attributed to the Company's  completing a private
placement in the third quarter of fiscal year 2003. Interest and dividend income
decreased  $224,000 or 14%, to  $1,416,000  from  $1,640,000 in fiscal year 2003
compared with fiscal year 2002. The decrease in interest  income is attributable
to a decrease in the amount of customer debits in National's customers' accounts
during most of fiscal year 2003, and a decrease in interest rates from the prior
year.  Transfer fees  increased  $507,000,  or 38%, to $1,850,000 in fiscal year
2003 from  $1,343,000 in fiscal year 2002. The increase is due to an increase in
transaction  volume  associated with the Company's  retail  brokerage  business.
Other revenue, consisting of asset management fees and miscellaneous transaction
fees and trading  fees,  increased  $329,000,  or 92%, to $685,000 from $356,000
during fiscal year 2003 compared to fiscal year 2002.  The increase is primarily
due to increased transaction fees and trading fees.

In comparison with the 19% increase in total revenues,  total expenses increased
$5,174,000 or 11%, to  $51,001,000  for fiscal year 2003 compared to $45,827,000
in fiscal  year 2002.  The  increase  in total  expenses  is a result of greater
commission expenses directly associated with commission  revenues,  as well as a
$441,000  increase  in its  reserve  for  uncollectible  accounts  on its  other
receivables.  The  increase in total  expenses  was  minimized  by  management's
efforts to streamline its operations and reduce fixed expenses  associated  with
its salaried employees, communication and occupancy expenses.

Commission expense,  which includes expenses related to commission revenue,  net
dealer inventory gains and investment banking,  increased $8,230,000, or 31%, to
$34,583,000 in fiscal year 2003 from $26,353,000 in fiscal year 2002. Commission
expense  related  to  commission  revenue  increased  $6,745,000,   or  33%,  to
$26,931,000 in fiscal year 2003 from $20,186,000 in fiscal year 2002; commission
expense related to net dealer inventory gains increased  $1,347,000,  or 23%, to
$7,312,000  in fiscal  year 2003  from  $5,965,000  in  fiscal  year  2002;  and
commission expense related to investment banking increased $138,000,  or 68%, to
$340,000 in fiscal year 2003 from $202,000 in fiscal year 2002.  All  categories


                                      -20-
<PAGE>

of commission  expense as a percentage of the related  revenues were  relatively
consistent between fiscal year 2003 and fiscal year 2002.

Employee  compensation  expense decreased  $1,070,000,  or 21%, to $4,021,000 in
fiscal year 2003 from  $5,091,000  in fiscal year 2002.  This decrease is due to
management's  ongoing efforts to reduce its fixed costs associated with salaried
employees.  Overall, combined commission and employee compensation expense, as a
percentage  of revenue  increased  slightly to 77% from 75% in fiscal years 2003
and 2002, respectively.

Clearing fees  decreased  $1,527,000,  or 36%, to $2,714,000 in fiscal year 2003
from  $4,241,000 in fiscal year 2002.  Although there was an increase in trading
volume,  clearing  fees  decreased due to a change in the number of lower priced
tickets  from the prior  period,  and a one time  clearing  charge  of  $548,000
incurred in fiscal year 2002. Communication expenses decreased $173,000 or 6% to
$2,693,000 from $2,866,000 in fiscal year 2003 compared to fiscal year 2002. The
decrease  is due to a  reduction  in voice  and data  charges.  Occupancy  costs
decreased  $622,000,  or 18%, to  $2,891,000  from  $3,513,000.  The decrease in
occupancy expense is due to the Company's renegotiating certain long-term office
leases,  and  finding  subtenants  to occupy  unused  space.  Professional  fees
increased  $433,000,  or 40%, to $1,526,000  from $1,093,000 in fiscal year 2003
compared to fiscal year 2002.  The  increase in  professional  fees is due to an
increase in the legal fees relating to various lawsuits and arbitrations.

Interest expense decreased $318,000, or 62%, to $193,000 from $511,000 in fiscal
year 2003  compared to fiscal year 2002.  The decrease is  primarily  due to the
Company's change from a self-clearing brokerage firm to an introducing brokerage
firm during the first  quarter of fiscal  year 2002,  and a decrease in interest
rates in 2003 from 2002. Taxes,  licenses and registration  decreased $4,000, or
1%, to $407,000  from $411,000 in fiscal year 2003 compared to fiscal year 2002.
Other expenses increased $225,000 or 13% to $1,973,000 from $1,748,000 in fiscal
year 2003 compared to fiscal year 2002. The increase in other expenses is due to
the Company's  increase of its reserve for  uncollectible  accounts on its other
receivables  related to  registered  representatives  formerly  associated  with
National, by $441,000 during fiscal year 2003, as compared to $209,000 in fiscal
year 2002.

The Company  reported a loss from continuing  operations  before income taxes of
$843,000  in fiscal  year 2003  compared  to a loss from  continuing  operations
before income taxes of $3,825,000 for fiscal year 2002.

In the first  quarter  of fiscal  year  2002,  the  Company  recorded  a gain of
$300,000 from discontinued  operations related to the write-off of WestAmerica's
net liabilities.  Overall,  the diluted loss attributable to common stockholders
in fiscal year 2003 was $1,093,000, or $.34 per common share, as compared to the
diluted loss  attributable to common  stockholders  of $3,613,000,  or $1.60 per
common  share  in  fiscal  year  2002.  The  net  loss  attributable  to  common
stockholders  for fiscal years 2003 and 2002  reflects  $250,000 and $168,000 of
cumulative but unpaid preferred stock dividends,  respectively, on the Company's
Preferred Stock issued during fiscal year 2002.

Fiscal Year 2002 Compared with Fiscal Year 2001

The  Company's  fiscal  year 2002  resulted  in a  decrease  in  revenues  and a
corresponding  greater decrease in expenses  compared with fiscal year 2001. The
decrease in revenues  is  primarily  due to the  continued  slumping  securities


                                      -21-
<PAGE>

markets,  decreased net dealer inventory gains and lower interest  income.  As a
result,  for fiscal  year 2002 the Company  reported a net loss from  continuing
operations  before income taxes and  extraordinary  item of $3,825,000  compared
with a net loss from continuing operations before income taxes and extraordinary
item of $7,420,000 for fiscal year 2001. The decrease in net loss is a result of
management's  efforts to reduce the fixed  costs  associated  with its  salaried
employees, communication expenses, occupancy costs and other expenses.

Total  revenues from  continuing  operations  decreased  $8,222,000,  or 16%, in
fiscal year 2002 to  $42,002,000  from  $50,224,000  in fiscal  year 2001.  This
decrease is mainly due to the weaker overall securities market compared with the
securities  market  during fiscal year 2001.  The number of  commission  tickets
generated,  and the charge per ticket affects  commission revenue and net dealer
inventory gains.  During fiscal year 2002 compared to fiscal year 2001,  trading
volume decreased by approximately 3%. Commission revenue decreased $484,000,  or
2%, to $28,168,000 from $28,652,000 during fiscal year 2002 compared with fiscal
year 2001.  The decrease is due to the weaker  securities  markets and decreased
trading  volume.   Net  dealer  inventory  gains,   which  includes  profits  on
proprietary  trading,   market  making  activities  and  customer  mark-ups  and
mark-downs, decreased $1,819,000, or 15%, to $10,242,000 from $12,061,000 during
fiscal  year 2002  compared  with  fiscal  year 2001.  During  fiscal year 2002,
revenues from proprietary  trading  decreased  $2,198,000,  or 19% to $9,190,000
from  $11,358,000  in fiscal year 2001;  revenues from market making  activities
increased $504,000,  or 130%, to $891,000 from $387,000 in fiscal year 2001; and
revenues from customer mark-ups and mark-downs  decreased  $125,000,  or 40%, to
$191,000  from  $316,000 in fiscal  year 2001.  Although  the weaker  securities
markets and decreased  trading volume created an overall  reduction in revenues,
the increase in revenues  from market making  activities  reflects the Company's
higher level of market making activity during most of fiscal year 2002.

Interest and dividend  income  decreased  $4,110,000 or 71%, to $1,640,000  from
$5,750,000 in fiscal year 2002 compared with fiscal year 2001.  This decrease is
partially  offset by the  corresponding  decrease  in  interest  expense,  which
decreased  $2,850,000,  or 85%, to $511,000 from  $3,361,000 in fiscal year 2002
compared to fiscal year 2001. The decrease in both interest  income and interest
expense is  attributable  to a decrease  in the amount of  customer  credits and
customer  debits at National due to the  conversion of its clearing  business in
December 2001, and a decrease in interest rates from 2001 to 2002.

Investment  banking  revenue  decreased  $767,000,  or  75%,  to  $253,000  from
$1,020,000 in fiscal year 2002  compared with fiscal year 2001.  The Company did
not manage a public  underwriting  in fiscal years 2002 or 2001. The decrease in
revenues is attributed to a general  slow-down in the broader  capital  markets.
During  fiscal years 2002 and 2001,  investment  banking  revenue was  generated
primarily from the  completion of private  placement  transactions  and advisory
fees.  Other  revenue,  consisting of asset  management  fees and  miscellaneous
transaction  fees and trading fees,  decreased  $1,293,000,  or 78%, to $356,000
from  $1,649,000  during  fiscal year 2002  compared  to fiscal  year 2001.  The
decrease  is due to a decline in asset  management  fees,  a decrease in service
fees on IRA accounts  that are now collected by First  Clearing  rather than the
Company, and fewer order flow rebates from other broker-dealers.

In comparison with the 16% decrease in total revenues,  total expenses decreased
$11,817,000 or 21%, to $45,827,000  for fiscal year 2002 compared to $57,644,000
in fiscal year 2001. The decrease in total expenses is a result of  management's
efforts to streamline its operations and reduce costs.  During fiscal year 2002,


                                      -22-
<PAGE>

the Company has consolidated  certain of its operations to its New York offices,
eliminated  redundancies in various departments,  renegotiated  long-term leases
and curtailed miscellaneous costs.

Commission expense,  which includes expenses related to commission revenue,  net
dealer inventory gains and investment banking,  decreased $2,095,000,  or 7%, to
$26,353,000 in fiscal year 2002 from $28,448,000 in fiscal year 2001. Commission
expense related to commission revenue was virtually  unchanged at $20,186,000 in
fiscal year 2002 compared to $20,148,000 in fiscal year 2001; commission expense
related  to  net  dealer  inventory  gains  decreased  $1,519,000,  or  20%,  to
$5,965,000  in fiscal  year 2002  from  $7,484,000  in  fiscal  year  2001;  and
commission expense related to investment banking decreased $614,000,  or 68%, to
$202,000 in fiscal year 2002 from $816,000 in fiscal year 2001.  All  categories
of commission  expense as a percentage of the related  revenues were  relatively
consistent between fiscal year 2002 and fiscal year 2001.

Employee  compensation  expense decreased  $3,635,000,  or 42%, to $5,091,000 in
fiscal year 2002 from $8,726,000 in fiscal year 2001. This significant  decrease
is due to a reduction  in senior  management  salaries  and a reduction in staff
made possible by clearing through First Clearing,  as opposed to  self-clearing.
Overall,  combined  commissions  and employee  compensation  as a percentage  of
revenue  increased  slightly  to 75% from 74% in  fiscal  years  2002 and  2001,
respectively.

Clearing fees decreased  $61,000,  or 1%, to $4,241,000 in fiscal year 2002 from
$4,302,000  in fiscal year 2001.  The decrease in clearing  expenses  would have
been greater, absent a dispute that occurred during the second quarter of fiscal
year 2002 while finalizing  National's  clearance  conversion to First Clearing.
This dispute arose among the Company,  US Clearing  (one of its former  clearing
firms) and First Clearing relating to the  responsibility  for debit balances in
certain trading accounts. The three parties agreed to share the expense equally,
resulting in a one-time charge of $548,000 in the second quarter.

As a result of cost cutting efforts, communication, occupancy, professional fees
and other expenses all decreased during fiscal year 2002 compared to fiscal year
2001.  Communication  expenses  decreased  $474,000  or 14% to  $2,866,000  from
$3,340,000 in fiscal year 2002 compared to fiscal year 2001.  This decrease is a
result of management's  eliminating  redundancies in the  communication  systems
that existed  prior to 2002.  Occupancy  costs  decreased  $902,000,  or 20%, to
$3,513,000  from  $4,415,000.  The decrease in  occupancy  expense is due to the
Company's renegotiating long-term office leases and finding subtenants to occupy
unused space.  Professional fees decreased $852,000,  or 44%, to $1,093,000 from
$1,945,000  in fiscal year 2002  compared to fiscal year 2001.  The  decrease in
professional  fees is due to a reduction  in both the number and amount of legal
consultations used in operating our business.  Other expenses decreased $596,000
or 25% to $1,748,000 from $2,344,000 in fiscal year 2002 compared to fiscal year
2001. This decrease in other expenses is attributable to management's efforts to
reduce travel, entertainment and miscellaneous expenses.

Interest expense  decreased  $2,850,000,  or 85%, to $511,000 from $3,361,000 in
fiscal year 2002 compared to fiscal year 2001. The decrease in interest  expense
is  attributable  to a decrease in the amount of customer  credits and  customer
debits at National due to the  conversion  of its clearing  business in December
2001,  and a decrease in interest rates from 2002 to 2001.  Taxes,  licenses and
registration  decreased  $352,000,  or 46%, to $411,000  from $763,000 in fiscal


                                      -23-
<PAGE>

year 2002  compared  to fiscal year 2001.  The  decrease is due to a decrease in
state  taxes  based on  commission  revenues  and a  decrease  in the  number of
employees for whom the Company pays state registration fees.

Overall,  the diluted loss from  continuing  operations  in fiscal year 2002 was
$1.73 per  common  share,  as  compared  to the  diluted  loss  from  continuing
operations  of  $3.33  per  common  share  in  fiscal  year  2001.  The net loss
attributable to common  stockholders  for fiscal year 2002 reflects  $168,000 of
cumulative but unpaid preferred stock dividends on the Company's Preferred Stock
issued during fiscal year 2002.

Results of Discontinued Operations
Fiscal Year 2002 Compared with Fiscal Year 2001

In December 2001, WestAmerica voluntarily withdrew its membership with the NASD,
ceased  conducting  business  as  a  broker-dealer,  and  filed  for  Chapter  7
bankruptcy  protection  in  accordance  with the  U.S.  Bankruptcy  Code.  Until
December 2001,  WestAmerica was registered as a  broker-dealer  with the SEC and
licensed in 44 states,  Puerto Rico and the District of  Columbia.  WestAmerica,
offered  traditional  securities  brokerage and financial  planning business and
fee-based  investment  management  business  to  its  retail  clients.  Recently
WestAmerica   experienced   operating  losses.  In  addition  to  these  losses,
WestAmerica had arbitration losses that exceeded its net capital.

In the first  quarter  of fiscal  year  2002,  the  Company  recorded  a gain of
$300,000 from discontinued  operations related to the write-off of WestAmerica's
net  liabilities.  The loss reported in fiscal year 2001 reflected the loss from
operations  of the  Company's  WestAmerica  subsidiary.  In the first quarter of
fiscal year 2002,  WestAmerica  filed for  Chapter 7  Bankruptcy  protection  in
accordance with the U.S.  Bankruptcy  Code.  This filing  eliminated the risk of
loss for the liabilities in excess of assets,  and accordingly,  that amount was
reversed and reflected as income in the first  quarter of fiscal year 2002.  The
Company did not  guarantee any of the  obligations  of  WestAmerica,  a distinct
legal  entity.  Consequently,  the Company  believes that it has no liability to
creditors of  WestAmerica.  As of December 18, 2002, no creditors of WestAmerica
have sought recovery from the Company. During fiscal year 2001, West America had
total revenues of $2,155,000, and a net loss of $1,002,000.

Liquidity and Capital Resources

As with most financial  services  firms,  substantial  portions of the Company's
assets are liquid,  consisting mainly of cash or assets readily convertible into
cash.  Through December 2001, while acting as a self-clearing  firm,  National's
interest  bearing and  non-interest  bearing  customer  credit  balances,  other
payables and equity capital primarily  financed these assets.  National utilized
short-term bank financing to supplement its ability to meet day-to-day operating
cash  requirements.  Such  financing  was  used to  maximize  cash  flow and was
regularly  repaid. In January 2001,  National entered into a $5,000,000  secured
line of credit with American National Bank and Trust Company of Chicago that was
guaranteed by the Company.  The line of credit has been fully repaid and expired
on December 31, 2001.

National,  as a registered  broker-dealer,  is subject to the SEC's  Uniform Net
Capital Rule 15c3-1,  which  requires  the  maintenance  of minimum net capital.
National has elected to use the  alternative  standard  method  permitted by the
rule.  This  requires that  National  maintain  minimum net capital equal to the


                                      -24-
<PAGE>

greater of $250,000 or a specified amount per security based on the bid price of
each security for which  National is a market maker.  On December 12, 2003,  the
Company  was  advised by the NASD that,  pursuant  to  National's  pledge of its
assets as security  for loans to the  Company  from First  Clearing  (such loans
aggregated  $2,131,000 as of September 30, 2003), National was not in compliance
with its net capital requirements.  Accordingly, at September 30, 2003, National
reported  an  excess  net  capital  deficiency  of  $829,000.   This  compliance
requirement was corrected on December 15, 2003, upon termination of the security
agreement with First Clearing.

In December 2001, WestAmerica voluntarily withdrew its membership with the NASD,
ceased  conducting  business  as  a  broker-dealer,  and  filed  for  Chapter  7
Bankruptcy  protection in accordance with the U.S. Bankruptcy Code.  WestAmerica
has been operated as a separate legal entity,  and although the Company believes
it  will  not  have  any  ongoing  liability  for  any  unpaid   obligations  of
WestAmerica,  there can be no assurances that creditors of WestAmerica  will not
seek recovery of their claims from the Company.

Advances,  dividend  payments and other equity  withdrawals  from the  Company's
subsidiary  are restricted by the  regulations  of the SEC and other  regulatory
agencies.  These regulatory restrictions may limit the amounts that a subsidiary
may dividend or advance to the Company.

The Company  extends  unsecured  credit in the normal  course of business to its
brokers.  The determination of the amount of uncollectible  accounts is based on
the amount of credit  extended and the length of time each  receivable  has been
outstanding, as it relates to each individual broker. The allowance for doubtful
accounts  increased  by $441,000 in fiscal year 2003,  reflecting  the amount of
loss that can be reasonably estimated by management.

The  objective of liquidity  management  is to ensure that the Company has ready
access to sufficient  funds to meet  commitments,  fund deposit  withdrawals and
efficiently provide for the credit needs of customers.

As a result of the losses  throughout  fiscal  year 2001,  notably  those of the
fourth quarter,  attributable in part to the  unprecedented  events in September
2001,  the Company  concluded  that existing  capital would not be sufficient to
satisfy  existing  operations.  The Company  explored  various  transactions  to
finance the Company's  operations.  In December  2001,  the Company  completed a
series  of  transactions  (the  "Investment  Transaction")  that are more  fully
described in Part 1. The Company  continued to incur operating losses throughout
fiscal year 2002, and as a result,  the Company  believed that its then existing
capital  was  not  sufficient  to  satisfy  its  current  level  of  operations.
Accordingly,  the Company  pursued  additional  sources of capital  from various
potential  investors.  In the fourth  quarter of fiscal  year 2002,  the Company
completed  $210,000 of investments  in the form of Series A Preferred  Stock and
continued to seek additional investments.

In the first  quarter of fiscal  year 2003,  the Company  consummated  a private
placement of its securities to a limited number of accredited investors pursuant
to Rule 501 of Regulation D under the Securities  Act (the "Private  Offering").
Each unit in the Private  Offering  sold for $0.65 and consisted of one share of
the Company's  Common Stock and one three-year  warrant to purchase one share of
the Company's Common Stock at a per share price of $1.25 (the  "Warrants").  Net
proceeds of $554,500  closed in the first  quarter of fiscal year 2003,  and the
Company  correspondingly  issued  1,016,186 shares of Common Stock and 1,016,186
Warrants.  In January 2003, the Company issued 76,923 shares of Common Stock and


                                      -25-
<PAGE>

a  three-year  warrant to purchase  76,923  shares of Common  Stock at $1.25 per
share to Seyfarth Shaw, as payment of $50,000 of legal fees that were accrued as
of  September  30,  2002.  The Warrants  issued in  connection  with the Private
Offering and the Warrants  issued to Seyfarth Shaw have been included along with
the proceeds of the shares of Common Stock issued as additional paid-in capital.

In March 2003, the Company filed a Registration  Statement on Form S-3 under the
Securities  Act for the resale of the  shares of Common  Stock and the shares of
Common Stock  issuable  upon  exercise of the  Warrants.  In October  2003,  the
Company filed a Form RW withdrawing the filing of the Registration  Statement on
Form S-3. Currently the Company is eligible to file a Registration  Statement on
Form S-3, and management  believes it will file such statement in the near term,
that will  include  the shares of Common  Stock and the  shares of Common  Stock
issuable upon exercise of the Warrants issued in the Private Offering.

In August 2001, the Company  entered into an agreement with First Clearing under
which First Clearing  provides  clearing and related services for National.  The
Clearing Agreement expands the products and services capabilities for National's
retail and  institutional  business,  and enables  National to  consolidate  its
existing clearing  operations and reduce the fixed overhead  associated with its
self-clearing activities.

The  conversion  to First  Clearing  began in December 2001 and was completed in
March 2002.  It is standard  business  practice in the  brokerage  industry  for
clearing firms to provide financial support to correspondent  clearing firms. As
such, in connection with the Clearing Agreement, the Company executed a ten-year
promissory  note in favor of First Clearing under which the Company  immediately
borrowed $1,000,000.  The funds were contributed by the Company to National, and
are being used as a deposit to secure National's  performance under the Clearing
Agreement. The Clearing Agreement also provided for another $1,000,000 loan that
was extended to the Company upon  substantial  completion  of the  conversion on
December 31, 2001 that was also contributed to National.  The amount of the note
that is repayable on each  anniversary  date is the  principal,  and interest if
any,  then  outstanding  divided by the remaining  life of the note.  Borrowings
under the  promissory  note are forgivable  annually based on achieving  certain
business  performance  and trading  volumes of the Company  over the life of the
loan. The Company would need to generate  approximately 250,000 tickets per year
over the ten-year  term of the note to satisfy the trading  volume  requirement,
which has been satisfied through fiscal year 2003.

In connection with the Clearing Agreement,  additional borrowings were available
to  the  Company  upon  the   attainment  by  National  of  certain  volume  and
profitability  goals.  In finalizing the  conversion,  a dispute arose among the
Company,  US Clearing  (one of its former  clearing  firms) and First  Clearing,
regarding the responsibility for debit balances in certain trading accounts. The
three parties agreed to share the expense  equally.  The Company's share of this
settlement, $548,000, was advanced to the Company by First Clearing and added to
the existing  promissory  note. As part of the settlement,  the minimum level of
stockholders'  equity the Company is required to maintain  under the  promissory
note was reduced from  $2,000,000 to $1,000,000  and no further  borrowings  are
available under the promissory note, as amended. Additionally, National received
its  clearing  deposit,  net of  miscellaneous  expenses,  of  $975,000  from US
Clearing. National terminated its clearing agreement with US Clearing.

In the first quarter of fiscal year 2003,  First Clearing  loaned the Company an
additional $375,000 in the form of clearing fee rebates.  The loan was due to be
repaid  in  January   2004.   Additionally,   First   Clearing  has  waived  its


                                      -26-
<PAGE>

stockholders' equity covenant as of September 30, 2003 and December 31, 2003.

In December  2003,  the  Company  engaged in various  discussions  with the NASD
relating to the Security Agreement between National and First Clearing,  and its
effect  on the  computation  of  National's  net  capital.  As a result of these
discussions,  on December 15,  2003,  the Company and First  Clearing  agreed in
principle to the  following:  (1) National's  clearing  deposit was reduced from
$1,000,000 to $500,000,  (2) the excess  $500,000 was paid to First  Clearing to
reduce the Company's outstanding loan balance on its promissory note and (3) the
Security   Agreement   between  National  and  First  Clearing  was  terminated.
Furthermore,  First  Clearing has waived payment of the $375,000 that was due to
be paid in January 2004. Additionally, the Company is engaged in discussions and
negotiations  with First  Clearing  regarding  the  clearing  relationship,  and
payment of the remaining outstanding balance on the promissory note.

In November  2003,  National and the holder of the $1.0 million  secured  demand
note that  matures on  February  1, 2004,  agreed that the note will be replaced
with a note in a principal amount equal to at least $500,000 that will mature on
February  28,  2005.  Additionally,  two  noteholders  have agreed to extend the
maturity  date on $1.0  million of notes from January 25, 2004 to July 31, 2005,
and effective  February 1, 2004, the interest rate will be increased to 12% from
9% per annum.

The Company believes that with the improved market  conditions and the Company's
increased volume of business experienced during the third and fourth quarters of
fiscal  year  2003,  and  the  first  quarter  of  fiscal  year  2004,  and  the
continuation  of such improved  market  conditions,  funds will be sufficient to
maintain  its current  level of  business  activities  during  fiscal year 2004.
Additionally,  the Company has recently  commenced  efforts to raise  additional
capital  in  order  to  strengthen  its  existing  capital.  If  current  market
conditions  do not  continue,  the  Company  would need to  consider  curtailing
certain of its business  activities,  further  reducing its fixed overhead costs
and/or seek additional sources of financing.

Inflation

The Company  believes that the effect of inflation on its assets,  consisting of
cash, securities, office equipment, leasehold improvements and computers has not
been significant.

New Accounting Standards

In November 2002, the FASB issued  Interpretation  ("FIN") No. 45,  "Guarantor's
Accounting  and  Disclosure  Requirements  for  Guarantees,  Including  Indirect
Guarantees  of  Indebtedness  of Others." FIN No. 45 requires a company,  at the
time it issues a guarantee, to recognize an initial liability for the fair value
of obligations assumed under the guarantee and elaborates on existing disclosure
requirements  related to  guarantees  and  warranties.  The initial  recognition
requirements of FIN No. 45 are effective for guarantees issued or modified after
December 31, 2002. The Company's adoption of the recognition requirements of FIN
No. 45 did not have any effect on its consolidated financial position or results
of operations.

In January 2003, the FASB issued  Interpretation  46,  Consolidation of Variable
Interest  Entities.  In general,  a variable  interest  entity is a corporation,
partnership, trust, or any other legal structure used for business purposes that
either (a) does not have equity  investors  with voting rights or (b) has equity


                                      -27-
<PAGE>

investors that do not provide sufficient  financial  resources for the entity to
support its activities. Interpretation 46 requires a variable interest entity to
be  consolidated  by a company if that  company is subject to a majority  of the
risk of loss from the  variable  interest  entity's  activities  or  entitled to
receive a majority of the entity's  residual returns or both. The  consolidation
requirements  of  Interpretation  46  apply  immediately  to  variable  interest
entities created after January 31, 2003. The consolidation requirements apply to
older entities in the first fiscal year or interim period  beginning  after June
15,  2003.  Certain  of the  disclosure  requirements  apply  in  all  financial
statements  issued  after  January 31,  2003,  regardless  of when the  variable
interest entity was established.  The adoption of FASB  Interpretation 46 is not
expected to have an impact on the Company's financial statements.

In May 2003,  the FASB issued SFAS No. 150,  "Accounting  for Certain  Financial
Instruments  with  Characteristics  of both  Liabilities  and  Equity"  which is
effective for financial instruments entered into or modified after May 31, 2003,
and  otherwise  is  effective  at the  beginning  of the  first  interim  period
beginning after June 15, 2003. This Statement  establishes  standards for how an
issuer   classifies   and   measures   certain   financial    instruments   with
characteristics  of both  liabilities  and equity.  It  requires  that an issuer
classify a financial  instrument  that is within its scope as a  liability.  The
Company is still evaluating the effect of this pronouncement on its consolidated
financial statements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The  Company's  primary  market  risk  arises  from the fact that it  engages in
proprietary trading and makes dealer markets in equity securities.  Accordingly,
the Company may be required to maintain  certain amounts of inventories in order
to facilitate  customer  order flow. The Company may incur losses as a result of
price movements in these  inventories due to changes in interest rates,  foreign
exchange rates,  equity prices and other political  factors.  The Company is not
subject to direct market risk due to changes in foreign exchange rates. However,
the Company is subject to market  risk as a result of changes in interest  rates
and equity prices, which are affected by global economic conditions. The Company
manages its exposure to market risk by limiting its net long or short positions.
Trading and inventory accounts are monitored daily by management and the Company
has instituted position limits.

Credit risk  represents the amount of accounting loss the Company could incur if
counterparties to its proprietary  transactions fail to perform and the value of
any  collateral  proves  inadequate.  Although  credit risk  relating to various
financing  activities  is reduced by the  industry  practice  of  obtaining  and
maintaining  collateral,  the Company  maintains more stringent  requirements to
further reduce its exposure.  The Company  monitors its exposure to counterparty
risk on a daily  basis by  using  credit  exposure  information  and  monitoring
collateral  values.  The Company  maintains a credit  committee,  which  reviews
margin  requirements  for  large  or  concentrated   accounts  and  sets  higher
requirements  or  requires a  reduction  of either  the level of margin  debt or
investment in high-risk securities or, in some cases,  requiring the transfer of
the account to another broker-dealer.

The Company  monitors its market and credit risks daily through internal control
procedures  designed to identify  and  evaluate  the various  risks to which the
Company is exposed. There can be no assurance,  however, that the Company's risk


                                      -28-
<PAGE>

management  procedures and internal  controls will prevent losses from occurring
as a result of such risks.

The following  table shows the quoted market values of the Company's  securities
held for resale and  securities  sold, but not yet purchased as of September 30,
2003:

                             Securities held     Securities sold, but
                               for resale          not yet purchased
                             ---------------     --------------------
Corporate stocks              $    238,000            $     63,000
Corporate bonds                     21,000                   5,000
Government obligations             115,000                  48,000
                              ------------            ------------
                              $    374,000            $    116,000
                              ============            ============


Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See Part IV, Item 14(a)(1) for a list of financial  statements  filed as part of
this Report.


                   REMAINDER OF PAGE INTENTIONALLY LEFT BLANK


                                      -29-
<PAGE>

Item 9.  CHANGES  IN  AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
         FINANCIAL DISCLOSURE

The Company  filed a Report on Form 8-K dated May 5, 2003  reporting a change in
its independent  public  accountants to Marcum & Kliegman LLP from Grassi & Co.,
CPAs,  P.C.  The  Company  filed a Report  on Form 8-K  dated  October  9,  2003
reporting a change in its  independent  public  accountants  attributable to the
merger of Feldman Sherb & Co., P.C. with Grassi & Co.,  CPAs,  P.C. on April 17,
2002. There were no  disagreements  with accountants on accounting and financial
disclosure for the fiscal year ended September 30, 2003.

Item 9A. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures. Based on the evaluation of the
Company's  disclosure  controls and  procedures  (as defined in the Exchange Act
Rules  13a-15(e) and 15d-15(e))  required by the Exchange Act Rules 13a-15(b) or
15d-15(b),  the Company's  Chief  Executive  Officer and Acting Chief  Financial
Officer have concluded that, as of the end of the period covered by this report,
the Company's disclosure controls and procedures were effective.

Changes in internal controls. There were no significant changes in the Company's
internal  controls or in other  factors  that could  significantly  affect those
controls subsequent to the date of our evaluation.

                                    PART III

Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Code of Ethics.  The Company has adopted a written  Code of Ethics (the "Code of
Ethics") that applies to its Chief Executive  Officer and Acting Chief Financial
Officer.  A copy of the Code of Ethics is available  on the National  website at
www.nationalsecurities.com,  and print copies are  available to any  shareholder
that  requests a copy.  Any amendment to the Code of Ethics or any waiver of the
Code of Ethics will be disclosed on the National website promptly  following the
date of such amendment or waiver.

The other  information  required by this Item will be included in the  Company's
2004 Proxy Statement and is incorporated herein by reference.

Item 11. EXECUTIVE COMPENSATION

The  information  required by this Item will be included in the  Company's  2004
Proxy Statement and is incorporated herein by reference.

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The  information  required by this Item will be included in the  Company's  2004
Proxy Statement and is incorporated herein by reference.


                                      -30-
<PAGE>

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The  information  required by this Item will be included in the  Company's  2004
Proxy Statement and is incorporated herein by reference.

Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

The  information  required by this Item will be included in the  Company's  2004
Proxy Statement and is incorporated herein by reference.

Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)      The following financial statements are included in Part II, Item 8:

         1.     Financial Statements
                    Independent Auditors' Reports
                    Consolidated Financial Statements
                         Statements of Financial  Condition,  September 30, 2003
                         and September 30, 2002 Statements of Operations,  Years
                         ended September 30, 2003, September 30, 2002 and
                           September 28, 2001
                         Statement of Changes in Stockholders' Equity (Deficit),
                           Years ended  September  30, 2003,  September 30, 2002
                           and September 28, 2001
                         Statements of Cash Flows,  Years  ended  September  30,
                           2003, September 30, 2002 and September 28, 2001
                         Notes to Consolidated Financial Statements

         2.     Financial Statement Schedules

                    Schedules  not listed above have been  omitted  because they
                    are not applicable or have been included in footnotes to the
                    consolidated financial statements.

(b)      Reports on Form 8-K

         No  Reports on Form 8-K were filed  during  the  fourth  quarter  ended
September 30, 2003.

(c)      Exhibits

         See Exhibit Index.


                                      -31-
<PAGE>

                                   SIGNATURES


Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities  and
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

OLYMPIC CASCADE FINANCIAL CORPORATION
(Registrant)


Date: December 29, 2003             By:  /s/Mark Goldwasser
                                        ----------------------------------------
                                         Mark Goldwasser
                                         President, Director and Chief Executive
                                         Officer

Date: December 29, 2003             By:   /s/Robert H. Daskal
                                        ----------------------------------------
                                         Robert H. Daskal,
                                         Acting Chief Financial Officer


Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of the  registrant and
in the capacities and on the dates indicated.

Date: December 29, 2003             By:  /s/Steven B. Sands
                                       -----------------------------------------
                                        Steven B. Sands, Co-Chairman

Date: December 29, 2003             By:  /s/Martin S. Sands
                                       -----------------------------------------
                                         Martin S. Sands, Co-Chairman

Date: December 29, 2003             By:  /s/Mark Goldwasser
                                       -----------------------------------------
                                         Mark Goldwasser,
                                         President, Director and Chief Executive
                                         Officer

Date: December 29, 2003             By:  /s/Norman J. Kurlan
                                       -----------------------------------------
                                          Norman J. Kurlan, Director

Date: December 29, 2003             By:  /s/Gary A. Rosenberg
                                       -----------------------------------------
                                        Gary A. Rosenberg, Director

Date:   December 29, 2003           By:  /s/Robert J. Rosan
                                         ---------------------------------------
                                        Robert J. Rosan, Director

Date:   December 29, 2003           By:  /s/Peter Rettman
                                         ---------------------------------------
                                        Peter Rettman, Director


                                      -32-
<PAGE>

                                  EXHIBIT INDEX

3.1      Certificate of Incorporation,  as amended,  previously filed as Exhibit
         3.4 to Form 10-Q in May 2002 and hereby incorporated by reference.

3.2      The Company's  Bylaws,  as amended,  previously filed as Exhibit 3.3 to
         Form 10-Q in February 2002, and hereby incorporated by reference.

3.3      The Company's By-Laws, as amended and restated on December 12, 2001.

10.1     Office lease, Chicago,  Illinois,  previously filed as Exhibit 10.27 to
         Form 10-K in December 1996 and hereby incorporated by reference.

10.2     Office lease, Spokane, Washington, previously filed as Exhibit 10.28 to
         Form 10-K in December 1996 and hereby incorporated by reference.

10.3     Amended office lease,  Chicago,  Illinois,  previously filed as Exhibit
         10.29  to  Form  10-K in  December  1996  and  hereby  incorporated  by
         reference.

10.4     Purchase  agreement  between  shareholders  of Friend and the  Company,
         previously  filed as Exhibit  10.30 to Form 10-K in  December  1997 and
         hereby incorporated by reference.

10.5     Purchase agreement between shareholders of WestAmerica and the Company,
         previously  filed as Exhibit  10.31 to Form 10-K in  December  1997 and
         hereby incorporated by reference.

10.6     Purchase  agreement  between  shareholders  of Travis and the  Company,
         previously  filed as Exhibit  10.32 to Form 10-K in  December  1997 and
         hereby incorporated by reference.

10.7     Borrowing  agreement  between  Seattle-First   National  Bank  and  the
         Company,  previously  filed as Exhibit  10.33 to Form 10-K in  December
         1998 and hereby incorporated by reference.

10.8     Note payable agreement,  previously filed as Exhibit 10.34 to Form 10-K
         in December 1998 and hereby incorporated by reference.

10.9     Note payable agreement,  previously filed as Exhibit 10.35 to Form 10-K
         in December 1998 and hereby incorporated by reference.

10.10    Note payable agreement,  previously filed as Exhibit 10.36 to Form 10-K
         in December 1998 and hereby incorporated by reference.

10.11    Sales  agreement  between Friend and the Company,  previously  filed as
         Exhibit 10.37 to Form 10-K in December 1998 and hereby  incorporated by
         reference.

10.12    1996 Stock Option Plan,  previously filed as Exhibit 4.1 to Form S-8 in
         February 1999 and hereby incorporated by reference.

10.13    1997 Stock Option Plan,  previously filed as Exhibit 4.2 to Form S-8 in
         February 1999 and hereby incorporated by reference.

10.14    1999 Stock Option Plan,  previously filed as Exhibit 4.3 to Form S-8 in
         February 1999 and hereby incorporated by reference.

10.15*   Employment contract dated July 1999,  previously filed as Exhibit 10.15
         to Form 10-K in December 1999 and hereby incorporated by reference.

10.16*   Employment  contract dated July 1999 previously  filed as Exhibit 10.16
         to Form 10-K in December 1999 and hereby incorporated by reference.

10.17*   Employment  contract dated July 1999 previously  filed as Exhibit 10.17
         to Form 10-K in December 1999 and hereby incorporated by reference.

10.18*   Employment  contract dated July 1999 previously  filed as Exhibit 10.18
         to Form 10-K in December 1999 and hereby incorporated by reference.

10.19*   Employment  contract dated July 1999 previously  filed as Exhibit 10.19
         to Form 10-K in December 1999 and hereby incorporated by reference.


                                      -33-
<PAGE>

10.20    Office lease, Seattle,  Washington previously filed as Exhibit 10.20 to
         Form 10-K in December 1999 and hereby incorporated by reference.

10.21    2000 Stock Option Plan,  previously filed as Exhibit 4.1 to Form S-8 in
         June 2000 and hereby incorporated by reference.

10.22*   Employment contract dated June 2000,  previously filed as Exhibit 10.21
         to Form 10-Q in August 2000 and hereby incorporated by reference.

10.23    Form of Note payable agreement dated January 2001,  previously filed as
         Exhibit  10.23  to Form  10-Q in May 2001 and  hereby  incorporated  by
         reference.

10.24    Secured Demand Note dated February  2001,  previously  filed as Exhibit
         10.24 to Form 10-Q in May 2001 and hereby incorporated by reference.

10.25    Loan and security  agreement  dated January 2001,  previously  filed as
         Exhibit 10.25 to Form 10-Q in February 2001 and hereby  incorporated by
         reference.

10.26    2001   Stock   Option   Plan,   previously   included   in  the   Proxy
         Statement-Schedule 14A filed in January 2001 and hereby incorporated by
         reference.

10.27    Audit committee charter, previously filed as Exhibit 10.22 to Form 10-Q
         in August 2000 and hereby incorporated by reference.

10.28    Clearing  Agreement,  previously filed as Exhibit 10.28 to Form 10-K in
         December 2001 and hereby incorporated by reference.

10.29    First  Amendment  to Clearing  Agreement,  previously  filed as Exhibit
         10.29  to  Form  10-K in  December  2001  and  hereby  incorporated  by
         reference.

10.30    Purchase Agreement by and among Olympic Cascade Financial  Corporation,
         Mark Goldwasser and Triage Partners, LLC dated as of December 14, 2001,
         previously  filed as  Exhibit  10.30 to Form  8-K in  January  2002 and
         hereby incorporated by reference.

10.31    Stock Purchase  Agreement  between Steven A.  Rothstein,  certain other
         persons or entities and Triage  Partners,  LLC dated as of December 14,
         2001, previously filed as Exhibit 10.31 to Form 8-K in January 2002 and
         hereby incorporated by reference.

10.32    Securities  Exchange  Agreement by and among Olympic Cascade  Financial
         Corporation,  Gregory P. Kusnick, Karen Jo Gustafson, Gregory C. Lowney
         and Maryanne K. Snyder dated as of December 14, 2001,  previously filed
         as Exhibit 10.32 to Form 8-K in January 2002 and hereby incorporated by
         reference.

10.33    Escrow   Agreement  by  and  made  among  Olympic   Cascade   Financial
         Corporation,   Mark  Goldwasser,  Triage  Partners,  LLC  and  National
         Securities  Corporation dated as of December 28, 2001, previously filed
         as Exhibit 10.33 to Form 8-K in January 2002 and hereby incorporated by
         reference.

10.34    Second  Amendment to Clearing  Agreement,  previously  filed as Exhibit
         10.34  to  Form  10-Q in  February  2002  and  hereby  incorporated  by
         reference.

10.35    Form of Warrant issued in December 2002.

14.      The Code of Ethics.

16.1     Change in Certifying Accountant, previously filed in Form 8-K in August
         1998 and hereby incorporated by reference.

16.2     Investment  Transaction,  previously  filed in Form 8-K in January 2002
         and hereby incorporated by reference.

16.3     Resignation of Director, previously filed in Form 8-K in April 2002 and
         hereby incorporated by reference.

16.4     Change in its Independent Public Accountants,  previously filed in Form
         8-K in May 2003 and hereby incorporated by reference.

16.5     Change in its Independent Public Accountants,  previously filed in Form
         8-K in October 2003 and hereby incorporated by reference.

21.      Subsidiaries of Registrant.

23.1     Consent of Feldman Sherb Erhlich & Co., P.C., previously filed to Forms
         S-8 in  February  1999 and June 2000 and Forms S-3 in May 1999 and June
         1999 and hereby incorporated by reference.

23.2     Consent of Moss Adams LLP,  previously  filed to Forms S-8 in  February
         1999 and June 2000 and  Forms S-3 in May 1999 and June 1999 and  hereby
         incorporated by reference.

23.3     Consent of Camhy Karlinsky & Stein LLP, previously filed to Form S-8 in
         February  1999 and  Forms  S-3 in May 1999  and  June  1999 and  hereby
         incorporated by reference.

23.4     Consent of D'Ancona & Pflaum LLC, previously filed to Forms S-8 in June
         2000 and June 2001 and hereby incorporated by reference.

24.      Power of Attorney,  previously  filed to Forms S-3 in May 1999 and June
         1999

31.1     Chief Executive  Officer's  Certificate  pursuant to Section 302 of the
         Sarbanes-Oxley Act of 2002.

31.2     Acting Chief Financial Officer's Certificate pursuant to Section 302 of
         the Sarbanes- Oxley Act of 2002.

32.1     Chief Executive  Officer's  Certificate  pursuant to Section 906 of the
         Sarbanes-Oxley Act of 2002.

32.2     Acting Chief Financial Officer's Certificate pursuant to Section 906 of
         the Sarbanes- Oxley Act of 2002.

         *Compensatory agreements


                                      -34-

<PAGE>

                          INDEPENDENT AUDITORS' REPORT

To the Stockholders and
Board of Directors
Olympic Cascade Financial Corporation

We have audited the accompanying  consolidated  statement of financial condition
of Olympic  Cascade  Financial  Corporation  and  Subsidiary as of September 30,
2003,  and  the  related  consolidated  statements  of  operations,  changes  in
stockholders' deficit and cash flows for the year then ended. These consolidated
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements based on our audit.

We conducted our audit in accordance with auditing standards  generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  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  audit  provides  a
reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the consolidated  financial position of Olympic Cascade
Financial   Corporation  and  Subsidiary  as  of  September  30,  2003  and  the
consolidated  results of their operations and their cash flows for the year then
ended, in conformity with accounting principles generally accepted in the United
States of America.


/s/ Marcum & Kliegman LLP
------------------------------------
Marcum & Kliegman LLP
Certified Public Accountants


December 3, 2003
(except with respect to the matter
discussed in Note 21, as to which
the date is December 15, 2003)
New York, New York


                                      F-1
<PAGE>

                          INDEPENDENT AUDITORS' REPORT

To the Stockholders and
Board of Directors
Olympic Cascade Financial Corporation

         We have audited the accompanying  consolidated  statements of financial
condition  of  Olympic  Cascade  Financial  Corporation  and  Subsidiary  as  of
September  30,  2002 and the  related  consolidated  statements  of  operations,
changes in stockholders'  deficit, and cash flows for the year then ended. These
consolidated  financial  statements  are  the  responsibility  of the  Company's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements based on our audit.

         We conducted our audit in accordance with auditing standards  generally
accepted in the United States of America.  Those standards  require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  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  audit  provides  a
reasonable basis for our opinion.

         In our opinion,  the  financial  statements  referred to above  present
fairly, in all material respects, the consolidated financial position of Olympic
Cascade  Financial  Corporation and Subsidiary as of September 30, 2002, and the
consolidated results of their operations and their cash flows for the year ended
September 30, 2002 in conformity with accounting  principles  generally accepted
in the United States of America.


                                                     /s/ Grassi & Co. CPAs, P.C.
                                                    ----------------------------
                                                        Grassi & Co., CPAs, P.C.
                                                    Certified Public Accountants

         December 18, 2002
         New York, New York


                                      F-2
<PAGE>

                          INDEPENDENT AUDITORS' REPORT

To the Stockholders and
Board of Directors
Olympic Cascade Financial Corporation

         We have audited the accompanying consolidated statements of operations,
changes in  stockholders'  equity,  and cash flows of Olympic Cascade  Financial
Corporation  and  Subsidiaries  for the year ended  September  28,  2001.  These
consolidated  financial  statements  are  the  responsibility  of the  Company's
management.  Our  responsibility is to express an opinion on these  consolidated
financial statements based on our audit.

         We conducted our audit in accordance with auditing standards  generally
accepted in the United States of America.  Those standards  require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  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  audit  provides  a
reasonable basis for our opinion.

         In our opinion,  the  financial  statements  referred to above  present
fairly,  in all material  respects,  the consolidated  results of operations and
cash flows of Olympic Cascade  Financial  Corporation and  Subsidiaries  for the
year ended September 28, 2001 in conformity with accounting principles generally
accepted in the United States of America.


                                                   /s/ Feldman Sherb & Co., P.C.
                                                   -----------------------------
                                                        Feldman Sherb & Co. P.C.
                                                    Certified Public Accountants

         December 26, 2001
         New York, New York


                                      F-3
<PAGE>

              OLYMPIC CASCADE FINANCIAL CORPORATION AND SUBSIDIARY

                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

<TABLE>
<CAPTION>
                                                          ASSETS

                                                                                                 September 30,      September 30,
                                                                                                     2003               2002
                                                                                                 ------------       ------------
<S>                                                                                              <C>                <C>
CASH                                                                                             $    451,000       $    325,000
CASH, restricted                                                                                           --            309,000
DEPOSITS WITH CLEARING ORGANIZATIONS                                                                1,041,000          1,489,000
RECEIVABLES FROM BROKER-DEALERS AND CLEARING ORGANIZATIONS                                          3,724,000          1,269,000
OTHER RECEIVABLES, net of reserve for uncollectible accounts of $650,000 and
            $209,000 at September 30, 2003 and 2002, respectively                                     709,000          1,155,000
ADVANCES TO REGISTERED REPRESENTATIVES                                                                644,000            799,000
SECURITIES HELD FOR RESALE, at market                                                                 374,000            606,000
FIXED ASSETS, net                                                                                     247,000            369,000
SECURED DEMAND NOTE                                                                                 1,000,000          1,000,000
OTHER ASSETS                                                                                          545,000            627,000
                                                                                                 ------------       ------------

TOTAL ASSETS                                                                                     $  8,735,000       $  7,948,000
                                                                                                 ============       ============

                                          LIABILITIES AND STOCKHOLDERS' DEFICIT

BANK OVERDRAFT                                                                                   $         --       $    408,000
PAYABLE TO BROKER-DEALERS AND CLEARING ORGANIZATIONS                                                  258,000            490,000
SECURITIES SOLD, BUT NOT YET PURCHASED, at market                                                     116,000            105,000
ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER LIABILITIES                                            4,520,000          2,821,000
NOTES PAYABLE                                                                                       3,170,000          3,215,000
                                                                                                 ------------       ------------
TOTAL LIABILITIES                                                                                   8,064,000          7,039,000
                                                                                                 ------------       ------------

SUBORDINATED BORROWINGS                                                                             1,000,000          1,000,000
                                                                                                 ------------       ------------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' DEFICIT
          Preferred stock, $.01 par value, 100,000 shares authorized; designated
             Series A 9% cumulative  convertible  preferred stock, 30,000 shares
             authorized; 27,825
             shares issued and outstanding (liquidation preference: $2,782,500)                            --                 --
          Common stock, $.02 par value, 60,000,000 shares authorized, 3,367,558 and
             2,274,449 issued and outstanding, at September 30, 2003 and 2002, respectively            67,000             45,000
          Additional paid-in capital                                                               12,628,000         12,045,000
          Accumulated deficit                                                                     (13,024,000)       (12,181,000)
                                                                                                 ------------       ------------
TOTAL STOCKHOLDERS' DEFICIT                                                                          (329,000)           (91,000)
                                                                                                 ------------       ------------

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT                                                      $  8,735,000       $  7,948,000
                                                                                                 ============       ============
</TABLE>


                See notes to consolidated financial statements.


                                      F-4
<PAGE>

              OLYMPIC CASCADE FINANCIAL CORPORATION AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                                         Years Ended
                                                               ----------------------------------------------------------------
                                                               September 30, 2003     September 30, 2002     September 28, 2001
                                                               ------------------     ------------------     ------------------
<S>                                                              <C>                    <C>                    <C>
REVENUES
      Commissions                                                $   34,218,000         $   28,168,000         $   28,652,000
      Net dealer inventory gains                                     11,564,000             10,242,000             12,061,000
      Investment banking                                                425,000                253,000              1,020,000
      Interest and dividends                                          1,416,000              1,640,000              5,750,000
      Transfer fees and clearance services                            1,850,000              1,343,000              1,092,000
      Other                                                             685,000                356,000              1,649,000
                                                                 --------------         --------------         --------------

                                                                     50,158,000             42,002,000             50,224,000
                                                                 --------------         --------------         --------------

EXPENSES
      Commissions                                                    34,583,000             26,353,000             28,448,000
      Employee compensation and related expenses                      4,021,000              5,091,000              8,726,000
      Occupancy and equipment costs                                   2,891,000              3,513,000              4,415,000
      Interest                                                          193,000                511,000              3,361,000
      Clearance fees                                                  2,714,000              4,241,000              4,302,000
      Communications                                                  2,693,000              2,866,000              3,340,000
      Taxes, licenses, registration                                     407,000                411,000                763,000
      Professional fees                                               1,526,000              1,093,000              1,945,000
      Other                                                           1,973,000              1,748,000              2,344,000
                                                                 --------------         --------------         --------------

                                                                     51,001,000             45,827,000             57,644,000
                                                                 --------------         --------------         --------------

Loss from continuing operations before
      income taxes and extraordinary item                              (843,000)            (3,825,000)            (7,420,000)
Income tax benefit                                                           --                 80,000                 82,000
                                                                 --------------         --------------         --------------

Loss from continuing operations before
      extraordinary item                                               (843,000)            (3,745,000)            (7,338,000)
                                                                 --------------         --------------         --------------

Income (loss) from discontinued operations, net of tax:
      Loss from operations                                                   --                     --               (915,000)
      Gain (loss) on disposal                                                --                300,000                (87,000)
                                                                 --------------         --------------         --------------

Income (loss) from discontinued operations                                   --                300,000             (1,002,000)
                                                                 --------------         --------------         --------------

 Income from extraordinary item- gain from
      extinguishment of debt, net of tax                                     --                     --                418,000
                                                                 --------------         --------------         --------------

Net loss                                                               (843,000)            (3,445,000)            (7,922,000)

Preferred stock dividends                                              (250,000)              (168,000)                    --
                                                                 --------------         --------------         --------------

Net loss attributable to common stockholders                     $   (1,093,000)        $   (3,613,000)        $   (7,922,000)
                                                                 ==============         ==============         ==============

INCOME (LOSS) PER COMMON SHARE

Basic and diluted:
      Loss from continuing operations                            $        (0.34)        $        (1.73)        $        (3.33)
      Income (loss) from discontinued operations                             --                   0.13                  (0.45)
      Extraordinary gain                                                     --                     --                   0.19
                                                                 --------------         --------------         --------------
              Net loss                                           $        (0.34)        $        (1.60)        $        (3.59)
                                                                 ==============         ==============         ==============

Weighted average number of shares outstanding:
      Basic and diluted                                               3,175,315              2,255,449              2,207,101
                                                                 ==============         ==============         ==============
</TABLE>


                See notes to consolidated financial statements.

                                       F-5

<PAGE>

              OLYMPIC CASCADE FINANCIAL CORPORATION AND SUBSIDIARY

       CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)

          SEPTEMBER 30, 2003, SEPTEMBER 30, 2002 AND SEPTEMBER 28, 2001

                                    <TABLE>
<CAPTION>

                                        Preferred Stock              Common Stock           Additional
                                  --------------------------  --------------------------     Paid-In
                                     Shares        Amount        Shares        Amount        Capital       Deficit         Total
                                  ------------  ------------  ------------  ------------  ------------  ------------   ------------
<S>                               <C>           <C>           <C>           <C>           <C>           <C>            <C>
BALANCE, September 29, 2000                 --  $         --     2,153,846  $     43,000  $  8,810,000  $   (814,000)  $  8,039,000

   Exercise of stock options                --            --        73,603         2,000       273,000            --        275,000
   Options issued to consultants            --            --            --            --       105,000            --        105,000
   Issuance of restricted common
      stock                                 --            --         9,000            --        25,000            --         25,000
   Original issue discount                  --            --            --            --       100,000            --        100,000
   Net loss                                 --            --            --            --            --    (7,922,000)    (7,922,000)
                                  ------------  ------------  ------------  ------------  ------------  ------------   ------------

BALANCE, September 28, 2001                 --            --     2,236,449        45,000     9,313,000    (8,736,000)       622,000

   Issuance of restricted common
      stock in exchange of note             --            --        38,000            --        49,000            --         49,000
   Issuance of preferred stock          17,825            --            --            --     1,683,000            --      1,683,000
   Issuance of preferred stock in
      exchange of notes                 10,000            --            --            --     1,000,000            --      1,000,000
   Net loss                                 --            --            --            --            --    (3,445,000)    (3,445,000)
                                  ------------  ------------  ------------  ------------  ------------  ------------   ------------

BALANCE, September 30, 2002             27,825            --     2,274,449        45,000    12,045,000   (12,181,000)       (91,000)

   Issuance of restricted common
       stock:                               --            --
        From private placement                                   1,016,186        21,000       533,000                      554,000
        Payment of legal fees                                       76,923         1,000        50,000                       51,000
   Net loss                                 --            --            --            --            --      (843,000)      (843,000)
                                  ------------  ------------  ------------  ------------  ------------  ------------   ------------

BALANCE, September 30, 2003             27,825  $         --     3,367,558  $     67,000  $ 12,628,000  $(13,024,000)  $   (329,000)
                                  ============  ============  ============  ============  ============  ============   ============
</TABLE>

                See notes to consolidated financial statements.


                                      F-6
<PAGE>

        OLYMPIC CASCADE FINANCIAL CORPORATION AND SUBSIDIARY

                CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                                 Years ended
                                                                          ----------------------------------------------------------
                                                                          September 30, 2003  September 30, 2002  September 28, 2001
                                                                          ------------------  ------------------  ------------------
<S>                                                                          <C>                 <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES
   Net loss                                                                  $   (843,000)       $ (3,445,000)      $ (7,922,000)
   Adjustments to reconcile net loss to net
   cash provided by (used in) operating activities
       Depreciation and amortization                                              217,000             566,000            632,000
       Compensation related to issuance of stock options                               --                  --            105,000
       Deferred income tax benefit                                                     --                  --             50,000
       Gain on extraordinary item-extinguishment of debt                               --                  --           (418,000)
       Amortization of note discount                                               33,000              33,000             23,000
       Provision for doubtful accounts                                            441,000             209,000                 --
       Forgiveness of loan                                                       (453,000)           (339,000)                --
       Write-down of limited partnership investment                                29,000                  --                 --
       Change in net assets (liabilities) of discontinued operations                   --            (300,000)           817,000
   Changes in assets and liabilities
       Cash, cash equivalents and securities                                           --          37,188,000         (7,671,000)
       Restricted cash                                                            309,000              16,000           (325,000)
       Deposits with clearing organizations                                       448,000           3,165,000         (2,862,000)
       Receivables from broker-dealers, clearing organizations and others      (2,295,000)         27,828,000         25,079,000
       Income taxes payable                                                            --                  --           (258,000)
       Securities held for resale, at market                                      232,000             525,000           (758,000)
       Other assets                                                                53,000             313,000         (1,689,000)
       Payables                                                                 1,892,000         (63,183,000)       (15,963,000)
       Securities sold, but not yet purchased, at market                           11,000            (687,000)           600,000
                                                                             ------------        ------------       ------------
   Net cash provided by (used in) operating activities                             74,000           1,889,000        (10,560,000)
                                                                             ------------        ------------       ------------

CASH FLOWS FROM INVESTING ACTIVITIES

       Purchase of fixed assets                                                   (94,000)            (94,000)          (806,000)
                                                                             ------------        ------------       ------------

CASH FLOWS FROM FINANCING ACTIVITIES
       Borrowings (payments) on line of credit                                         --          (3,500,000)         3,500,000
       Proceeds from notes payable                                                     --           1,548,000          4,000,000
       Payment of notes payable                                                        --             (13,000)           (84,000)
       Payments on capital lease                                                       --            (300,000)          (340,000)
       Issuance of restricted stock                                                    --                  --             25,000
       Increase (decrease) in cash overdraft                                     (408,000)         (1,148,000)         1,556,000
       Net proceeds from issuance of preferred stock                                   --           1,683,000                 --
       Net proceeds from issuance of common stock and warrants                    554,000                  --                 --
       Exercise of stock options                                                       --                  --            275,000
                                                                             ------------        ------------       ------------
   Net cash provided by (used in) financing activities                            146,000          (1,730,000)         8,932,000
                                                                             ------------        ------------       ------------

NET INCREASE (DECREASE) IN CASH                                                   126,000              65,000         (2,434,000)

CASH BALANCE
       Beginning of the year                                                      325,000             260,000          2,694,000
                                                                             ------------        ------------       ------------

       End of the year                                                       $    451,000        $    325,000       $    260,000
                                                                             ============        ============       ============

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid during
  the year for:
       Interest                                                              $    193,000        $    535,000       $  3,317,000
                                                                             ============        ============       ============
       Income taxes                                                          $         --        $     12,000       $    323,000
                                                                             ============        ============       ============

SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND
          FINANCING ACTIVITIES
       Exchange of notes payable for preferred stock                         $         --        $  1,000,000       $         --
                                                                             ============        ============       ============
       Exchange of notes payable for common stock                            $         --        $     49,000       $         --
                                                                             ============        ============       ============
       Exchange of accounts payable for common stock                         $     51,000        $         --       $         --
                                                                             ============        ============       ============
       Conversion of accounts payable to loan payable                        $    375,000        $         --       $         --
                                                                             ============        ============       ============
       Warrants issued as a discount on notes payable                        $         --        $         --       $    100,000
                                                                             ============        ============       ============
       Forgiveness of loan                                                   $    453,000        $    339,000       $         --
                                                                             ============        ============       ============
</TABLE>

                See notes to consolidated financial statements.


                                      F-7
<PAGE>
                      OLYMPIC CASCADE FINANCIAL CORPORATION
                                 AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

          SEPTEMBER 30, 2003, SEPTEMBER 30, 2002 AND SEPTEMBER 28, 2001

1.       ORGANIZATION

         Olympic Cascade Financial Corporation ("Olympic" or the "Company") is a
         diversified  financial  services  organization,  operating  through its
         wholly owned subsidiary,  National Securities Corporation ("National").
         The Company's business includes securities brokerage for individual and
         institutional   clients,   market-making   trading  activities,   asset
         management and corporate finance  services.  National is an introducing
         broker and clears all transactions through a clearing organization on a
         fully disclosed basis.

         In June 1997,  the Company  acquired  all of the  outstanding  stock of
         WestAmerica  Investment Group  ("WestAmerica"),  a Scottsdale,  Arizona
         based  broker-dealer  specializing  in retail  brokerage  services.  In
         December 2001, WestAmerica voluntarily withdrew its membership with the
         NASD,  ceased  conducting  business  as a  broker-dealer  and filed for
         Chapter 7 Bankruptcy  protection in accordance with the U.S. Bankruptcy
         Code. Accordingly, the accompanying financial statements of WestAmerica
         have been  reclassified  as  discontinued  operations  for all  periods
         presented.

         In June 2000,  the Company  acquired  all of the  outstanding  stock of
         Canterbury  Securities  Corporation  ("Canterbury"),  an Illinois based
         broker-dealer  focusing on private placement of securities.  Canterbury
         was  acquired  for  $30,000 in cash plus the  issuance  of  warrants to
         purchase 5,000 shares of the common stock of the Company at an exercise
         price of  $6.375  per  share.  Canterbury  had no  activity  since  its
         acquisition.  In May 2002,  pursuant to an agreement made  simultaneous
         with the  Investment  Transaction  (see  Note  3b),  the  Company  sold
         Canterbury  for its book value of $11,000 to Mr.  Steven A.  Rothstein,
         the former Chief Executive Officer of the Company.

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         a.       Principles  of  Consolidation  -  The  consolidated  financial
                  statements  include  the  accounts  of Olympic  and its wholly
                  owned subsidiary.  All significant  intercompany  accounts and
                  transactions have been eliminated in consolidation.

         b.       Estimates  -  The  preparation  of  financial   statements  in
                  conformity with accounting  principles  generally  accepted in
                  the  United  States of  America  requires  management  to make
                  estimates and assumptions  that affect the reported amounts of
                  assets and  liabilities,  disclosure of contingent  assets and


                                      F-8
<PAGE>

                  liabilities at the date of the financial  statements,  and the
                  reported amounts of revenues and expenses during the reporting
                  period. Actual results could differ from those estimates.

         c.       Revenue  Recognition - Customer security  transactions and the
                  related  commission  income and expense are recorded as of the
                  trade date. Investment banking revenues include gains, losses,
                  and fees, net of syndicate  expenses,  arising from securities
                  offerings  in which  the  Company  acts as an  underwriter  or
                  agent.  Investment  banking  revenues also include fees earned
                  from providing financial advisory services. Investment banking
                  management  fees are  recorded  on the  offering  date,  sales
                  concessions on the settlement date, and  underwriting  fees at
                  the time the  underwriting  is  completed  and the  income  is
                  reasonably  determinable.  Customers who are  financing  their
                  transaction  on margin,  are charged  interest.  The Company's
                  margin  requirements  are in  accordance  with the  terms  and
                  conditions mandated by First Clearing Corporation ("FCC"), its
                  clearing  firm.  The  interest is billed on the average  daily
                  balance of the margin account.

                  Net dealer inventory gains result from securities transactions
                  entered  into for the  account  and risk of the  Company.  Net
                  dealer  inventory  gains are  recorded  on a trade date basis.
                  Transfer  fees  are  charged  for  each  customer's   security
                  transaction,   and  are  recognized  as  of  the  trade  date.
                  Investment  advisory fees are account management fees for high
                  net worth clients,  and are billed quarterly and recognized as
                  earned.

         d.       Fixed Assets - Fixed assets are recorded at cost. Depreciation
                  is  calculated  using the  straight-line  method  based on the
                  estimated useful lives of the related assets, which range from
                  five to seven  years.  Leasehold  improvements  are  amortized
                  using  the  straight-line  method  over  the  shorter  of  the
                  estimated  useful  lives  of the  assets  or the  terms of the
                  leases.  When assets are retired or otherwise disposed of, the
                  costs and related accumulated depreciation or amortization are
                  removed  from the accounts and any gain or loss on disposal is
                  recognized.

         e.       Fiscal  Year - In fiscal year 2002,  the  Company  changed its
                  fiscal  year from a 52-53 week  fiscal year ending on the last
                  Friday in September, to a fiscal year ending on September 30.

         f.       Income Taxes - The Company recognizes  deferred tax assets and
                  liabilities  based on the  difference  between  the  financial
                  statements  carrying  amounts  and the tax basis of assets and
                  liabilities,  using  the  effective  tax rates in the years in
                  which the  differences  are  expected to reverse.  A valuation


                                      F-9
<PAGE>

                  allowance related to deferred tax assets is also recorded when
                  it is more  likely  than not that some or all of the  deferred
                  tax asset will not be realized.

         g.       Investment in Limited  Partnership - The Company  accounts for
                  its investment in the limited  partnership in accordance  with
                  the equity method of accounting.  Such asset has been included
                  in other assets in the accompanying consolidated statements of
                  financial condition.

         h.       Fair Value of Financial  Instruments  - The  carrying  amounts
                  reported in the balance sheet for cash, receivables,  accounts
                  payable,  accrued expenses and other liabilities  approximates
                  fair  value  based  on  the   short-term   maturity  of  these
                  instruments.

         i.       Impairment  of  Long-Lived   Assets  -  The  Company   reviews
                  long-lived  assets for impairment  whenever  circumstances and
                  situations  change such that there is an  indication  that the
                  carrying amounts may not be recovered.  At September 30, 2003,
                  the Company  believes that there has been no impairment of its
                  long-lived assets.

         j.       Income (Loss) per Common Share - Basic income (loss) per share
                  is computed  on the basis of the  weighted  average  number of
                  common shares outstanding.  Diluted income (loss) per share is
                  computed on the basis of the weighted average number of common
                  shares  outstanding  plus the  potential  dilution  that could
                  occur if securities or other  contracts to issue common shares
                  were exercised or converted.  Stock options and warrants,  and
                  conversion of the cumulative convertible preferred stock, were
                  excluded from the diluted loss per share  computation  for the
                  fiscal years ended  September 30, 2003 and 2002, and September
                  28, 2001,  since the Company  incurred  losses for these years
                  and the inclusion of such  securities  would be  antidilutive.
                  Income  (loss) per common  share for the year ended  September
                  30, 2002 has been revised to reflect  cumulative  dividends on
                  preferred stock.

         k.       Stock  Based  Compensation  - During  fiscal  year  2003,  the
                  Company  adopted  Statement of Financial  Accounting  Standard
                  ("SFAS") No. 148,  "Accounting for Stock-Based  Compensation -
                  Transition and  Disclosure."  This statement  amended SFAS No.
                  123,  "Accounting for Stock-Based  Compensation." As permitted
                  under  SFAS No.  123,  the  Company  continues  to  apply  the
                  Accounting  Principles  Board Opinion No. 25,  "Accounting for
                  Stock Issued to Employees."


                                      F-10
<PAGE>

<TABLE>
<CAPTION>
                                                                               Fiscal Years Ended
                                                               ----------------------------------------------------
                                                                 September 30,      September 30,     September 28,
                                                                     2003               2002              2001
                                                               ----------------------------------------------------
<S>                                                            <C>                <C>                <C>
Net loss attributable to common stockholders - as reported     $  (1,093,000)     $  (3,613,000)     $  (7,922,000)

Stock-based employee compensation cost determined
under fair value method, net of tax effects                          (36,000)           (50,000)          (535,000)

                                                               ----------------------------------------------------
Net loss attributable to common stockholders - pro forma       $  (1,129,000)     $  (3,663,000)     $  (8,457,000)
                                                               ====================================================

Loss per share

Basic and diluted loss per share:
Net loss attributable to common stockholders - as reported     $       (0.34)  $          (1.60)  $          (3.59)

Per share stock-based employee compensation cost
determined under fair value method, net of tax effects                 (0.01)             (0.02)             (0.24)

                                                               ----------------------------------------------------
Net loss attributable to common stockholders - pro forma       $       (0.35)  $          (1.62)  $          (3.83)
                                                               ====================================================
</TABLE>

                  The Black-Scholes  option valuation model was used to estimate
                  the fair value of the options  granted during the fiscal years
                  ended September 30, 2003 and 2002, and September 28, 2001. The
                  model  includes   subjective   input   assumptions   that  can
                  materially  affect  the fair  value  estimates.  The model was
                  developed  for use in  estimating  the fair  value  of  traded
                  options that have no vesting  restrictions  and that are fully
                  transferable.   For  example,   the  expected   volatility  is
                  estimated based on the most recent  historical  period of time
                  equal to the  weighted  average  life of the options  granted.
                  Options   issued  under  the   Company's   option  plans  have
                  characteristics   that   differ  from   traded   options.   In
                  management's   opinion,   this   valuation   model   does  not
                  necessarily  provide a  reliable  single  measure  of the fair
                  value of its employee  stock  options.  Principal  assumptions
                  used in  applying  the  Black-Scholes  model  along  with  the
                  results from the model were as follows:

                                               Fiscal Years Ended
                                  ----------------------------------------------
                                   September 30,   September 30,   September 28,
                                        2003            2002            2001
                                  ----------------------------------------------
Assumptions:
Risk-free interest rate               4.01%            5.7%              5.0%

Expected life, in years                5.0             5.0               5.0

Expected volatility                    311%            286%               96%

Results:
Fair value of options granted      $  0.52          $  0.02          $  0.24


                                      F-11
<PAGE>


         l.       Concentrations  of Credit  Risk - The  Company  is  engaged in
                  trading  and  a  broad  range  of  securities   brokerage  and
                  investment  services  to a diverse  retail  and  institutional
                  clientele, as well as corporate finance and investment banking
                  services to corporations and businesses. Counterparties to the
                  Company's  business  activities  include   broker-dealers  and
                  clearing    organizations,    banks   and   other    financial
                  institutions.  The Company  uses  clearing  brokers to process
                  transactions and maintain customer accounts on a fee basis for
                  the  Company.   The  Company  uses  one  clearing  broker  for
                  substantially  all of its  business.  The Company  permits the
                  clearing  firms to extend credit to its  clientele  secured by
                  cash and  securities  in the client's  account.  The Company's
                  exposure to credit risk associated with the non-performance by
                  its  customers   and   counterparties   in  fulfilling   their
                  contractual  obligations can be directly  impacted by volatile
                  or illiquid trading  markets,  which may impair the ability of
                  customers and  counterparties  to satisfy their obligations to
                  the Company.  The Company has agreed to indemnify the clearing
                  brokers for losses they incur  while  extending  credit to the
                  Company's  clients.  It is the Company's policy to review,  as
                  necessary,  the  credit  standing  of its  customers  and each
                  counterparty.  Amounts due from  customers that are considered
                  uncollectible  are charged back to the Company by the clearing
                  broker when such amounts become determinable. Such amounts are
                  then charged to the broker  initiating the transaction and are
                  included in other receivables in the accompanying consolidated
                  statements of financial condition.

                  The Company maintains cash with major financial  institutions.
                  The Federal Deposit Insurance  Corporation ("FDIC") insures up
                  to $100,000  at each  institution.  At times such  amounts may
                  exceed the FDIC limits.  At September  30, 2003 the  uninsured
                  cash bank balance was $202,000. The Company believes it is not
                  exposed to any significant credit risks for cash.

         m.       Other  Receivables - The Company extends  unsecured  credit in
                  the  normal   course  of   business   to  its   brokers.   The
                  determination of the amount of uncollectible accounts is based
                  on the amount of credit  extended  and the length of time each
                  receivable  has  been  outstanding,  as  it  relates  to  each
                  individual   broker.   The  allowance  for  doubtful  accounts
                  reflects the amount of loss that can be  reasonably  estimated
                  by  management,  and is  included  in  other  expenses  in the
                  accompanying consolidated statements of operations.

         n.       Advances to Registered Representatives - Advances are given to
                  certain  registered  representatives as an incentive for their
                  affiliation  with  National.   The  representative   signs  an
                  independent contractor agreement with National for a specified
                  term. The advance is then amortized  on a  straight-line basis


                                      F-12
<PAGE>

                  over the amount of time the  representative is obligated to be
                  affiliated  with  National,  and is  included  in  commissions
                  expense  in  the  accompanying   consolidated   statements  of
                  operations. In the event the representative's affiliation with
                  National   terminates   prior  to  the  fulfillment  of  their
                  contract,   the   representative  is  required  to  repay  the
                  unamortized balance.

         o.       Other  Assets - Other  assets  consist  of the  investment  in
                  venture capital fund, pre-paid expenses and lease deposits.

         p.       Recent Accounting  Pronouncements - In November 2002, the FASB
                  issued Interpretation ("FIN") No. 45, "Guarantor's  Accounting
                  and Disclosure Requirements for Guarantees, Including Indirect
                  Guarantees of  Indebtedness  of Others." FIN No. 45 requires a
                  company,  at the time it issues a  guarantee,  to recognize an
                  initial  liability for the fair value of  obligations  assumed
                  under the  guarantee  and  elaborates  on existing  disclosure
                  requirements related to guarantees and warranties. The initial
                  recognition  requirements  of FIN  No.  45 are  effective  for
                  guarantees  issued or modified  after  December 31, 2002.  The
                  Company's adoption of the recognition  requirements of FIN No.
                  45 did not  have  any  effect  on its  consolidated  financial
                  position or results of operations.

                  In  January   2003,   the  FASB  issued   Interpretation   46,
                  Consolidation of Variable  Interest  Entities.  In general,  a
                  variable interest entity is a corporation, partnership, trust,
                  or any other legal  structure used for business  purposes that
                  either (a) does not have equity  investors  with voting rights
                  or (b) has equity  investors  that do not  provide  sufficient
                  financial  resources for the entity to support its activities.
                  Interpretation  46 requires a variable  interest  entity to be
                  consolidated  by a company  if that  company  is  subject to a
                  majority  of the  risk  of loss  from  the  variable  interest
                  entity's  activities  or entitled to receive a majority of the
                  entity's   residual   returns  or  both.   The   consolidation
                  requirements  of   Interpretation   46  apply  immediately  to
                  variable interest entities created after January 31, 2003. The
                  consolidation  requirements  apply  to older  entities  in the
                  first fiscal year or interim period  beginning  after June 15,
                  2003.  Certain  of the  disclosure  requirements  apply in all
                  financial statements issued after January 31, 2003, regardless
                  of when the  variable  interest  entity was  established.  The
                  adoption of FASB  Interpretation 46 is not expected to have an
                  impact on the Company's consolidated financial statements.

                  In May 2003,  the FASB issued SFAS No.  150,  "Accounting  for
                  Certain  Financial  Instruments with  Characteristics  of both
                  Liabilities  and  Equity"  which is  effective  for  financial
                  instruments  entered into or modified  after May 31, 2003, and
                  otherwise is effective at the  beginning of the first  interim


                                      F-13
<PAGE>

                  period   beginning   after  June  15,  2003.   This  Statement
                  establishes   standards  for  how  an  issuer  classifies  and
                  measures certain financial instruments with characteristics of
                  both  liabilities  and  equity.  It  requires  that an  issuer
                  classify a financial  instrument that is within its scope as a
                  liability.  The  adoption  of SFAS No. 150 is not  expected to
                  have  an  impact  on  the  Company's   consolidated  financial
                  statements.

         q.       Reclassification  of Revenues - The  revenues  generated  from
                  principal   trades  to  institutions  for  which  the  Company
                  receives  commission  revenues,  previously  classified as net
                  dealer inventory gains and other revenues in prior years, have
                  been  reclassified  in the  September  28,  2001  consolidated
                  financial  statements as  commission  revenues to conform with
                  the presentation  used in the September 30, 2002 and September
                  30, 2003 consolidated  financial  statements without affecting
                  the previously reported net losses.

         r.       Management's   Liquidity   Plans  -  The   market   conditions
                  experienced  during fiscal years 2001 and 2002,  and the first
                  half  of  fiscal  year  2003,   have  resulted  in  continuing
                  operating losses and a reduction in the  stockholders'  equity
                  of the Company.  Accordingly,  the Company pursued  additional
                  sources of capital from various  potential  investors.  In the
                  fourth  quarter of fiscal  year  2002,  the  Company  received
                  $210,000  from  the  sale of  Series  A  Preferred  Stock  and
                  continued to seek additional funds.

                  In  the  first  quarter  of  fiscal  year  2003,  the  Company
                  consummated a private placement of its securities to a limited
                  number  of  accredited  investors  pursuant  to  Rule  501  of
                  Regulation  D  under  the  Securities  Act.  Net  proceeds  of
                  $554,500  closed in the first  quarter  of fiscal  year  2003.
                  Additionally,  in the first  quarter of fiscal year 2003,  FCC
                  loaned  the  Company  $375,000  in the  form of  clearing  fee
                  rebates.

                  In November 2003,  National and the holder of the $1.0 million
                  secured  demand note that matures on February 1, 2004,  agreed
                  that  the note  will be  replaced  with a note in a  principal
                  amount equal to at least $500,000 that will mature on February
                  28, 2005. Additionally,  two noteholders have agreed to extend
                  the  maturity  date on $1.0  million of notes from January 25,
                  2004 to July 31, 2005,  and  effective  February 1, 2004,  the
                  interest rate will be increased to 12% from 9% per annum.

                  In December  2003,  National's  clearing  deposit with FCC was
                  reduced from  $1,000,000 to $500,000,  the excess $500,000 was
                  paid to FCC to reduce the Company's  outstanding  loan balance
                  on its promissory note, and FCC forgave the $375,000 loan that
                  was due to be repaid in January 2004.


                                      F-14
<PAGE>

                  The Company believes that with the improved market  conditions
                  and the  Company's  increased  volume of business  experienced
                  during the third and fourth  quarters of fiscal year 2003, and
                  the first quarter of fiscal year 2004, and the continuation of
                  such improved market  conditions,  funds will be sufficient to
                  maintain  its  current  level of  business  activities  during
                  fiscal  year 2004.  Additionally,  the  Company  has  recently
                  commenced  efforts  to raise  additional  capital  in order to
                  strengthen its existing capital.  If current market conditions
                  do not continue, the Company would need to consider curtailing
                  certain of its business activities, further reducing its fixed
                  overhead costs and/or seek additional sources of financing.

3.       SIGNIFICANT AGREEMENTS AND TRANSACTIONS

         a.       CLEARING AGREEMENTS

                  In August 2001,  National  entered  into a ten-year  agreement
                  with FCC, a wholly-owned  subsidiary of Wachovia  Corporation,
                  under which FCC provides  clearing and other related  services
                  for National. The conversion to FCC began in December 2001 and
                  was completed in March 2002.

                  As part of the clearing  agreement,  FCC has agreed to execute
                  orders,  prepare and mail order  confirmations  to  National's
                  customers,  prepare and mail monthly  statements to National's
                  customers,  and provide  various other  clearing and execution
                  related  services.  National pays FCC fees for the services it
                  performs in accordance with standard industry  practices.  FCC
                  maintains  possession and control of National's customer funds
                  and securities in accordance with the broker-dealer  financial
                  responsibility rules promulgated under the Securities Exchange
                  Act of 1934, as amended,  and other  applicable laws, rules or
                  regulations.  National's  customers  maintain  control  of and
                  receive the benefits from their customer accounts.  National's
                  registered  representatives  receive the commissions generated
                  by  transactions  on the  customer  accounts.  The customer is
                  responsible  for any and all losses for  transactions on their
                  account. National, however, has indemnified FCC for debts owed
                  by customers from transactions in their accounts.

                  In connection with the Clearing Agreement, the Company entered
                  into a  ten-year  promissory  note  with FCC  under  which the
                  Company  immediately  borrowed  $1,000,000.   The  funds  were
                  contributed by the Company to National,  and are being used as
                  a deposit to secure National's  performance under the Clearing
                  Agreement.  The Clearing  Agreement  also provided for another
                  $1,000,000   loan  that  was  extended  to  the  Company  upon
                  substantial  completion of the conversion on December 31, 2001


                                      F-15
<PAGE>

                  that the Company also  contributed to National.  The amount of
                  the note that is  repayable  on each  anniversary  date is the
                  principal,  and interest if any, then  outstanding  divided by
                  the remaining  life of the note.  Principal and interest under
                  the promissory  note are forgivable  annually based on certain
                  business  performance and trading volumes of the Company.  The
                  Company  would need to  generate,  on  average,  approximately
                  250,000 tickets per year over the ten-year term of the note to
                  satisfy  the  trading  volume  requirement,   which  has  been
                  satisfied through fiscal year 2003. Based on actual tickets, a
                  total of $453,000 and $339,000  were  forgiven in fiscal years
                  2003 and  2002,  respectively,  which has been  recorded  as a
                  reduction  in  clearing  fees  expense  in  the   accompanying
                  consolidated statements of operations.

                  In  connection   with  the  Clearing   Agreement,   additional
                  borrowings  were  available to the Company upon the attainment
                  by  National of certain  volume and  profitability  goals.  In
                  finalizing the conversion,  a dispute arose among the Company,
                  US  Clearing  (one of its  former  clearing  firms)  and  FCC,
                  regarding  the  responsibility  for debit  balances in certain
                  trading  accounts.  The  three  parties  agreed  to share  the
                  expense  equally.  The  Company's  share  of this  settlement,
                  $548,000,  was advanced to the Company by FCC and added to the
                  existing  promissory  note.  As  part of the  settlement,  the
                  minimum level of stockholders'  equity the Company is required
                  to  maintain  under  the  promissory  note  was  reduced  from
                  $2,000,000  to  $1,000,000  and  no  further   borrowings  are
                  available under the promissory note, as amended. Additionally,
                  National received its clearing  deposit,  net of miscellaneous
                  expenses,  of $975,000 from US Clearing.  National  terminated
                  its clearing agreement with US Clearing.

                  The agreement  also requires the payment of a termination  fee
                  ranging from $2,000,000 to $400,000 if terminated within years
                  one  through  six of the  agreement.  Olympic  has pledged its
                  shares of stock of National to secure the aforementioned note.
                  In addition,  substantially all of the assets of National were
                  collateralized for the aforementioned loan.

                  During  the year  ended  September  30,  2003,  FCC loaned the
                  Company an  additional  $375,000 in the form of  clearing  fee
                  rebates  that  the  Company   simultaneously   contributed  to
                  National.  The  loan  is due to be  repaid  in  January  2004.
                  Additionally, FCC has waived its stockholders' equity covenant
                  as of September 30, 2003 and December 31, 2003.

                  See Note 21, "Subsequent  Events" regarding matters concerning
                  the Company and FCC.


                                      F-16
<PAGE>

         b.       EQUITY TRANSACTIONS

                  (i)      During  fiscal year 2002, a company  affiliated  with
                           the President of Olympic and an unaffiliated  company
                           (collectively,    the    "Investors")    obtained   a
                           significant ownership in the Company (the "Investment
                           Transaction")  through  purchasing  15,725  shares of
                           Series  A  convertible  preferred  stock  ("Preferred
                           Stock") of  Olympic  at $100 per  share,  convertible
                           into common stock at a price of $1.50 per share.

                  (ii)     Concurrent with the closing of the above transaction,
                           the then current  Chief  Executive  Officer and Chief
                           Financial   Officer  of  Olympic   terminated   their
                           employment    agreements   with   the   Company   and
                           simultaneously  entered into consulting agreements of
                           eighteen and twenty-seven months, respectively,  at a
                           monthly consideration of $10,000 for each consultant.
                           In  addition,  the Chief  Executive  Officer was also
                           given the  option to  purchase  all of the  shares of
                           stock   of   Canterbury   for  its   book   value  of
                           approximately $11,000, which closed in May 2002. Such
                           officer  also sold  285,000  shares of the  Company's
                           common  stock  owned by the officer and his family to
                           the aforementioned unaffiliated company.

                  (iii)    Also, in December 2001, Olympic executed a securities
                           exchange  agreement  with the  holders  of  Olympic's
                           $2,000,000    promissory   note   holders,    whereby
                           $1,000,000  of such notes were  exchanged  as payment
                           for  the  issuance  of  10,000  shares  of  Series  A
                           convertible  preferred  stock at $100 per  share.  In
                           addition,  100,000 of the warrants issued pursuant to
                           the original loan  transaction  were repriced from an
                           exercise price of $5.00 per share to $1.75 per share.
                           No effect was given to the repriced Warrants,  as the
                           Company's  Common  Stock was selling at prices  below
                           $1.75 per share.  The two noteholders  have agreed to
                           extend the maturity date on the remaining  $1,000,000
                           from  January  25, 2004 to July 31,  2005.  Effective
                           February 1, 2004, the interest rate on the notes will
                           be increased to 12% from 9% per annum.  Additionally,
                           the  other  100,000  warrants  to  acquire  shares of
                           common stock will be repriced from an exercise  price
                           of  $5.00  per  share  to $1.25  per  share,  and the
                           expiration  date  for all  200,000  warrants  will be
                           extended to July 31, 2005.

                  (iv)     In the  fourth  quarter  of fiscal  2002,  the former
                           Chief  Executive  Officer  of  the  Company  invested
                           $210,000 in the Company by purchasing 2,100 shares of
                           the Preferred Stock at $100 per share.


                                      F-17
<PAGE>

                  (v)      In the first quarter of fiscal year 2003, the Company
                           consummated a private  placement of its securities to
                           a limited number of accredited  investors pursuant to
                           Rule 501 of  Regulation  D under the  Securities  Act
                           (the  "Private  Offering").  Each unit in the Private
                           Offering sold for $0.65 and consisted of one share of
                           the Company's common stock and one three-year warrant
                           to purchase one share of the  Company's  common stock
                           at a per  share  price  of  $1.25.  Net  proceeds  of
                           $554,500 were received in the first quarter of fiscal
                           year 2003,  and the  Company  correspondingly  issued
                           1,016,186  shares  of  restricted  common  stock  and
                           1,016,186  warrants.  In January  2003,  the  Company
                           issued 76,923 shares of common stock and a three-year
                           warrant to purchase  76,923 shares of common stock at
                           $1.25  per  share  to  Seyfarth  Shaw  LLP  (formerly
                           D'Ancona & Pflaum LLC),  as payment of  approximately
                           $51,000  of  legal  fees  that  were  accrued  as  of
                           September 30, 2002. The warrants issued in connection
                           with the Private  Offering and the warrants issued to
                           Seyfarth  Shaw  have  been  included  along  with the
                           proceeds  of the  shares  of common  stock  issued as
                           additional paid-in capital.

                           In  March  2003,  the  Company  filed a  Registration
                           Statement  on Form S-3 under the  Securities  Act for
                           the  resale of the  shares  of  common  stock and the
                           shares of common stock  issuable upon exercise of the
                           warrants.  In October 2003,  the Company filed a Form
                           RW  withdrawing   the  filing  of  the   Registration
                           Statement  on Form  S-3.  Currently  the  Company  is
                           eligible  to file a  Registration  Statement  on Form
                           S-3,  and  management  believes  it  will  file  such
                           statement  in the near term,  that will  include  the
                           shares of common stock and the shares of common stock
                           issuable upon exercise of the warrants  issued in the
                           Private Offering.

4.       DISCONTINUED OPERATIONS

         In the first quarter of fiscal year 2002, WestAmerica filed for Chapter
         7 Bankruptcy  protection in accordance with the U.S.  Bankruptcy  Code.
         This filing  eliminated the risk of loss for the  liabilities in excess
         of assets,  and accordingly,  that amount was reversed and reflected as
         income in the first  quarter of fiscal  year 2002.  The Company did not
         guarantee  any of the  obligations  of  WestAmerica,  a distinct  legal
         entity. Consequently,  the Company believes that it has no liability to
         creditors  of  WestAmerica.  As of December 3, 2003,  no  creditors  of
         WestAmerica have sought recovery from the Company,  and the Company has
         been  advised  by  legal  counsel  that  the  bankruptcy  case has been
         completed.


                                      F-18
<PAGE>

         The following is a summary of the Company's discontinued operations:

                                        September 30, 2002  September 28, 2001
                                        ------------------  ------------------
         Revenues                          $        --         $ 2,134,000
                                           -----------         -----------
         Loss from operations                       --            (915,000)
         Gain (loss) on disposal               300,000             (87,000)
                                           -----------         -----------
         Income (loss) from discontinued
         operations                        $   300,000         $(1,002,000)
                                           ===========         ===========

5.       RESTRICTED CASH

         The  Company  maintained  an escrow  account on behalf of a customer in
         which  National  acted  as its  underwriter.  Funds  were  wired at the
         direction of the customer.  The restricted cash balance was $309,000 as
         of September 30, 2002.  During the year ended  September 30, 2003,  the
         Company disbursed the remaining balance in such account.

6.       BROKER-DEALERS AND CLEARING ORGANIZATIONS RECEIVABLES AND PAYABLES

         At September 30, 2003 and 2002 the amounts receivable of $3,724,000 and
         $1,269,000,  respectively,  from brokers and dealers  represent amounts
         due for fees and  commissions.  At  September  30,  2003 and 2002,  the
         amounts payable to broker dealers and clearing organization of $258,000
         and $490,000,  respectively,  represent  amounts  payable for inventory
         purchases on behalf of the Company and its customers.

7.       OTHER RECEIVABLES

         An analysis  of other  receivables,  and the reserve for  uncollectible
         accounts on such  receivables  for the fiscal years ended September 30,
         2002 and 2003 is as follows:

                                          Other                         Net
                                       Receivables      Reserve     Receivables
                                      ------------   ------------   -----------
         Balance, September 28, 2001  $   349,000    $        --    $   349,000
         Additions                      1,015,000                     1,015,000
         Provision                                      (209,000)      (209,000)
                                      -----------------------------------------
         Balance, September 30, 2002    1,364,000       (209,000)     1,155,000
         Additions                         17,000                        17,000
         Collections                      (22,000)                      (22,000)
         Provision                                      (441,000)      (441,000)
                                      -----------------------------------------
         Balance, September 30, 2003  $ 1,359,000    $  (650,000)   $   709,000
                                      =========================================


                                      F-19
<PAGE>

8. ADVANCES TO REGISTERED REPRESENTATIVES

         An analysis of advances to registered  representatives for fiscal years
         ended September 30, 2002 and 2003 is as follows:

                  Balance, September 28, 2001         $    487,000
                  Advances                                 896,000
                  Amortization of advances                (584,000)
                                                      ------------
                  Balance, September 30, 2002              799,000
                  Advances                                 555,000
                  Amortization of advances                (710,000)
                                                      ------------
                  Balance, September 30, 2003         $    644,000
                                                      ============

9.       SECURITIES HELD FOR RESALE AND SECURITIES  SOLD, BUT NOT YET PURCHASED,
         AT MARKET

         The  following  table shows the quoted  market  values of the Company's
         securities  held for resale and securities  sold, but not yet purchased
         as of September 30, 2003 and 2002, respectively:

<TABLE>
<CAPTION>
                                               September 30, 2003                  September 30, 2002
                                               ------------------                  ------------------
                                                           Securities                           Securities
                                          Securities      sold, but not        Securities     sold, but not
                                        held for resale   yet purchased      held for resale   yet purchased
                                         ------------      ------------      ------------      ------------
<S>                                      <C>               <C>               <C>               <C>
         Corporate stocks                $    238,000      $     63,000      $    576,000      $     29,000
         Corporate bonds                       21,000             5,000                --                --
         Government obligations
                                              115,000            48,000            30,000            76,000
                                         ------------      ------------      ------------      ------------
                                         $    374,000      $    116,000      $    606,000      $    105,000
                                         ============      ============      ============      ============
</TABLE>

         Securities  held for resale and securities  sold, but not yet purchased
         are recorded at fair value.  Fair value is generally  based upon quoted
         market  prices.  If  quoted  market  prices  are not  available,  or if
         liquidating  the Company's  position is  reasonably  expected to impact
         market  prices,  fair value is  determined  based  upon other  relevant
         factors,  including dealer price quotations,  price activity of similar
         instruments and pricing models.  Pricing models consider the time value
         and volatility factors  underlying the financial  instruments and other
         economic measurements.

         Securities  sold,  but not yet purchased  commit the Company to deliver
         specified  securities at  predetermined  prices.  The  transactions may
         result in market risk since,  to satisfy  the  obligation,  the Company
         must  acquire the  securities  at market  prices,  which may exceed the
         values reflected on the consolidated statements of financial condition.



                                      F-20
<PAGE>

10.      FIXED ASSETS

         Fixed assets as of September 30, 2003 and 2002,  respectively,  consist
         of the following:

<TABLE>
<CAPTION>
                                             September 30, 2003      September 30, 2002
                                             ------------------      ------------------
<S>                                             <C>                     <C>
         Office machines                        $    99,000             $   338,000
         Furniture and fixtures                     183,000                 672,000
         Interactive fixed assets                    56,000                  56,000
         Phone system                                15,000                 159,000
         Electronic equipment                       683,000               1,431,000
         Leasehold improvements                     166,000                 170,000
                                                -----------             -----------
                                                  1,202,000               2,826,000
         Less accumulated depreciation and
         amortization                              (955,000)             (2,457,000)
                                                -----------             -----------
         Fixed assets - net                     $   247,000             $   369,000
                                                ===========             ===========
</TABLE>

         During  the year  ended  September  30,  2003,  the  Company  wrote off
         approximately $1,718,000 of retired and fully depreciated fixed assets.
         Depreciation and amortization expense for the years ended September 30,
         2003, 2002 and September 28, 2001 was $217,000,  $566,000 and $632,000,
         respectively.

         In  April  1998  and June  1998,  the  Company  entered  into  sale and
         leaseback  agreements with an outside funding  company.  As part of the
         agreement the Company sold certain fixed assets to the funding  company
         for $930,000 and $250,000 in April and June,  respectively,  and agreed
         to lease these assets back over a forty-eight month period. The Company
         recorded no gain or loss and has recorded this transaction as a capital
         lease. These leases expired in fiscal year 2002.

   11. OTHER ASSETS

         Other assets as of September 30, 2003 and 2002,  respectively,  consist
of the following:

<TABLE>
<CAPTION>
                                             September 30, 2003         September 30, 2002
                                             --------------------    ---------------------

<S>                                             <C>                     <C>
         Investment in limited partnership      $   107,000             $   136,000
         Pre-paid expenses                          362,000                 415,000
         Deposits                                    76,000                  76,000
                                                -----------             -----------
         Total                                  $   545,000             $   627,000
                                                ===========             ===========
</TABLE>


                                      F-21
<PAGE>

12.      LINE OF CREDIT

         In January 2001,  National  consummated  a revolving  line of credit of
         $5,000,000,  amended to $4,000,000  on November 8, 2001,  with American
         National Bank.  Interest was payable  monthly.  The line was secured by
         certain  assets of  National,  excluding  items  prohibited  from being
         pledged  and  assets  set  forth by the U.S.  Securities  and  Exchange
         Commission  ("SEC").  As a  result  of  default  of  certain  financial
         covenants,  on November 8, 2001,  National  entered into a  forbearance
         agreement  expiring  December 21, 2001,  at which time any  outstanding
         balance  was due to be paid and the line of credit  terminated.  During
         the year ended  September 30, 2002 the Company  repaid the  outstanding
         balance of $3,500,000.

13.      NOTES PAYABLE

         In November  1997, the Company  executed two promissory  notes totaling
         $925,000,  one of which was settled during the year ended September 29,
         2000.  At September  29, 2000,  the balance on the  remaining  note was
         $455,000. During the year ended September 28, 2001, the Company settled
         the  remaining  note for $52,000.  At the time of the  settlement,  the
         outstanding balance,  including accrued interest, totaled $470,000. The
         gain of $418,000 has been recorded as an  extraordinary  item in fiscal
         year ended September 28, 2001.

         In January 1998, the Company executed a promissory note for $1,000,000.
         This note bears  interest  at 8% per annum and the  principal  is to be
         repaid in 24 monthly  installments  commencing on December 31, 2000. In
         connection  with the note,  warrants for the purchase of 157,500 shares
         at an exercise  price of $5.34 per share of the Company's  common stock
         were issued.  The warrants were valued at $157,500 and were recorded as
         a discount to the note.  During the year ended  September 29, 2000, the
         Company  prepaid  $841,000  of the  note  with  the  proceeds  from the
         exercise  of 157,500  warrants,  leaving a balance of  $159,000.  As of
         September 28, 2001, the remaining balance was $113,000.  In March 2002,
         the $49,000  balance of this note was repaid by the  issuance of 38,000
         shares of common stock of the Company.

         In  January  2001,  the  Company  executed  two  promissory  notes  for
         $1,000,000  each.  These  notes  bear  interest  at 9% per  annum  with
         interest paid quarterly.  The principal of each note matures in January
         2004.  In  connection  with each  note,  warrants  were  issued for the
         purchase of 100,000 shares of the Company's common stock at an exercise
         price of $5.00 per share.  The  warrants,  which expire on the maturity
         date,  have been valued at $50,000  each,  and have been  recorded as a
         discount to the  respective  notes.  As of September 30, 2003 and 2002,
         the   aggregate   unamortized   discount   was  $11,000  and   $44,000,
         respectively.  As discussed in Note 3b(iii),  the holders of such notes
         executed a securities  exchange  agreement,  whereby $1,000,000 of such
         notes were  exchanged as payment for the  issuance of 10,000  shares of
         Series A convertible  preferred  stock at $100 per share.  In addition,
         100,000  of  the  warrants   issued   pursuant  to  the  original  loan
         transaction  were repriced from an exercise price of $5.00 per share to


                                      F-22
<PAGE>

         $1.75 per share. As discussed in Note 3b(iii), the two noteholders have
         agreed to extend the maturity date on the remaining  $1,000,000 to July
         31, 2005.

         As  discussed  in Note 3a, the  Company  has  received  loans from FCC,
         payable over the life of the  agreement,  and is forgivable  based upon
         the Company attaining certain trading volumes.  The note bears interest
         at the  lender's  prime rate,  which was 4.0% and 4.75% per annum as of
         September 30, 2003 and 2002, respectively. The note balance outstanding
         and loan activity is as follows:

         Balance, September 28, 2001          $ 1,000,000
         Additional borrowings                  1,548,000
         Amount forgiven                         (339,000)
                                              -----------
         Balance, September 30, 2002            2,209,000
         Amount Forgiven                         (453,000)
                                              -----------
         Balance, September 30, 2003          $ 1,756,000
                                              ===========

         The following table  summarizes notes payable at September 30, 2003 and
2002, respectively:

                                              September 30,     September 30,
                                                   2003            2002
                                                ----------      ----------
         Note payable to FCC                    $1,756,000      $2,209,000
         Notes payable to noteholders
           (net of discount of $11,000 and
            $44,000, respectively)                 989,000         956,000
         Loan from FCC                             375,000              --
         Loan from former officer                   50,000          50,000
                                                ----------      ----------
                                                $3,170,000      $3,215,000
                                                ==========      ==========

         The  following is a schedule by years of debt  maturity as of September
30, 2003:

         Fiscal year ending
         2004                                   $1,645,000
         2005                                      220,000
         2006                                      220,000
         2007                                      220,000
         2008                                      220,000
         Thereafter                                656,000
                                                ----------
                                                 3,181,000
         Less: discount on notes                    11,000
                                                ----------
                                                $3,170,000
                                                ==========


                                      F-23
<PAGE>

14.      SECURED DEMAND NOTE

         On  February  1, 2001,  National  entered  into a secured  demand  note
         collateral  agreement  with an employee of National and Director of the
         Company,  to  borrow  securities  that can be used by the  Company  for
         collateral  agreements.  These  securities have been initially  pledged
         through an unrelated broker-dealer, and have a borrowing value totaling
         $1,000,000. This note bears interest at 5% per annum, paid monthly, and
         matures on  February  1,  2004.  Certain  of the  securities  have been
         pledged as  collateral  for a security  deposit for an office lease and
         two  letters  of  credit,  in the  amounts of  $249,000,  $125,000  and
         $38,000,  respectively,  executed by the Company on behalf of National.
         No amounts  have been drawn on these  letters  of credit.  In  November
         2003,  National  and the note  holder  agreed that upon  maturity,  the
         $1,000,000  note will be replaced  with a note with a principal  amount
         equal to at least $500,000 that will mature on February 28, 2005.

15.      INCOME TAXES

         The income tax (provision) benefit consists of:

                                                Fiscal Years Ended
                                  ---------------------------------------------
                                  September 30,   September 30,   September 28,
                                      2003            2002            2001
                                   -----------    -----------     -----------
         Current federal
            income tax benefit
                                   $        --    $    90,000     $    82,000
         Current state
           income tax provision             --        (10,000)             --
                                   -----------    -----------     -----------
                                   $        --    $    80,000     $    82,000
                                   ===========    ===========     ===========

         The income  tax  (provision)  benefit  related  to income  (loss)  from
         continuing  operations  before  income  taxes and  extraordinary  items
         varies from the federal statutory rate as follows:

                                               Years Ended
                               ------------------------------------------------
                                September 30,   September 30,     September 28,
                                   2003            2002             2001
                                -----------     -----------       -----------
         Statutory
          federal rate          $   287,000     $ 1,287,000       $ 2,523,000
         State income taxes
          net of federal
          income tax benefit         27,000         124,000                --
         Losses for which no
          benefit is provided      (314,000)     (1,331,000)       (2,441,000)
                                -----------     -----------       -----------
                                $        --     $    80,000       $    82,000
                                ===========     ===========       ===========



                                      F-24
<PAGE>

         Significant  components of the  Company's  deferred tax assets that are
         included in other assets in the accompanying  financial  statements are
         as follows:

                                          September 30,     September 30,
                                             2003              2002
                                          -----------       -----------
         Net operating loss
         carryforwards                    $ 4,114,000       $ 3,436,000
         Reserves for uncollectible
         receivables                          254,000
                                                                107,000
         Other temporary differences           10,000                --
                                          -----------       -----------
         Total deferred tax asset           4,378,000         3,543,000
         Valuation allowance               (4,378,000)       (3,543,000)
                                          -----------       -----------
            Deferred tax asset            $        --       $        --
                                          ===========       ===========

         At September 30, 2003,  the Company has available  unused net operating
         loss  carryovers  of  approximately  $11.0  million that may be applied
         against  future  taxable  income and expires at various  dates  through
         2023,  subject to certain  limitations.  The Company has a deferred tax
         asset  arising  from  such net  operating  loss  carryforwards  and has
         recorded a valuation allowance for the full amount of such deferred tax
         asset since the likelihood of realization of the tax benefits cannot be
         determined. The valuation allowance for deferred tax asset increased by
         $835,000 and $650,000  during the fiscal years ended September 30, 2003
         and 2002, respectively.

16.      COMMITMENTS

         Employment  Agreements - During fiscal years 1999 and 2000, the Company
         entered into employment  agreements with six executive officers that in
         total provided for annual salaries aggregating $1,710,000.  Pursuant to
         the Investment Transaction, four of these agreements were terminated in
         fiscal year 2002.  One of these  agreements was modified in conjunction
         with the Investment Transaction.  The final agreement is the subject of
         a dispute (see Note 17).

         Leases - As of September 30, 2003,  the Company leases office space and
         equipment in various states  expiring at various dates through 2012 and
         is committed under  operating  leases for future minimum lease payments
         as follows:


                                      F-25
<PAGE>

         Fiscal Year Ending

                       2004          $  1,756,000
                       2005             1,616,000
                       2006             1,501,000
                       2007             1,479,000
                       2008             1,423,000
                 Thereafter             2,150,000
                                      ------------
                                     $  9,925,000
                                      ============

         In February 2003, in connection  with the signing of a lease  extension
         in the New York  office,  the  Company  was  given a  deferral  of rent
         totaling $360,000,  over twelve months,  commencing with the March 2003
         rent payment.  Such deferral,  accruing interest at 6.25% per annum, is
         to be repaid in monthly installments of approximately  $19,000 starting
         in September 2006.

         Rental expense under all operating leases for the years ended September
         30, 2003,  September 30, 2002 and  September  28, 2001 was  $2,029,000,
         $2,404,000 and $1,889,000, respectively.

         Underwritings  -  During  fiscal  2003,  the  Company  participated  in
         underwriting  securities for private placements,  initial and secondary
         public offerings. At September 30, 2003, the Company has no outstanding
         commitments relating to underwriting transactions.

17.      CONTINGENCIES

         National was named,  together  with  others,  as a defendant in several
         class action lawsuits filed against  Complete  Management,  Inc. in the
         United  States  District  Court for the Southern  District of New York.
         Plaintiffs in the class action sought  approximately $80.0 million from
         all named  parties.  In June 2000,  National  filed a motion to dismiss
         this action.  In March 2001,  the United States  District Court for the
         Southern District of New York denied  National's motion to dismiss.  In
         May 2001,  National  submitted  its answer to the complaint in which it
         set forth its defenses. In November 2001, the plaintiffs filed a motion
         to certify the class.  Plaintiffs  thereafter withdrew their motion and
         the case was referred to mediation. The mediation process resulted in a
         global settlement of the matter. During the fiscal year ended September
         30, 2003, National settled its portion of this litigation for $100,000,
         which was paid by its insurance company.

         A  former  executive  officer  of the  Company,  Craig  M.  Gould,  has
         commenced  an  arbitration  proceeding  against the Company  claiming a
         breach of his employment contract,  and seeking approximately  $850,000
         in damages.  The  arbitration  commenced in July 2003, and continued in
         December 2003.  The Company  believes it has  meritorious  defenses and
         intends to vigorously defend this action, although the ultimate outcome
         of the matter cannot be  determined at this time.  Since the Company is


                                      F-26
<PAGE>

         unable to predict the outcome of this matter,  no adjustments have been
         made in the  consolidated  financial  statements  in  response  to this
         matter.

         In June 2002,  National was named,  together with others as a defendant
         in a class action lawsuit relating to a series of private placements of
         securities in Fastpoint Communications,  Inc. in the Superior Court for
         the State of  California  for the County of San Diego.  In August 2002,
         the plaintiffs filed an amended complaint alleging  violations of state
         statutory and common law, as well as Section 12 of the  Securities  Act
         of 1933.  Plaintiffs are seeking  approximately  $14.0 million,  but no
         specific  amount of damages  has been  sought  against  National in the
         complaint.  The complaint  asserts claims in connection with National's
         role as placement agent in a series of private placements of securities
         in Fastpoint.  Plaintiffs allege that the private  placement  memoranda
         contained false and misleading statements or omitted facts necessary to
         make statements not misleading. National filed its answer, and believes
         it has  meritorious  defenses and intends to  vigorously  contest class
         certification and defend this action,  although the ultimate outcome of
         the matter cannot be determined at this time. Accordingly,  the Company
         is unable to predict the  outcome of this  matter,  and no  adjustments
         have been made in the consolidated  financial statements in response to
         this matter.

         The  Company is also a  defendant  in various  other  arbitrations  and
         administrative   proceedings,   lawsuits  and  claims  seeking  damages
         aggregating approximately $3.0 million (exclusive of specified punitive
         damages of  approximately  $4.0 million,  unspecified  punitive damages
         related to certain claims and expected insurance coverage). The Company
         has  filed  a  counterclaim  for  approximately  $200,000  in one  such
         proceeding.  These  matters arise out of the normal course of business.
         The  Company  intends to  vigorously  defend  itself in these  actions,
         however the ultimate  outcome of these matters  cannot be determined at
         this time.  The  amount  related to such  matters  that are  reasonably
         estimable and which has been accrued at September 30, 2003 and 2002, is
         $366,000 and $343,000, respectively.

18.      STOCKHOLDERS' EQUITY

         Shares  Authorized  - During the year ended  September  30,  2002,  the
         Company  increased its authorized number of shares of Common Stock from
         6,000,000 to 60,000,000.

         Cumulative  Dividends on Convertible  Preferred  Stock - The holders of
         the  Series A  Cumulative  Convertible  Preferred  Stock are to receive
         dividends  on a quarterly  basis at a rate of 9% per annum,  per share.
         Such dividends are cumulative and accrue whether or not declared by the
         Company's  Board of  Directors,  but are payable  only when,  as and if
         declared by the Company's Board of Directors. The amount of accumulated


                                      F-27
<PAGE>

         dividends on the  Company's  27,825  issued and  outstanding  shares of
         preferred  stock was $418,000  and  $168,000 at September  30, 2003 and
         2002, respectively.

         Stock  Options - The  Company's  stock  option  plans  provide  for the
         granting  of stock  options to certain  key  employees,  directors  and
         investment  executives.   Generally,   options  outstanding  under  the
         Company's stock option plan are granted at prices equal to or above the
         market value of the stock on the date of grant, vest either immediately
         or ratably over up to five years,  and expire five years  subsequent to
         award.

         A summary of the status of the  Company's  stock  options and  warrants
         outstanding is presented below.

         The  following  tables  summarize   information   about  stock  options
         outstanding at September 30, 2003.

     Stock Options Under Plan
------------------------------------
<TABLE>
<CAPTION>
                                                                                                     Weighted
                                                                                                   Average Price
                                          Authorized         Outstanding          Available          Per Share
                                        ----------------    ---------------    ----------------   ----------------
<S>                                           <C>                <C>                   <C>                 <C>
Balance, September 29, 2000                   1,682,217          1,237,141             445,076             $ 5.41
Creation of new plan                          1,000,000                 --           1,000,000
Granted                                              --            294,500            (294,500)
Exercised                                       (73,603)           (73,603)                  --              3.73
Forfeitures                                    (186,530)          (186,530)                  --
                                        ----------------    ---------------    ----------------

Balance, September 28, 2001                   2,422,084          1,271,508           1,150,576               5.66
Granted                                              --            117,500            (117,500)
Exercised                                            --                 --                  --
Forfeitures                                    (430,584)          (543,640)            113,056
                                        ----------------    ---------------    ----------------

Balance, September 30, 2002                   1,991,500            845,368           1,146,132               5.08
Granted                                              --             30,000             (30,000)
Exercised                                            --                 --                  --
Forfeitures                                          --           (471,218)            471,218
                                        ----------------    ---------------    ----------------

Balance, September 30, 2003                   1,991,500            404,150           1,587,350               4.97
                                        ================    ===============    ================
</TABLE>


                                      F-28
<PAGE>

<TABLE>
<CAPTION>
                                    Options Outstanding                              Options Exercisable
                     ------------------------------------------------------     ---------------------------------
                                             Weighted
                                             Average            Weighted                             Weighted
    Range of                                Remaining           Average                               Average
Exercise Prices           Number           Contractual          Exercise            Number           Exercise
                       Outstanding             Life              Prices          Exercisable          Prices
-----------------    ----------------     ---------------     -------------     ---------------    --------------
<C>                      <C>                   <C>              <C>                 <C>               <C>
$0.40-$2.00              120,000               3.69             $  1.43             86,250            $  1.24

$3.80-$3.88               28,900               2.14                3.85             27,925               3.86

$4.00-$4.69               29,000               0.47                4.24             29,000               4.24

$5.38-$5.75               15,000               1.96                5.50             12,500               5.53

$6.13-$7.25              180,000               1.73                7.06            180,000               7.06

$7.50-$8.50               31,250               1.49                7.98             31,250               7.98
                     ----------------                                         ---------------
                         404,150                                                   366,925
                     ================                                         ===============
</TABLE>

        The following tables summarize information about warrants outstanding at
September 30, 2003.


Warrants
--------

                                            Weighted Average
                                                Exercise
                            Shares                Price             Exercisable
                        --------------     -------------------    --------------
Outstanding at
September 29, 2000             87,925         $   5.17                  87,925
                                                                  ==============
Granted                       375,000             3.35
                        --------------
Outstanding at
September 28, 2001            462,925             3.69                 462,925
                                                                  ==============
Granted                         5,000             5.00
Expired                                           4.76
                             (33,075)
                        --------------
Outstanding at
September 30, 2002            434,850             3.63                 434,850
                                                                  ==============
Granted                     1,296,347             1.20
Expired                                           5.36
                              (47,250)
                        --------------
Outstanding at
September 30, 2003          1,683,947             1.71               1,683,947
                        ==============                            ==============


                                      F-29
<PAGE>

                          Warrants Outstanding and Exercisable
                --------------------------------------------------------
                                        Weighted            Weighted
                                        Average             Average
 Exercise           Number              Remaining           Exercise
  Prices          Outstanding        Contractual Life        Prices
------------    ----------------    ------------------    -------------
    $0.65               101,619           2.23             $  0.65
    $1.25             1,194,728           2.23                1.25
    $1.75               175,000           0.32                1.75
    $3.00                25,000           0.74                3.00
    $4.00                 2,600           0.65                4.00
    $5.00               180,000           0.41                5.00
    $6.38                 5,000           1.75                6.38
                ----------------
                      1,683,947
                ================

19.      NET CAPITAL REQUIREMENTS

         National,  as a  registered  broker-dealer,  is  subject  to the  SEC's
         Uniform Net Capital Rule 15c3-1,  which  requires  the  maintenance  of
         minimum  net  capital.  National  has  elected  to use the  alternative
         standard  method  permitted by the rule.  This  requires  that National
         maintain  minimum  net  capital  equal to the  greater of $250,000 or a
         specified  amount per security  based on the bid price of each security
         for which National is a market maker. On December 12, 2003, the Company
         was  advised by the NASD that,  pursuant  to  National's  pledge of its
         assets as  security  for  loans to the  Company  from FCC  (such  loans
         aggregated  $2,131,000 as of September  30, 2003),  National was not in
         compliance with its net capital requirements. Accordingly, at September
         30,  2003,  National  reported  an excess  net  capital  deficiency  of
         $829,000.  This  compliance  requirement  was corrected on December 15,
         2003, upon termination of the security agreement with FCC.

         Advances,  dividend  payments  and other  equity  withdrawals  from its
         subsidiaries  are  restricted by the  regulations of the SEC, and other
         regulatory  agencies.  These  regulatory  restrictions  may  limit  the
         amounts that a subsidiary may dividend or advance to the Company.

20.      EMPLOYEE BENEFITS

         The Company's  subsidiary has a defined 401(k) profit sharing plan (the
         "Plan") that covers substantially all of its employees. Under the terms
         of the  Plan,  employees  can  elect  to  defer  up to 25% of  eligible
         compensation,  subject  to  certain  limitations,  by making  voluntary
         contributions to the Plan. The Company's annual  contributions are made
         at the  discretion of the Board of  Directors.  During the fiscal years
         September 30, 2003,  September  30, 2002 and  September  28, 2001,  the
         Company made no contributions to the Plan.


                                      F-30
<PAGE>

21.      SUBSEQUENT EVENTS

         In December 2003, the Company engaged in various  discussions  with the
         NASD relating to the Security  Agreement  between National and FCC, and
         its effect on the computation of National's net capital. As a result of
         these discussions,  on December 15, 2003, the Company and FCC agreed in
         principle to the  following  amendments  to the  clearing  arrangement:
         National's  clearing  deposit  has  been  reduced  from  $1,000,000  to
         $500,000;  the excess  $500,000 was paid to FCC to reduce the Company's
         outstanding  loan  balance on its  promissory  note;  and the  Security
         Agreement  between National and FCC has been  terminated.  Furthermore,
         FCC has waived  payment of $375,000  that was due to be paid in January
         2004.   Additionally,   the  Company  is  engaged  in  discussions  and
         negotiations with FCC regarding the clearing relationship,  and payment
         of the remaining outstanding balance on the promissory note.


                                      F-31
<PAGE>

22.      UNAUDITED QUARTERLY DATA

                        Selected Quarterly Financial Data
                  (Dollars in thousands, except per share data)

<TABLE>
<CAPTION>
                                                      December       March          June        September
                                                      31, 2001     31, 2002       30, 2002      30, 2002
                                                     --------------------------------------------------------
<S>                                                   <C>            <C>            <C>            <C>
Revenues                                              $ 12,287       $ 10,970       $  9,829       $  8,916
                                                      =======================================================

Net loss from continuing operations                   $   (734)      $ (1,064)      $   (574)      $ (1,373)

Income from discontinued operations, net of tax            300             --             --             --
                                                     --------------------------------------------------------

Net loss                                                  (434)        (1,064)          (574)        (1,373)

Preferred stock dividends                                   (2)           (48)           (57)           (61)
                                                     --------------------------------------------------------

Net loss attributable to common stockholders          $   (436)      $ (1,112)      $   (631)      $ (1,434)
                                                      =======================================================

Loss per common share from continuing operations      $  (0.32)      $  (0.50)      $  (0.28)      $  (0.63)

Income per share from discontinued operations             0.13             --             --             --
                                                     --------------------------------------------------------

Loss per common share                                 $  (0.19)      $  (0.50)      $  (0.28)      $  (0.63)
                                                      =======================================================

<CAPTION>
                                                       December       March          June        September
                                                       31, 2002     31, 2003       30, 2003      30, 2003
                                                     --------------------------------------------------------
<S>                                                   <C>            <C>            <C>            <C>
Revenues                                              $ 10,593       $  9,393       $ 15,075       $ 15,097
                                                      =======================================================

Net income (loss)                                     $   (159)      $   (591)      $    363       $   (456)

Preferred stock dividends                                  (63)           (62)           (62)           (63)
                                                     --------------------------------------------------------

Net income (loss) attributable
  to common stockholders                              $   (222)      $   (653)      $    301       $   (519)
                                                      =======================================================

Income (loss) per common share - Basic                $  (0.08)      $  (0.20)      $   0.09       $  (0.15)
                                                      =======================================================

Income (loss) per common share - Diluted              $  (0.08)      $  (0.20)      $   0.07       $  (0.15)
                                                      =======================================================
</TABLE>

During the quarter  ended  December  31,  2001,  the Company  recorded a gain of
$300,000  from  discontinued  operations  related to the  previous  write off of
$300,000  of  net  liabilities  of  WestAmerica  Investment  Group,  its  former
subsidiary, pursuant to the former subsidiary's Chapter VII bankruptcy filing.


                                      F-32
<PAGE>

23.      FINANCIAL INFORMATION - OLYMPIC CASCADE FINANCIAL CORPORATION

         Olympic was  organized  in 1996,  and began  operations  on February 6,
         1997. The following Olympic (parent company only) financial information
         should be read in conjunction  with the other notes to the consolidated
         financial statements.

                        STATEMENTS OF FINANCIAL CONDITION

                                     ASSETS

                                           September 30,    September 30,
                                               2003              2002
                                           -----------       -----------
Cash                                       $    23,000       $     1,000
Investment in subsidiary                     2,839,000         2,955,000
Other assets                                   214,000           329,000
                                           -----------       -----------
                                           $ 3,076,000       $ 3,285,000
                                           ===========       ===========

                     LIABILITIES AND STOCKHOLDERS' DEFICIT

Accounts payable, accrued expenses
  and other liabilities                    $   235,000       $   161,000
Notes payable                                3,170,000         3,215,000
                                           -----------       -----------
                                             3,405,000         3,376,000
Stockholders' deficit                         (329,000)          (91,000)
                                           -----------       -----------
                                           $ 3,076,000       $ 3,285,000
                                           ===========       ===========


                                      F-33
<PAGE>
NOTE 23 - FINANCIAL INFORMATION - OLYMPIC (CONTINUED)

                            STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                             Years ended
                                                           --------------------------------------------------
                                                           September 30,     September 30,      September 28,
                                                                2003              2002            2001
                                                            -----------       -----------       -----------
<S>                                                         <C>               <C>               <C>
Operating expenses                                          $  (651,000)      $  (597,000)      $(1,111,000)
Other income (expense)
                    Interest and other income                        --            91,000             3,000
                    Loss on investment in subsidiaries         (192,000)       (3,239,000)       (6,230,000)
                                                            -----------       -----------       -----------
Net loss before income tax                                     (843,000)       (3,745,000)       (7,338,000)
Discontinued operations, net of tax                                  --           300,000        (1,002,000)
Extraordinary item, net of tax                                       --                --           418,000
                                                            -----------       -----------       -----------

Net loss before income tax                                  $  (843,000)      $(3,445,000)      $(7,922,000)
                                                            ===========       ===========       ===========
</TABLE>


             STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)

<TABLE>
<CAPTION>
                                         Preferred Stock              Common Stock         Additional
                                     -------------------------  -------------------------    Paid-In
                                        Shares       Amount        Shares       Amount      Capital     Deficit         Total
                                     ------------ ------------  ------------ ------------ ------------ ------------  ------------
<S>                                  <C>          <C>           <C>          <C>          <C>          <C>           <C>
BALANCE, September 29, 2000                    -- $         --     2,153,846 $     43,000 $ 12,586,000 $ (4,590,000) $  8,039,000

  Exercise Stock Options                       --           --        73,603        2,000      273,000           --       275,000
  Issuance of restricted stock to
    former employees                           --           --         9,000           --       25,000           --        25,000
  Options issued to consultants                --           --            --           --      105,000           --       105,000
  Original discount on notes payable           --           --            --           --      100,000           --       100,000
  Net loss                                     --           --            --           --           --   (7,922,000)   (7,922,000)
                                     ------------ ------------  ------------ ------------ ------------ ------------  ------------

BALANCE, September 28, 2001                    --           --     2,236,449       45,000   13,089,000  (12,512,000)      622,000

  Issuance of restricted common
    stock in exchange of note                  --           --        38,000           --       49,000           --        49,000
  Issuance of preferred stock              17,825           --            --           --    1,683,000           --     1,683,000
  Issuance of preferred stock in
    exchange of notes                      10,000           --            --           --    1,000,000           --     1,000,000
  Net loss                                     --           --            --           --           --   (3,445,000)   (3,445,000)
                                     ------------ ------------  ------------ ------------ ------------ ------------  ------------

BALANCE, September 30, 2002                27,825           --     2,274,449       45,000   15,821,000  (15,957,000)      (91,000)

  Issuance of restricted common
    stock:
       From private placement                  --           --    1,016,186       21,000      533,000            --       554,000
       Payment of legal fees                   --           --       76,923        1,000       50,000            --        51,000
  Net loss                                     --           --            --           --           --     (843,000)     (843,000)
                                     ------------ ------------  ------------ ------------ ------------ ------------  ------------

BALANCE, September 30, 2003                27,825 $         --     3,367,558 $     67,000 $ 16,404,000 $(16,800,000) $   (329,000)
                                     ============ ============  ============ ============ ============ ============  ============
</TABLE>


                                      F-34
<PAGE>

NOTE 23- FINANCIAL INFORMATION - OLYMPIC (CONTINUED)

                            STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                              Years ended
                                                                     ---------------------------------------------------------------
                                                                     September 30, 2003    September 30, 2002     September 28, 2001
                                                                     ------------------    ------------------     ------------------
<S>                                                                     <C>                   <C>                   <C>
CASH FLOWS FROM OPERATING ACTIVITIES
         Net loss                                                       $  (843,000)          $(3,445,000)          $(7,922,000)
         Adjustments to reconcile net loss to net
            cash provided by (used in) operating activities
             Loss on investment in subsidiaries                             191,000             3,114,000             8,204,000
             Gain on extraordinary item-extinguishment of debt                   --                    --              (418,000)
             Compensation related to issuance of stock options                   --                    --               105,000
             Amortization of note discount                                   33,000                33,000                23,000
             Forgiveness of loan                                           (453,000)             (339,000)                   --
             Write-down of limited partnership investment                    29,000                    --                    --
             Depreciation and amortization                                       --               238,000               339,000
             Changes in assets and liabilities                              210,000              (107,000)             (146,000)
                                                                        -----------           -----------           -----------
         Net cash provided by (used in) operating activities               (833,000)             (506,000)              185,000
                                                                        -----------           -----------           -----------

CASH FLOWS FROM INVESTING ACTIVITIES
             (Capital contributions to) advances from
               subsidiary - net                                             301,000            (2,486,000)           (3,072,000)
                                                                        -----------           -----------           -----------
         Net cash provided by (used in) investing activities                301,000            (2,486,000)           (3,072,000)
                                                                        -----------           -----------           -----------

CASH FLOWS FROM FINANCING ACTIVITIES
         Exercise of stock options                                               --                    --               275,000
         Proceeds from notes payable                                             --             1,548,000             3,000,000
         Issuance of common stock                                           554,000                    --                25,000
         Issuance of preferred                                                   --             1,683,000                    --
         Payments on capital lease                                               --              (281,000)             (340,000)
         Payments on notes payable                                               --                    --               (61,000)
                                                                        -----------           -----------           -----------
         Net cash provided by financing activities                          554,000             2,950,000             2,899,000
                                                                        -----------           -----------           -----------

NET (DECREASE) INCREASE IN CASH                                              22,000               (42,000)               12,000

CASH BALANCE
         Beginning of year                                                    1,000                43,000                31,000
                                                                        -----------           -----------           -----------
         End of year                                                    $    23,000           $     1,000           $    43,000
                                                                        ===========           ===========           ===========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid
  during the year for:
         Interest                                                       $   127,832           $   179,454           $   125,278
                                                                        ===========           ===========           ===========
         Income taxes                                                   $        --           $    12,000           $   323,000
                                                                        ===========           ===========           ===========

SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND
            FINANCING ACTIVITIES
         Exchange of notes payable for preferred stock                  $        --           $ 1,000,000           $        --
                                                                        ===========           ===========           ===========
         Exchange of notes payable for common stock                     $        --           $    49,000           $        --
                                                                        ===========           ===========           ===========
         Conversion of accounts payable to loan payable                 $   375,000           $        --           $        --
                                                                        ===========           ===========           ===========
         Warrants issued as a discount on notes payable                 $        --           $        --           $   100,000
                                                                        ===========           ===========           ===========
         Forgiveness of loan                                            $   453,000           $   339,000           $        --
                                                                        ===========           ===========           ===========
         Exchange of accounts payable for common stock                  $    51,000           $        --           $        --
                                                                        ===========           ===========           ===========
</TABLE>

                                      F-35