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 29, 2000                                                    ----------


                      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 of principal executive offices)      (Zip Code)

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.

                                               YES   X        No
                                                   ------

As of December 11, 2000,  1,622,531  shares of the  Company's  common stock were
held by  non-affiliates,  having an aggregate  market value of  $6,490,124.  The
number of common shares outstanding as of December 11, 2000 was 2,163,846.

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Company's Proxy Statement filed with the Securities and Exchange
Commission   ("SEC")  in  connection  with  the  Company's   Annual  Meeting  of
Shareholders to be held on March 12, 2001 (the "Company's 2001 Proxy Statement")
are incorporated by reference into Part III hereof.

<PAGE>

                                     PART I

ITEM 1 - BUSINESS
(A) GENERAL

EXCEPT FOR HISTORICAL INFORMATION CONTAINED HEREIN, THIS REPORT CONTAINS CERTAIN
FORWARD-LOOKING  INFORMATION  THAT INVOLVES RISKS AND  UNCERTAINTIES  THAT COULD
CAUSE RESULTS TO DIFFER  MATERIALLY,  INCLUDING  CHANGING MARKET  CONDITIONS AND
OTHER  RISKS  DETAILED IN THIS  ANNUAL  REPORT ON FORM 10-K AND OTHER  DOCUMENTS
FILED BY THE COMPANY WITH THE  SECURITIES AND EXCHANGE  COMMISSION  FROM TIME TO
TIME.

Olympic Cascade Financial Corporation,  a Delaware corporation organized in 1997
("Olympic" or the "Company"),  is a financial services  organization,  operating
through its three wholly-owned subsidiaries,  National Securities Corporation, a
Washington  corporation organized in 1947 ("National"),  WestAmerica  Investment
Group, a California corporation organized in 1974 ("WestAmerica") and Canterbury
Securities  Corporation  ("Canterbury"),  an Illinois  corporation  organized in
1998.  Olympic is  committed  to  establishing  a  significant  presence  in the
financial services industry by providing  financing options for emerging,  small
and middle capitalization companies both in the United States and abroad through
research, financial advisory services and sales, and investment banking services
for  both  public  offerings  and  private  placements,   and  providing  retail
brokerage, institutional trading and trade clearance operations.

In June 2000, the Company acquired all of the outstanding stock of Canterbury, a
Chicago,   Illinois  based  broker-dealer   specializing  in  private  placement
transactions.  Canterbury  was  acquired for cash of $30,000 and the issuance of
five-year warrants to acquire 5,000  unregistered  shares of common stock of the
Company at a price of $6.375 per share.

National  conducts a national  securities  brokerage  business  through its main
office in  Seattle,  Washington  and in 62 other  offices  located in 20 states.
Additionally,  National operates in several  international  cities. Its business
includes  securities   brokerage  for  individual  and  institutional   clients,
market-making  trading  activities,   asset  management  and  corporate  finance
services.  National's  operations,  and its largest sales office,  is located in
Seattle, Washington. Additionally, National has a significant retail and trading
presence in New York City with  corporate  finance  transactions  originating in
Chicago,  Illinois.  The  majority of  National's  transactions  with the public
involve solicited trades.

WestAmerica,   based  in  Scottsdale,   Arizona,  is  a  registered   securities
broker-dealer  providing primarily retail brokerage operations.  The majority of
WestAmerica's transactions with the public involve solicited trades.

As of September 29, 2000, the Company and its subsidiaries had approximately 120
employees and 310 independent  contractors.  Of these totals,  approximately 350
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

                                       2
<PAGE>

(A)
GENERAL (Continued)

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  which 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 is engaged in a highly competitive business.  With respect to one or
more aspects of its business,  its competitors  include member  organizations of
the New York Stock Exchange,  Inc. and other registered  securities exchanges in
the United  States  and  Canada,  and  members of the  National  Association  of
Securities   Dealers,   Inc.   ("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.

The Company's  business plan includes the growth of its retail and institutional
brokerage business,  increased fixed income and proprietary  trading,  increased
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 October 2000, the Company  opened a significant  branch office of National in
New York City. This office  specializes in principal  mark-ups and mark-downs as
well as agency  trading of fixed  income  products,  OTC and Listed  equities to
various institutional clients. Additionally, this office has proprietary trading
of Listed equities and retail brokers. In the future this branch may expand into
market-making trade activities.  This type of expansion would require additional
capital at National.

(B) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS

For a more detailed  analysis of our results by segment see Item 7,  "Management
Discussion and Analysis of Financial Condition and Results of Operation."


                                       3
<PAGE>

(C) BROKERAGE SERVICES

Brokerage  services to retail clients are provided  through the Company's  sales
force of investment executives at National and WestAmerica.

NATIONAL SECURITIES CORPORATION

National is  registered  as a  broker-dealer  with the  Securities  and Exchange
Commission  ("SEC") and  licensed  in 50 states,  the  District of Columbia  and
Puerto Rico.  National is also a member of the NASD,  the  Municipal  Securities
Rulemaking  Board ("MSRB") and the Securities  Investor  Protection  Corporation
("SIPC").  During the fiscal year National sold its Chicago Stock Exchange (CHX)
membership.

National is organized 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.

It is not  National's  policy to recommend  particular  securities to customers.
Recommendations to customers are determined by individual  investment executives
based upon their own  research  and  analysis,  and 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  from
inventory positions to ensure compliance with applicable standards of conduct.

Salespersons  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 the salespersons 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 is able to pay an average of 70% of  commissions  and
mark-ups  generated by the investment  executive.  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,
receipt,  identification  and  delivery  of funds  and  securities,  custody  of
customer securities,  internal financial controls and compliance with regulatory
and legal requirements.

                                       4
<PAGE>

(C) BROKERAGE SERVICES  (Continued)

National's  data   processing  is  supplied  by  an  independent   vendor  on  a
time-sharing basis to process orders,  reports,  confirmations and statements as
well as to maintain the general  ledger,  files of  customers,  and other market
data.  National utilizes other computer  software,  which is used for investment
executive  payroll and telephone cost allocation,  including word processing and
other office applications.

National clears  approximately 90% of its own securities  transactions and posts
its books and records daily, with the remaining 10% of the transactions clearing
through Bear Stearns  Securities  Corporation and Pershing.  Periodic reviews of
controls  are  conducted,  and  administrative  and  operations  personnel  meet
frequently with management to review operating conditions.  Operations personnel
monitor compliance with applicable laws, rules and regulations.

WESTAMERICA INVESTMENT GROUP

WestAmerica is registered as a broker-dealer  with the SEC and is licensed in 39
states and the District of Columbia.  WestAmerica  is also a member of the NASD,
the MSRB and the SIPC. WestAmerica,  offers traditional securities brokerage and
financial planning business and fee-based investment  management business to its
retail clients.

Unlike  National,  the  majority  of  WestAmerica's  investment  executives  are
employees.  As such the average commission payout is approximately  20-30% lower
than National's  commission  payout of  approximately  70%. Since the commission
payout is much lower, WestAmerica provides office space, equipment, supplies and
other resources for its investment executives.

WestAmerica   operates  pursuant  to  the  exemptive   provisions  of  SEC  Rule
15c3-3(k)(2)(ii)  and clears all transactions  with and for customers on a fully
disclosed  basis.  WestAmerica  has a clearing  arrangement  with  Correspondent
Services   Corporation   ("CSC"),  a  wholly-owned   subsidiary  of  PaineWebber
Incorporated.  CSC provides  WestAmerica  with back office support,  transaction
processing services on all principal national securities exchanges and access to
many other  financial  services and  products.  This  agreement  with CSC allows
WestAmerica to offer a range of products and services that is generally  offered
only by firms that are larger or have more capital.

CANTERBURY SECURITIES CORPORATION

Canterbury  is a registered as a  broker-dealer  with the SEC and is licensed in
Illinois.  Canterbury is a member of the NASD, the MSRB and the SIPC. Canterbury
specializes in private placement transactions. Canterbury has no retail customer
accounts and therefore operates pursuant to the exemptive provisions of SEC Rule
15c3-3(k)(2)(i). Since acquisition, Canterbury has had no activity.


                                       5
<PAGE>

(D) 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 has expanded its  corporate
finance  operations  to  provide  a broader  range of  financial  and  corporate
advisory  services,  including  mergers  and  acquisitions,  project  financing,
capital   structure   and  specific   financing   opportunities.   National  has
underwritten both equity  securities and convertible  corporate bonds as initial
or secondary public offerings.

National will manage, underwrite and sell shares of each underwriting.  National
collects  fees from the  underwriting  proceeds for  providing  these  services,
including  non-accountable expenses.  Additionally,  National participates as an
underwriter  in the syndicate  group of other  underwritings,  which it does not
manage. All of these activities require a substantial  commitment of capital and
expose National to additional risk. Accordingly, National maintains a commitment
committee  that  reviews  every  proposed  underwriting  and must  approve  each
underwriting  in order for it to  proceed.  Additionally,  such  activities  are
periodically reviewed by members of the Board of Directors.

National's  corporate finance department is headquartered in Chicago,  Illinois.
This office includes  investment  executives,  investment bankers and employees.
The office and the corporate  finance  department are under the direction of the
Company's Chairman, Steven A. Rothstein.

WestAmerica  is  approved  by  the  NASD  to  engage  in  underwriting  and  has
participated as an underwriter.

(E) 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 also  maintains  inventories  in  corporate  and
municipal debt securities for sale to customers.

At National, a staff of six traders and assistants in its Seattle  headquarters,
and three traders and assistants in its Spokane,  Washington  office,  manage an
inventory of securities,  and conduct market-making  activities. As of September
29, 2000,  National made a market in approximately  100 equity  securities,  the
majority  of which  were  quoted  on the  NASDAQ  stock  market.  This  includes
companies  for  which  National   managed  or  co-managed  a  public   offering.
Additionally,  through its recently opened New York branch,  the Company intends
to substantially  increase the number of securities for which it makes a market,
and thereby increase this business in the coming year.

The Company's trading departments  require a substantial  commitment of capital.

                                       6
<PAGE>

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.

(E) PRINCIPAL AND AGENCY TRANSACTIONS (Continued)

Because 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,
which 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
agent and charges commissions which the Company believes are competitive,  based
on the services the Company  provides to its customers.  The Company may receive
rebates  for the  order  flow of the  securities  for  which  it does not make a
market.

(F) ONLINE TRADING

The  Company  through  NSCdirect  (a  division  of  National),  provides  online
investing services for its customers.  NSCdirect began trading in April 2000 and
is serviced  out of  Seattle,  Washington.  The Company has various  third party
vendor agreements,  which provide  development,  and hosting of the website. The
website is located at www.nscdirect.com.

(G) SUPERVISION

The  Securities  Exchange Act of 1934,  as amended,  and the NASD Conduct  Rules
require the Company's subsidiaries to supervise the activities of its investment
executives. As part of providing such supervision,  the subsidiaries maintain an
Operations and Procedures Manual.  Compliance  personnel conduct  inspections of
branch offices no less  frequently  than annually 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 the subsidiaries. Compliance reviews each customer trade to ensure
compliance with the NASD Conduct Rules including mark-up guidelines.


                                       7
<PAGE>

ITEM 2 - PROPERTIES

The Company owns no real property.  Its corporate  headquarters  are shared with
National  in  leased  space  in  Chicago,  Illinois  and  Seattle,   Washington.
Additionally,  through its  subsidiaries,  the Company  leases  office  space in
Marietta,  Georgia,  Scottsdale,  Arizona and  Spokane,  Washington.  The branch
offices,  which  are  run  by  independent  contractors,  are  leased  by  those
contractors. In October, 2000 the Company opened an office in New York, New York
and will be leasing space for that office.

Leases expire at various times through July 2009. The Company  believes the rent
at each of its  locations  is at current  market  rates.  At current  production
levels, the Company believes its leased space is suitable and adequate, however,
increased activity could require additional space to be leased.

ITEM 3 - LEGAL PROCEEDINGS

1.   THE MAXAL TRUST, ET AL. V. NATIONAL  SECURITIES  CORPORATION ET AL., United
     States District Court, Central District of California,  Case No. CV-97-4392
     ABC (Shx).  See disclosure in the Company's Form 10-Q for the quarter ended
     December  31,  1998 and Form 10-K for the fiscal year ended  September  24,
     1999.

     On  February  16,  1999,  the  District  Court  dismissed  the  plaintiffs'
     remaining claims against National in their entirety and granted  National's
     motion for summary  judgment.  A final  judgment was issued by the court on
     April 26, 1999. The plaintiffs  filed a notice of appeal on May 4, 1999 and
     oral arguments were heard on December 6, 2000.

2.   COMPLETE MANAGEMENT, INC. National has been named together with others as a
     defendant in a  consolidated  class action  lawsuit filed against  Complete
     Management,  Inc.  No specific  amount of damages  has been sought  against
     National in the  complaint.  In June 2000,  National  filed to dismiss this
     action.

The Company is a defendant  in various  other  arbitrations  and  administrative
proceedings,  lawsuits  and  claims,  which in the  aggregate  seek  general and
punitive  damages  approximating  $3,600,000.  The  Company  believes  that  the
resolution  of these  matters  will not have a material  adverse  effect.  These
matters arise out of the normal course of business.

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 29, 2000.


                                       8
<PAGE>

ITEM 4(A)- EXECUTIVE OFFICERS OF REGISTRANT

The following sets forth the names, ages and positions of all executive officers
of the Company:

Steven A. Rothstein     50     Chairman and Chief Executive Officer
                               Chairman and Chief Executive Officer of National
                               Director of WestAmerica
                               Director of Canterbury

Mark A. Goldwasser      42     President
                               Managing Director of National

Robert H. Daskal        59     Senior Vice President
                               Chief Financial Officer
                               Treasurer and Secretary
                               Secretary of National
                               Director of WestAmerica
                               Director of Canterbury

Michael A. Bresner      56     President of National

David M. Williams       31     Corporate Controller and Chief Accounting Officer
                               Chief Operating Officer of National

Craig M. Gould          30     Vice-Chairman of Technology
                               Managing Director of National

                                     PART II

ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
         STOCKHOLDER MATTERS

On September 7, 2000 the  Company's  common stock  stopped  trading on the NASDQ
Small Cap and began trading on The American Stock  Exchange.  Additionally,  the
Company's  common  stock trades on The Chicago  Stock  Exchange.  The  Company's
common stock trades using the symbol OLY. As of September 29, 2000,  the Company
had approximately 1,000 shareholders, including those shareholders holding stock
in street name and trust accounts.

Delaware law authorizes the 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

                                       9
<PAGE>

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.  As of this time, no shareholder holds
preferential  rights in  liquidation.  The  Company  has never  declared  a cash
dividend,  and does not  presently  foresee  declaring  one in the coming fiscal
year.  High and low closing bid quotations  from September 26, 1998 to September
29, 2000 have been obtained  from NASDAQ and The American  Stock  Exchange.  The
range of market prices for each quarter of fiscal years ended September 24, 1999
and September 29, 2000 are as follows:

PERIOD                                                    HIGH               LOW
------                                                    ----               ---
September 26, 1998/December 31, 1998                     $4.00             $0.88
January 1, 1999/March 26, 1999                           $8.97             $1.25
March 27, 1999/June 25, 1999                             $6.38             $2.31
June 26, 1999/September 24, 1999                         $5.19             $2.75

September 25, 1999/December 31, 1999                     $8.50             $3.13
January 1, 2000/March 31, 2000                          $13.56             $5.63
April 1, 2000/June 30, 2000                              $8.50             $5.75
July 1, 2000/September 29, 2000                          $8.06             $5.13

The closing bid price of the  Company's  common stock on December  11, 2000,  as
reported on the American Stock Exchange, was $4.00 per share.

ITEM 6 - SELECTED FINANCIAL DATA

Set forth below is the historical financial data with respect to the Company for
the fiscal years ended 2000,  1999,  1998, 1997, and 1996 . This information has
been derived from, and should be read in conjunction with, the audited financial
statements,  which appear elsewhere in this report. All information is expressed
in thousands of dollars except per share information.


                                              Fiscal Year

                                      2000      1999    1998      1997     1996
Net revenues                        $60,809   $43,330  $45,694  $39,994  $34,899
Net income (loss) after tax           1,556       118   (4,666)     101    1,735
Net income (loss) per common share     0.73      0.08    (3.12)    0.07     1.66
Total assets                         92,915    86,697   73,116   63,774   57,955
Long-term obligations                   608     2,150    2,770        -        -
Stockholders' equity                  8,039     4,039    2,948    7,604    5,316
Cash dividends                            -         -        -        -        -

                                       10
<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 THE
COMPANY'S REGISTRATION STATEMENT ON FORM S-3 (REGISTRATION NO. 333-80247), FILED
WITH THE  SECURITIES  AND EXCHANGE  COMMISSION ON JUNE 9, 1999 AND THE COMPANY'S
OTHER SECURITIES AND EXCHANGE COMMISSION FILINGS, INCLUDING THE COMPANY'S ANNUAL
REPORTS ON FORM 10-K AND  QUARTERLY  REPORTS ON FORM 10-Q.  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.

RESULTS OF OPERATIONS

FISCAL YEAR 2000 COMPARED WITH FISCAL YEAR 1999

The Company's fiscal year 2000 resulted in significant  increase in revenues and
net income as compared  with the fiscal year 1999.  The increase in revenues was
due to growth in the retail brokerage and dealer operations combined with strong
markets in the first half of fiscal  2000.  Overall,  the Company  reported  net
income of  $1,556,000  in the  fiscal  year  2000  compared  with net  income of
$118,000 in the fiscal year 1999.

Revenues  increased  $17,479,000  or 40% in the fiscal year 2000 to  $60,809,000
from $43,330,000 in the fiscal year 1999 and expenses  increased  $15,678,000 or
36% to $58,894,000  in the fiscal year 2000 from  $43,216,000 in the fiscal year
1999.  Revenues  increased  primarily due to the increase in commissions and net
dealer  inventory gains based on the strength of the market in the first half of
the fiscal year.

Net dealer  inventory  gains,  which includes  profits on  proprietary  trading,
market  making  activities  and  customer  mark-ups  and mark  downs,  increased
$10,893,000, or 120%, to $19,950,000 from $9,057,000 during the fiscal year 2000
compared with the fiscal year 1999.  This  increase is due to National's  London
office  dramatically  increasing  its  business  and the strength of the markets
during the first half of the fiscal year.

                                       11
<PAGE>

Commission  revenue increased  $3,329,000 or 14% to $27,894,000 from $24,565,000
during the fiscal year 2000  compared  with the fiscal year 1999.  This increase
was due to the  strength  of the  markets in the first  half of the fiscal  year
2000.

RESULTS OF OPERATIONS (continued)
FISCAL YEAR 2000 COMPARED WITH FISCAL YEAR 1999 (continued)

Investment banking revenue increased $80,000 or 3% to $2,539,000 from $2,459,000
in the fiscal year 1999.  The Company  did not manage a public  underwriting  in
fiscal years 2000 or 1999. During the fiscal year 2000 and the fiscal year 1999,
investment  banking  revenue was  generated  primarily  from the  completion  of
private placement transactions and advisory fees.

Other  revenue,  consisting  of asset  management  fees and revenue  from market
making trade order flow, increased $797,000, or 97%, to $1,620,000 from $823,000
during the fiscal year 2000  compared to the fiscal year 1999.  The  increase in
other  revenue was due mainly to an increase in asset  management  fees received
through National Asset Management, a subsidiary of National.

Concurrent  with the overall  increase in  revenues,  total  expenses  increased
$15,678,000,  or 36%, to $58,894,000  from  $43,216,000 in the fiscal year 1999.
This  increase in expenses was  anticipated  due to  increases in revenues,  and
thereby an increase in commission expense and employee compensation.

Commission expense increased $9,935,000, or 39%, to $35,670,000 from $25,735,000
due to the increase in commission  revenue,  and net dealer inventory gains from
which  commission  expense  is paid.  Employee  compensation  expense  increased
$1,939,000,  or 40%, to $6,821,000  from  $4,882,000 in the fiscal year 1999. In
September 1998,  certain members of management of the Company received temporary
reductions  in  compensation,  ranging from 10% to 62%.  These  reductions  were
reinstated in full prior to the first quarter of fiscal 2000. Overall,  combined
commissions  and  employee  compensation  as a percentage  of revenue  decreased
slightly to 69.9% from 70.7% in the fiscal year 2000 and 1999, respectively.

As  anticipated,  with  the  overall  increase  in  revenue  expenses  regarding
occupancy,  taxes,  licenses and  registration and other have increased from the
fiscal year 1999 to the fiscal year 2000.  Occupancy expense,  consisting mainly
of rent,  office  supplies and  depreciation  increased  $1,088,000,  or 43%, to
$3,636,000  from  $2,548,000.  This increase  relates mainly to increased  rent,
depreciation and computer  services.  Rent increased  approximately  $320,000 at
National  due to a new  office  lease  signed in July 1999 at a higher  rate per
square foot, as well as office space added for NSCdirect. Additionally, with the
addition  of   NSCdirect,   computer   services   and   depreciation   increased
approximately  $665,000,  due to costs for  additional  equipment  and  computer
services  such as web  hosting,  off-site  server  maintenance  and other  costs
associated with online trade execution and online account access.  Additionally,
included  in  the  increase  in  computer  services  are  increased  costs  from
National's third party data processing company.  These charges are calculated on
a cost per trade basis and as overall  trade volume  increased in the first half
of the fiscal year 2000, computer services increased.

                                       12
<PAGE>

RESULTS OF OPERATIONS (continued)
FISCAL YEAR 2000 COMPARED WITH FISCAL YEAR 1999 (continued)

Taxes,  licenses and registration  increased $721,000, or 680%, to $827,000 from
$106,000.  This  increase was due  primarily  to National  receiving a refund of
prior years' business operating taxes totaling $330,000 in the fiscal year 1999.
Additionally,  with the  increased  revenue in fiscal  2000  business  operating
taxes, which are a revenue based tax, increased.

Other  expenses  increased  $1,025,000,  or 78%, to $2,344,000  from  $1,319,000
during the fiscal year 2000 and 1999, respectively. In the fiscal year 2000, the
Company incurred travel and moving expenses  totaling  $818,000,  an increase of
approximately  $263,000  from the prior  fiscal  year 1999.  Also,  the  Company
incurred additional employment agency fees totaling $83,000 as the Company hired
more people to accommodate  growth.  Finally,  customer  write-offs and bad debt
expense increased approximately $492,000 from the fiscal year 1999.

Interest expense increased $956,000, or 25%, to $4,720,000 from $3,764,000.  The
main reason for this increase is the increase in customer deposits, on which the
Company  pays  interest  and the  accelerated  accretion of interest on original
issue  discount  notes,  which were repaid  during the second  quarter of fiscal
2000. Original issue discount interest for the nine months totaled $232,000. The
remaining interest expense increase was due to the increase in customer deposits
of $7.0 million during the fiscal year 2000.  This increase was more than offset
by increased interest income from customer margin debt, which increased by $16.2
million during the fiscal year 2000.  Interest income increased  $1,985,000,  or
36%, to $7,542,000 from $5,557,000  during the fiscal year 2000 as compared with
the fiscal year 1999.

Professional  fees decreased  $380,000,  or 19%, to $1,576,000 from  $1,956,000.
This decrease is due to the Company resolving several of its lawsuits during the
previous fiscal year.

Overall,  diluted earnings were $0.73 per share as compared with $0.08 per share
for the fiscal years 2000 and 1999, respectively.

FISCAL YEAR 1999 COMPARED WITH FISCAL YEAR 1998

The  Company's  fiscal year 1999  resulted in net income of $118,000 or $.08 per
share diluted as compared to a net loss of $4,666,000 or $3.12 per share diluted
for fiscal year 1998.  The  Company's  fiscal year 1999 resulted in decreases in
both revenues and expenses  compared with the fiscal year 1998.  These decreases
were  primarily  due to the sale of two  subsidiaries,  L.H.  Friend,  Weinress,
Franksen & Presson, Inc. ("Friend") and Travis Capital, Inc. ("Travis"),  as the
Company  continued its focus on retail  operations,  resulting in an increase in

                                       13

<PAGE>

retail commissions and net dealer inventory gains.

RESULTS OF OPERATIONS (continued)
FISCAL YEAR 1999 COMPARED WITH FISCAL YEAR 1998 (continued)

Revenues decreased  $2,364,000 or 5% in the fiscal year 1999 to $43,330,000 from
$45,694,000 in the fiscal year 1998 and expenses decreased  $7,768,000 or 15% to
$43,216,000  in the fiscal year 1999 from  $50,984,000  in the fiscal year 1998.
Exclusive  of Friend  and  Travis,  revenues  increased  $5,174,000  or 14% from
$38,156,000  to $43,330,000  and expenses  increased less than 1% or $407,000 in
the fiscal year 1999 from the fiscal year 1998.

Revenues decreased primarily due to the decrease in underwriting  revenue as the
weak capital markets for initial public  offerings by emerging growth  companies
continued.  For the fiscal year 1999,  underwriting revenue decreased $8,267,000
or 77%  to  $2,459,000  from  $10,726,000  in the  fiscal  year  1998.  National
participated in four private placements raising $13 million in gross proceeds in
the fiscal year 1999. In the fiscal year 1998, National,  through the management
of two  underwritings and co-management of one underwriting with Friend, as well
as three successful  private  placements,  generated  $5,177,000 of underwriting
revenue.  Friend managed its first underwriting  during the first nine months of
fiscal  1998  and  participated  in  several  other  underwritings  and  private
placements,  generating $5,460,000 of underwriting revenue.  Exclusive of Friend
and Travis,  underwriting revenue decreased $2,718,000 or 25% in the fiscal year
1999 compared with the fiscal year 1998.

Net dealer  inventory  gains  increased  $3,545,000,  or 64%, to $9,057,000 from
$5,512,000  during  the fiscal  year 1999  compared  with the fiscal  year 1998.
Exclusive of Friend and Travis, net dealer inventory gains increased  $4,397,000
or 80%. This increase is due to National's London office dramatically increasing
its business and the strength of the markets the past twelve months.

Although  overall  revenue  decreased  during the fiscal  year 1999,  commission
revenue increased $929,000, or 4%, to $24,565,000 from $23,636,000. Exclusive of
Friend and Travis,  commission revenue increased  $2,013,000,  or 9%, during the
fiscal year 1999.  This increase is due to favorable  market  conditions and the
addition of registered representatives.

Concurrent  with the overall  decrease in  revenues,  total  expenses  decreased
$7,768,000,  or 15%, to  $43,216,000  from  $50,984,000 in the fiscal year 1998.
This decrease in expenses was anticipated due to decreases in revenues,  and the
Company's efforts to reduce overhead costs. The most significant  decreases were
salary expense, occupancy and other.

Salaries decreased $3,864,000, or 44%, to $4,882,000 from $8,746,000. Friend and
Travis had combined  salary  expense of $3,251,000 in the fiscal year 1998.  The
remaining decrease in salary expense was $613,000 or 7% in the fiscal year 1999,

                                       14
<PAGE>

as  management  incurred  salary  reductions  in an effort  to  reduce  overhead
expenses.  With the increased commission revenue and net dealer inventory gains,
overall  commission  expense  increased  $690,000 or 3% from  $25,045,000 in the
fiscal year 1998 to $25,735,000 in the fiscal year 1999.

RESULTS OF OPERATIONS (continued)
FISCAL YEAR 1999 COMPARED WITH FISCAL YEAR 1998 (continued)

Exclusive of Friend and Travis,  commission expense increased  $3,698,000 in the
fiscal year 1999 from the fiscal year 1998.  Overall,  combined  commissions and
salaries as a percentage  of revenue  decreased 3% to 71% from 74% in the fiscal
year 1999 and 1998, respectively.

As  anticipated,   with  the  sale  of  Friend  and  Travis  expenses  regarding
communications,  occupancy,  taxes,  licenses  and  registration  and other have
decreased  from the  fiscal  year 1998 to the fiscal  year 1999.  Communications
expenses, mainly telephone, telequote and mailing decreased $789,000, or 41%, to
$1,133,000  from  $1,922,000.  Friend  and Travis  had  combined  communications
expenses of $344,000 in fiscal 1998.  Occupancy  expense,  consisting  mainly of
rent,  office  supplies  and  depreciation  decreased  $1,188,000,  or  32%,  to
$2,548,000  from  $3,736,000.  This  decrease  relates  to the  sale  of the two
subsidiaries  as well as  National  closing  a  branch  office  in New  York and
subletting  excess  office space in Chicago.  Taxes,  licenses and  registration
decreased  $514,000,  or 83%, to $106,000 from  $620,000.  This decrease was due
primarily  to National  receiving a refund of prior  years'  business  operating
taxes totaling $330,000.

Finally,  other  expenses  decreased  $3,810,000,  or 74%,  to  $1,319,000  from
$5,129,000  during  the fiscal  year 1999 and 1998,  respectively.  The  largest
component of this decrease,  totaling  $2,521,000,  relates to the write-down of
certain receivables and investments, including those relating to the disposition
of the two subsidiaries.  Additionally,  the other expenses relating to the sale
of the two  subsidiaries  and closure of a branch office in New York contributed
another $987,000 to this decrease.

Moving expenses and amortization  combined were $300,000 more in the fiscal year
1998 compared with the fiscal year 1999. Amortization decreased due to the write
off of goodwill related to the sale of the two subsidiaries and the amortization
of a prepaid asset at WestAmerica  that was recorded  during fiscal 1997 as part
of the purchase price.

Interest  expense,  clearing fees and  professional  fees  increased  during the
fiscal  year 1999 as  compared  with the  fiscal  year  1998.  Interest  expense
increased $924,000,  or 33%, to $3,764,000 from $2,840,000.  The main reason for
this  increase is the increase in customer  deposits,  on which the Company pays
interest, and the interest on debt incurred in fiscal 1998. Interest expense was
offset by increased  interest revenue of $1,177,000,  or 27%, to $5,557,000 from
$4,380,000.

Clearing  fees  actually  increased   $208,000,   or  13%,  to  $1,773,000  from
$1,565,000.  Exclusive of Friend,  clearing fees  increased  $589,000 due to the
increased volume of transactions including the London office of National.


                                       15
<PAGE>

RESULTS OF OPERATIONS (continued)
FISCAL YEAR 1999 COMPARED WITH FISCAL YEAR 1998 (continued)

Professional  fees increased  $575,000,  or 42%, to $1,956,000 from  $1,381,000.
After adjusting for  professional  fees paid at Friend and Travis,  professional
fees increased  $654,000,  or 47%, during the fiscal year 1999 compared with the
fiscal year 1998 due to increased  litigation  that was  substantially  resolved
during the fiscal year 1999.  Included in professional fees is $524,000 relating
to the settlement of three lawsuits during the fiscal year 1999, only $75,000 of
which represented a cash payment.

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.  These assets are financed  primarily by National's  interest  bearing and
non-interest  bearing  customer  credit  balances,  other  payables  and  equity
capital. Occasionally, National utilizes short-term bank financing to supplement
its ability to meet day-to-day  operating cash requirements.  Such financing has
been  used to  maximize  cash  flow  and is  regularly  repaid.  National  has a
$3,000,000  revolving  secured  credit  facility  with  Bank of  America.  These
borrowings  are  short-term  and  generally do not extend  beyond a few days. At
September  29,  2000,  National  had no  borrowings  outstanding  on this  line.
Additionally,  National  may  borrow up to 70% of the market  value of  eligible
securities pledged through an unrelated broker-dealer.

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 2% of  aggregate  debit  items.  At  September  29, 2000,
National's net capital exceeded the requirement by $4,575,000.

WestAmerica,  as a  registered  broker-dealer,  is also subject to the SEC's Net
Capital Rule 15c3-1, which, under the standard method, requires that WestAmerica
maintain  minimum  net  capital  equal to the  greater of  $100,000 or 6 2/3% of
aggregate  indebtedness.  At  September  30,  2000,  WestAmerica's  net  capital
exceeded the requirement by $193,000.

Canterbury,  as a  registered  broker-dealer,  is also  subject to the SEC's Net
Capital Rule 15c3-1, which, under the standard method,  requires that Canterbury
maintain   minimum  net  capital  equal  to  $5,000.   At  September  29,  2000,
Canterbury's net capital exceeded the requirement by $3,877.

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 these subsidiaries may
dividend or advance to Olympic.


                                       16
<PAGE>

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.

The Company believes its internally generated liquidity, together with access to
external  capital  and  debt  resources,   is  sufficient  to  satisfy  existing
operations.  However,  as the Company  expands  its  operations,  including  the
expansion of its market making  activities,  or acquires other  businesses,  the
Company will require additional capital.

As of the fiscal year ended  September 29, 2000,  total assets were  $92,915,000
compared to total  assets of  $86,697,000  as of the fiscal year  September  24,
1999, which represents a 7% increase in total assets for the 12-month period. As
of fiscal year ended September 24, 1999, total assets were $86,697,000, compared
to total assets of $73,116,000 as of September 25, 1998,  which represents a 19%
increase in total assets for the 12-month period.

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.  Whereas inflation has not had a materially  adverse impact on
the costs or the operations of the Company, inflation does have an effect on the
Company's business. Increases in inflation rates may be accompanied by increases
in interest  rates,  which may  adversely  affect  short-term  stock prices and,
thereby, adversely affect the Company's performance. However, in an inflationary
environment  other  corporate  financing  activities  may  become  more  readily
pursued,  such as financial  advisory  services.  It is  therefore  difficult to
predict the net impact of inflation on the Company.

NEW ACCOUNTING STANDARDS

In June 1997,  the FASB issued SFAS Nos. 130 and 131.  SFAS No. 130  establishes
standards for reporting and display of comprehensive  income and its components.
SFAS No. 131  establishes  standards for  reporting  about  operating  segments,
products and services,  geographic  areas,  and major  customers.  The standards
become effective for fiscal years beginning after December 15, 1997.  Management
adopted these standards in the year ended September 24, 1999.

In June 1999,  the FASB  issued  SFAS NO. 133 which  establishes  standards  for
accounting and reporting  derivative  instruments,  including certain derivative
instruments   embedded  in  other  contracts,   (collectively   referred  to  as
derivatives) and for hedging  activities.  Management adopted these standards in
the year ended September 24, 1999.


                                       17
<PAGE>

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
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
owned  ("long"),  securities  sold  but  not  yet  purchased  ("short")  and net
positions as of September 29, 2000:

                              LONG            SHORT                  NET

Corporate stocks           $370,000         $192,000             $178,000 (long)
Stock options              $  6,000         $      -             $  6,000 (long)


ITEM 8 - FINANCIAL STATEMENTS

                                       18
<PAGE>

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

ITEM 9 -  CHANGES IN  AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
          FINANCIAL DISCLOSURE

There  were no matters  submitted  to a vote of  security  holders in the fourth
quarter of fiscal year ended September 29, 2000.

                                    PART III

ITEM 10 - DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
          PERSONS, COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

The  information  required by this item will be included in the  Company's  2001
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  2001
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  2001
Proxy Statement and is incorporated herein by reference.

ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The  information  required by this item will be included in the  Company's  2001
Proxy Statement and is incorporated herein by reference.

 ITEM 14 - EXHIBITS AND REPORTS ON FORM 8-K

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

         1.     FINANCIAL STATEMENTS

                    Independent Auditors' Report
                    Consolidated Financial Statements
                         Statements of Financial  Condition,  September 29, 2000
                           and September 24, 1999
                         Statements  of  Operations,  Years Ended  September 29,
                         2000,   September  24,  1999  and  September  25,  1998

                         Statements of Changes in  Stockholders'  Equity,  Years
                         ended September 29, 2000, September 24, 1999 and
                           September 25, 1998

                                       19
<PAGE>

                         Statements of Cash Flows,   Years  ended  September 29,
                           2000, September 24, 1999 and September 25, 1998
                         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 29, 2000.

(C)      EXHIBITS

         See Exhibit Index

                                       20
<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 20, 2000              BY:   /S/STEVEN A. ROTHSTEIN
      ------------------------                 ---------------------------------
                                        Steven A. Rothstein, Chairman and
                                        Chief Executive Officer

DATE:    DECEMBER 20, 2000              BY:    /S/ROBERT H. DASKAL
      ------------------------                 ---------------------------------
                                        Robert H. Daskal, Senior Vice President,
                                        Chief Financial Officer,  Treasurer  and
                                        Secretary

DATE:    DECEMBER 20, 2000              BY: /S/DAVID M. WILLIAMS
     ------------------------               ------------------------------------
                                        David M. Williams
                                        Chief Accounting Officer and
                                        Corporate Controller

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 20, 2000              BY:    /S/STEVEN A. ROTHSTEIN
      ------------------------                 ---------------------------------
                                               Steven A. Rothstein, Chairman and
                                               Chief Executive Officer

DATE:    DECEMBER 20, 2000              BY:    /S/GARY A. ROSENBERG
      ------------------------                 ---------------------------------
                                               Gary A. Rosenberg, Director

DATE:    DECEMBER 20, 2000              BY:    /S/JAMES C. HOLCOMB, JR.
        ---------------------------            ---------------------------------
                                               James C. Holcomb, Jr., Director

DATE:    DECEMBER 20, 2000              BY:    /S/D.S. PATEL
        ---------------------------            ---------------------------------
                                               D.S. Patel, Director

                                       21
<PAGE>
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  Subsidiaries as of September 29,
2000  and  September  24,  1999  and  the  related  consolidated  statements  of
operations,  changes in stockholders'  equity, and cash flows for the years then
ended  September 29, 2000,  September  24, 1999 and  September  25, 1998.  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 audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  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 audits provides a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all material  respects,  the financial  position of Olympic  Cascade
Financial  Corporation  and  Subsidiaries as of September 29, 2000 and September
24, 1999, and the results of their operations and their cash flows for the years
ended  September  29,  2000,  September  24,  1999  and  September  25,  1998 in
conformity with generally accepted accounting principles.

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

New York, New York
December 1, 2000

                                      F-1


<PAGE>


             OLYMPIC CASCADE FINANCIAL CORPORATION AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

                                               September 29,       September 24,
                                                   2000                  1999
                                          -----------------    -----------------
                                     ASSETS

CASH, subject to immediate withdrawal       $    3,020,000       $      384,000

CASH, CASH EQUIVALENTS AND SECURITIES           29,517,000           41,416,000

DEPOSITS                                         1,792,000            1,679,000

RECEIVABLES:

     Customers                                  54,243,000           38,038,000
     Brokers and dealers                         1,994,000            2,342,000
     Other                                         394,000              976,000

SECURITIES HELD FOR RESALE, at market              376,000              298,000

FIXED ASSETS, net                                1,112,000            1,176,000

GOODWILL, net                                       74,000               45,000

OTHER ASSETS                                       393,000              343,000
                                          -----------------    -----------------
                                             $  92,915,000       $   86,697,000
                                          =================    =================


                      LIABILITIES AND STOCKHOLDERS' EQUITY

PAYABLES:

     Customers                               $  74,183,000       $   67,158,000
     Brokers and dealers                         5,329,000            7,581,000

SECURITIES SOLD, BUT NOT YET PURCHASED, at market  192,000              139,000

ACCOUNTS PAYABLE, ACCRUED EXPENSES AND
     OTHER LIABILITIES                           3,976,000            3,167,000

REVOLVING CREDIT LINE                                    -            2,100,000

NOTES PAYABLE                                      614,000            1,648,000

CAPITAL LEASE PAYABLE                              582,000              865,000
                                          ----------------     ----------------
                                                84,876,000           82,658,000
                                          -----------------    -----------------
COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
     Preferred stock, $.01 par value, 100,000 shares
       authorized, none issued and outstanding           -                    -
     Common stock, $.02 par value, 6,000,000 shares
       authorized, 2,153,846 and 1,694,595 shares
         issued and outstanding                     43,000               34,000
     Additional paid-in capital                  8,810,000            6,375,000
     Accumulated Deficit                          (814,000)          (2,370,000)
                                          -----------------    -----------------
                                                 8,039,000            4,039,000
                                          -----------------    -----------------
                                          $     92,915,000     $     86,697,000
                                          =================    =================



                 See notes to consolidated financial statements.

                                       F-2

<PAGE>

                      OLYMPIC CASCADE FINANCIAL CORPORATION
                      CONSOLIDATED STATEMENTS OF OPERATIONS

                                                    Years Ended
                                     -------------------------------------------
                                     September 29,  September 24,  September 25,
                                         2000            1999           1998
                                     ------------    -----------   -------------

REVENUES:

  Commissions                        $ 27,894,000   $ 24,565,000   $ 23,636,000
  Net dealer inventory gains           19,950,000      9,057,000      5,512,000
  Underwriting                          2,539,000      2,459,000     10,726,000
  Interest and dividends                7,542,000      5,557,000      4,380,000
  Transfer fees and clearance services  1,264,000        869,000        735,000
  Other                                 1,620,000        823,000        705,000
                                     ------------    -----------   -------------

                                       60,809,000     43,330,000     45,694,000
                                     ------------    -----------   -------------

EXPENSES:

  Commissions                          35,670,000     25,735,000     25,045,000
  Employee compensation and
    related expenses                    6,821,000      4,882,000      8,746,000
  Occupancy and equipment costs         3,636,000      2,548,000      3,736,000
  Interest                              4,720,000      3,764,000      2,840,000
  Clearance fees                        2,035,000      1,773,000      1,565,000
  Communications                        1,265,000      1,133,000      1,922,000
  Taxes, licenses, registration           827,000        106,000        620,000
  Professional fees                     1,576,000      1,956,000      1,381,000
  Other operating expenses              2,344,000      1,319,000      5,129,000

                                     ------------    -----------   -------------
                                       58,894,000     43,216,000     50,984,000
                                     ------------    -----------   -------------

INCOME (LOSS) BEFORE INCOME TAXES       1,915,000        114,000     (5,290,000)

(PROVISION) BENEFIT FOR INCOME TAXES     (359,000)         4,000        624,000
                                     ------------    -----------   -------------

NET INCOME (LOSS)                    $  1,556,000   $    118,000   $ (4,666,000)
                                     ============    ===========   =============

EARNINGS (LOSS) PER SHARE OF COMMON STOCK
  Basic                              $       0.80   $       0.08   $      (3.12)
                                     ============    ===========   =============
  Diluted                            $       0.73   $       0.08   $      (3.12)
                                     ============    ===========   =============

WEIGHTED AVERAGE NUMBER OF COMMON SHARES
  Basic                                 1,947,572      1,563,499      1,496,634
                                     ============    ===========   =============
  Diluted                               2,124,751      1,563,499      1,496,634
                                     ============    ===========   =============









                 See notes to consolidated financial statements.

                                       F-3
<PAGE>
             OLYMPIC CASCADE FINANCIAL CORPORATION AND SUBSIDIARIES
            CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

             YEARS ENDED SEPTEMBER 29, 2000, SEPTEMBER 24, 1999 AND

                               SEPTEMBER 25, 1998
<TABLE>
<CAPTION>


                                                             Common Stock             Additional      Retained
                                                     ---------------------------       Paid-In        Earnings
                                                         Shares         Amount         Capital        (Deficit)           Total
                                                     -----------    ------------    ------------    ------------     ---------------
<S>                                                  <C>            <C>            <C>            <C>                <C>

BALANCE, September 26, 1997                            1,444,205      $  29,000      $ 5,045,000    $  2,530,000       $  7,604,000

     Exercise of stock options                             2,012              -            8,000               -              8,000
     Stock dividends                                      72,299          1,000          351,000        (352,000)                 -
     Original issue discount                                   -              -          307,000               -            307,000
     Treasury stock                                      (55,509)        (1,000)        (304,000)              -           (305,000)
     Net loss                                                  -              -                -      (4,666,000)        (4,666,000)
                                                     ------------     ----------    -------------    -----------     ---------------

BALANCE, September 25, 1998                            1,463,007         29,000        5,407,000      (2,488,000)         2,948,000

     Exercise of stock options                            82,613          2,000          297,000               -            299,000
     Exercise of stock warrants                            5,000              -           20,000               -             20,000
     Issuance of common stock and warrants
       in lawsuit settlement and payment of expenses     145,000          3,000          618,000               -            621,000
     Options issued to consultants                             -              -           38,000               -             38,000
     Treasury stock                                       (1,025)             -           (5,000)              -             (5,000)
     Net income                                                -              -                -         118,000            118,000
                                                     ------------     ----------    -------------    -----------     ---------------

BALANCE, September 24, 1999                            1,694,595         34,000        6,375,000      (2,370,000)         4,039,000

     Exercise of stock options, including
       $150,000 income tax benefit                       144,063          3,000          744,000                            747,000
     Exercise of stock warrants                          315,188          6,000        1,589,000                          1,595,000
     Options issued to consultants                                                        82,000                             82,000
     Warrants issuance in connection with acquisition                                     20,000                             20,000
     Net income                                                                                        1,556,000          1,556,000

                                                     ------------     ----------    -------------    -----------     ---------------

BALANCE, September 29, 2000                            2,153,846      $  43,000      $ 8,810,000    $   (814,000)      $  8,039,000
                                                     ============     ==========    =============    ============    ===============


</TABLE>


                 See notes to consolidated financial statements.

                                       F-4
<PAGE>
             OLYMPIC CASCADE FINANCIAL CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>

                                                                                                 Years Ended
                                                                        ------------------------------------------------------------
                                                                             September 29,      September 24,        September 25,
                                                                                2000                 1999                  1998
                                                                        ------------------   ------------------    -----------------
<S>                                                                       <C>                <C>                  <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net income (loss)                                                      $  1,556,000       $    118,000         $    (4,666,000)
     Adjustments to reconcile net income (loss) to net cash
       provided by (used in) operating activities
     Depreciation and amortization                                               498,000            408,000                 716,000
     Issuance of common stock in lawsuit settlement                                    -            501,000                       -
     Issuance of common stock in payment of expenses                                   -            120,000                       -
     Compensation related to issuance of stock options                            82,000             38,000                       -
     Loss (gain) on sale of subsidiaries                                               -             (5,000)              1,114,000
     Loss on disposal of fixed assets                                                  -                  -                       -
     Deferred income tax                                                         (76,000)            (2,000)                  6,000
     Changes in assets and liabilities:
       Decrease (increase) in cash, cash equivalents and securities           11,899,000        (14,068,000)              3,586,000
       (Increase) decrease in deposits                                          (113,000)           345,000                (732,000)
       Increase in receivables                                               (15,275,000)          (535,000)            (16,379,000
       Decrease (increase) in federal income tax receivable                      258,000            654,000                 (57,000)
       (Increase) decrease in securities held for resale                         (78,000)           (63,000)              1,831,000
       Increase(decrease) in other assets                                         26,000           (211,000)               (413,000)
       Increase in payables                                                    4,773,000         12,477,000              11,682,000
       Increase (decrease) in securities sold, but not yet purchased              53,000             66,000                (974,000)
       Increase (decrease) in accounts payable, accrued expenses
         and other liabilities                                                   758,000          1,195,000                (320,000)
                                                                        ------------------   ------------------    -----------------
NET CASH PROVIDED(USED IN) BY OPERATING ACTIVITIES                             4,361,000          1,038,000              (4,606,000)
                                                                        ------------------   ------------------    -----------------

CASH FLOWS FROM INVESTING ACTIVITIES:
     Purchase of fixed assets                                                   (413,000)          (276,000)               (371,000)
     Sale of fixed assets                                                              -                  -                 124,000
     Purchase of subsidiary                                                      (30,000)                 -                       -
     Proceeds from sale of subsidiary                                                  -                  -                 500,000
                                                                        ------------------   ------------------    -----------------
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES                             (443,000)          (276,000)                253,000
                                                                        ------------------   ------------------    -----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
     Excercise of stock warrants                                               1,595,000                  -                       -
     Exercise of stock options                                                   597,000            319,000                   8,000
     Borrowings (repayments) on line of credit                                (2,100,000)          (600,000)              2,700,000
     Proceeds from notes payable                                                       -                  -               1,925,000
     Payments on capital lease                                                  (340,000)          (348,000)               (108,000)
     Payments on notes payable                                                (1,034,000)          (300,000)               (600,000)
                                                                        ------------------   ------------------    -----------------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES                           (1,282,000)          (929,000)              3,925,000
                                                                        ------------------   ------------------    -----------------

INCREASE (DECREASE) IN CASH                                                    2,636,000           (167,000)               (428,000)

CASH, beginning of year                                                          384,000            551,000                 979,000
                                                                        ------------------   ------------------    -----------------
CASH, end of year                                                       $      3,020,000     $      384,000          $      551,000
                                                                        ==================   ==================    =================

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid during the year for:

     Interest                                                           $      4,714,000     $    3,727,000          $    2,783,000
                                                                        ==================   ==================    =================
     Income taxes                                                       $              -     $            -          $            -
                                                                        ==================   ==================    =================

SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND
     FINANCING ACTIVITIES

     Warrants issued in connection with acquisition                     $         20,000     $            -          $            -
                                                                        ==================   ==================    =================
     Tax effect of stock options exercised                              $        150,000     $            -          $            -
                                                                        ==================   ==================    =================
     Warrants issued as a discount on notes payable                     $              -     $            -          $      307,000
                                                                        ==================   ==================    =================
     Redemption and retirement of capital stock                         $              -     $        5,000          $      305,000
                                                                        ==================   ==================    =================
     Assets under capital lease                                         $              -     $            -          $    1,180,000
                                                                        ==================   ==================    =================
</TABLE>


                 See notes to consolidatd financial statements.

                                       F-5
<PAGE>





                      OLYMPIC CASCADE FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
          SEPTEMBER 29, 2000, SEPTEMBER 24, 1999 AND SEPTEMBER 25, 1998
          -------------------------------------------------------------


1.   ORGANIZATION:

     OLYMPIC  CASCADE  FINANCIAL  CORPORATION  ("OLYMPIC" OR THE "COMPANY") is a
     diversified  financial services  organization,  operating through its three
     wholly owned subsidiaries,  National Securities  Corporation  ("National"),
     WestAmerica  Investment  Group  ("WestAmerica")  and Canterbury  Securities
     Corporation   ("Canterbury").   Olympic  provides   financing  options  for
     emerging,  small and middle capitalization  companies through institutional
     research  and  sales  and  investment  banking  services  for  both  public
     offerings and private  placements,  and also provides retail  brokerage and
     trade clearance operations.

     During the year ended September 25, 1998, the Company sold its interests in
     both L.H. Friend, Weinress,  Frankson & Presson, Inc. ("Friend") and Travis
     Capital, Inc. ("Travis").

     During the year ended  September 29, 2000, the Company  acquired all of the
     outstanding  the stock of Canterbury.  Canterbury had no activity since its
     acquisition.

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

     a. PRINCIPLES OF  CONSOLIDATION  - The  consolidated  financial  statements
     include  the  accounts of Olympic and its wholly  owned  subsidiaries.  All
     significant intercompany accounts and transactions have been eliminated.

     b. ESTIMATES - The  preparation  of the financial  statements in conformity
     with generally accepted  accounting  principles requires management to make
     estimates and  assumptions  that affect the reported  amounts of assets and
     liabilities, disclosure of contingent assets and 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.  ACCOUNTING  METHOD - Customer  security  transactions  and the  related
     commission  income and expense are recorded on a settlement date basis. The
     Company's   financial   condition  and  results  of  operations  using  the
     settlement  date basis are not materially  different from that of the trade
     date  basis.  Revenue  from  consulting  services  and  investment  banking
     activities is recognized as the services are performed.

     d.  FIXED  ASSETS  - Fixed  assets  are  stated  at cost.  Depreciation  is
     calculated  using the straight  line method based on the  estimated  useful
     lives of the related assets, which range from three to five years.

                                      F-6
<PAGE>

     e. FISCAL YEAR - The Company  has a  fifty-two  or  fifty-three  week year,
     ending on the last Friday in September.

     f. CASH AND CASH EQUIVALENTS - For purposes of the statement of cash flows,
     the Company  defines cash as cash subject to  immediate  withdrawal.  Cash,
     cash equivalents and securities as discussed in Note 4 are not considered a
     change in cash for this purpose.

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

     h. FAIR VALUE OF FINANCIAL INSTRUMENTS - Substantially all of the Company's
     financial  statements are carried at fair value.  Assets,  including  cash,
     cash equivalents and securities, deposits, certain receivables,  securities
     held for resale and other  assets,  are carried at fair value or contracted
     amounts which  approximate fair value.  Similarly,  liabilities,  including
     certain  payables,  securities sold but not yet purchased and notes payable
     are carried at fair value or contracted  amounts  approximating fair value.
     I. EARNINGS  (LOSS) PER SHARE - Basic  earnings  (loss) per common share is
     based upon the net  income  (loss)  for the year  divided  by the  weighted
     average  number of  common  shares  outstanding  during  the year.  Diluted
     earnings (loss) per common share assumes that all common stock  equivalents
     have been converted to common shares using the treasury stock method.

     j. 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  29, 2000 the Company  believes that there has been no impairment
     of its long-lived assets.

     k. STOCK BASED  COMPENSATION - The Company accounts for stock  transactions
     in  accordance  with APB Opinion No. 25,  "Accounting  for Stock  Issued to
     Employees".  In accordance  with Statement of Financial  Standards No. 123,
     "Accounting for Stock Based  Compensation"  the Company has adopted the pro
     forma disclosure requirements of Statement No. 123.


                                      F-7
<PAGE>

     l.  CONCENTRATIONS  OF CREDIT RISK - The  Company is  actively  involved in
     securities  underwriting,  brokerage,  distribution and trading.  These and
     other  related  services  are  provided on a national  basis to a large and
     diversified  group  of  clients  and  customers,   including  corporations,
     governments, financial institutions and individual investors. The Company's
     exposure  to  credit  risk  associated  with the  non-performance  by these
     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.

     Substantially  all of the  securities  held for the  exclusive  benefit  of
     customers,  pursuant  to SEC Rule  15c3-3,  consist  of  issues by the U.S.
     Government or federal agencies. The Company's most significant counterparty
     concentrations   are  other   brokers  and   dealers,   commercial   banks,
     institutional clients and other financial institutions.  This concentration
     arises in the normal course of the Company's business.

     Additionally,  the Company  maintains  deposits at  financial  institutions
     which at times, may exceed the $100,000 federally insured limit.

3.   CORPORATE RESTRUCTURING AND ACQUISITIONS AND DISPOSALS

     ACQUISITIONS  - In June 1997, the Company  acquired all of the  outstanding
     stock  of   WestAmerica,   a  Scottsdale,   Arizona   based   broker-dealer
     specializing  in retail  brokerage  services.  WestAmerica was acquired for
     $443,000 in cash and an  agreement  that  provides for the payment of bonus
     compensation  to certain  brokers.  The Company  recorded this  transaction
     under the purchase  method of accounting  and recorded  goodwill of $83,000
     for the purchase  price and direct costs in excess of the net fair value of
     the assets acquired.

     Effective  January 1, 1998,  the Company sold its  investment  in Travis to
     Travis & Company,  a Salt Lake City, Utah based  broker-dealer  focusing on
     private placement of securities for emerging and middle market companies in
     the U.S. and internationally which it had acquired in June 1999 in exchange
     for 20,000  unregistered  shares of the  Company's  common  stock valued at
     $90,000.  Travis was sold in exchange for a note of  $281,000.  The Company
     wrote off unamortized goodwill of $40,000, recorded a gain of approximately
     $97,000 and  subsequent to the sale recorded a  corresponding  allowance on
     the note  receivable  of  $215,000.  The  Company  collected  approximately
     $66,000 and received 1,025 shares of the Company's common stock.

     Effective  August 31, 1998,  the Company sold its  investment in Friend,  a
     Southern  California  based  broker  dealer  acquired in March 1997,  to an
     investment  group  led by  the  subsidiary's  management  in  exchange  for
     $500,000 and the redemption of 55,509 shares of the Company's  common stock
     issued in the purchase.  The Company wrote off goodwill and  receivables of
     approximately $1,334,000. The Company recorded a loss on the transaction of
     approximately $900,000.


                                      F-8
<PAGE>

     In  June  2000,  the  Company  acquired  all of the  outstanding  stock  of
     Canterbury,  an Illinois based broker-dealer  focusing on private placement
     of  securities.  Canterbury  was  acquired  for  $30,000  in cash  plus the
     issuance of warrant to  purchase  5,000  shares of the common  stock of the
     Company at an  excercise  price of $6.375 per share.  The Company  recorded
     this  transaction  under the  purchase  method of  accounting  and recorded
     goodwill of $50,000.

     The  operating  results of these  acquired  companies  are  included in the
     consolidated  statement of  operations  from their  respective  acquisition
     dates  through  their dates of  disposition.  Goodwill  resulting  from the
     WestAmerica  and  Canterbury  acquisitions  are being  amortized  over five
     years.

4.   CASH, CASH EQUIVALENTS AND SECURITIES

     Cash,  cash  equivalents,  and securities  have been  segregated in special
     reserve bank  accounts for the  exclusive  benefit of customers  under Rule
     15c3-3 of the Securities and Exchange Commission and consist of:

                                         September 29,             September 24,
                                            2000                      1999
                                      ----------------        ------------------
     United States Government
     obligations                      $   29,512,000          $      40,521,000

     Cash                                      5,000                    895,000
                                      ----------------        ------------------
                                      $   29,517,000          $      41,416,000
                                      ================        ==================


     The United States  Government  obligations  mature at various dates through
     January  2029  and  are  stated  at  current  market  values.  The  reverse
     repurchase agreements are carried at cost, which approximates market value.
     The Company purchases these  obligations at fixed,  variable and adjustable
     interest rates in order to reduce exposure to interest rate changes.

5.   CUSTOMER RECEIVABLES AND PAYABLES

     The Company seeks to protect itself from the risks associated with customer
     activities  by  requiring   customers  to  maintain  margin  collateral  in
     compliance with regulatory and its own internal guidelines,  which are more
     stringent than regulatory margin requirements.  Margin levels are monitored
     daily and  additional  collateral  must be  deposited  as  required.  Where
     customers cannot meet collateral  requirements,  the Company will liquidate
     underlying  financial  instruments  sufficient  to bring  the  accounts  in
     compliance.

     Exposure  to  credit  risk  is  affected  by  the  markets  for   financial
     instruments, which can be volatile and may impair the ability of clients to
     satisfy their obligations to the Company.


                                      F-9
<PAGE>

     Credit  limits are  established  and closely  monitored  for  customers and
     broker-dealers engaged in transactions deemed to be credit-sensitive.

     Included  in amounts  payable to  customers  are  balances  in  accounts of
     officers and directors totaling $204,000 at September 29, 2000 and $109,000
     at September 24, 1999 respectively.


6.   BROKER-DEALER RECEIVABLES AND PAYABLES

     Amounts receivable from and payable to brokers and dealers include:

                                           September 29,           September 24,
                                              2000                    1999
                                        ----------------     -------------------
     Due from clearing organization     $        461,000     $         1,231,000
     Deposits paid for securities borrowed       179,000                 720,000
     Commissions receivable                      292,000                 327,000
     Interest and dividends                            -                   5,000
     Securities failed to deliver              1,062,000                  59,000
                                        ----------------      ------------------
          Total receivable              $      1,994,000     $         2,342,000
                                        ================      ==================

     Due to clearing organization       $      4,499,000     $         6,819,000
     Securities failed to receive                830,000                 762,000
                                        ----------------      ------------------
           Total payable                $      5,329,000     $         7,581,000
                                        ================      ==================

     Securities  borrowed are recorded at the amount of cash collateral advanced
     or received.  The Company monitors the market value of securities  borrowed
     and  loaned  on a  daily  basis  and  obtains  additional  collateral  from
     counterparties as necessary.

     The Company has receivables and payables for financial  instruments sold to
     and purchased from  broker-dealers.  The Company is exposed to risk of loss
     from the  inability of  broker-dealers  to pay for  purchases or to deliver
     financial instruments sold, in which case the Company would have to sell or
     purchase the financial instruments at prevailing market prices.

                                      F-10
<PAGE>

7.   SECURITIES HELD FOR RESALE

     Securities  held for  resale and  securities  sold,  but not yet  purchased
     consist of the following:

                             September 29, 2000            September 24, 1999
                    ----------------------------------  ------------------------
                        Securities        Sold , But    Securities     Sold, But
                      Held For Resale      Not Yet        Held For       Not Yet
                                          Purchased       Resale       Purchased
                    ----------------  ---------------   ----------    ----------

     Corporate stocks $   370,000      $  192,000      $  294,000  $     134,000

     U.S. Government
     obligations            6,000               -               -              -

     Stock options              -               -           4,000          5,000

                    -------------      ----------      -----------  ------------
                     $    376,000      $  192,000      $  298,000  $     139,000
                    =============      ==========      ===========  ============

     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 Statement of Financial Condition.

                                      F-11
<PAGE>



8.   FIXED ASSETS

     Fixed assets, at cost, consist of the following:

                                    September 29, 2000        September 24, 1999
                                    ------------------        ------------------
     Office machines                $         446,000         $          320,000
     Furniture and fixtures                   629,000                    561,000
     Interactive fixed assets                  56,000                          -
     Phone system                             151,000                          -
     Electronic equipment                   1,155,000                    383,000
     Leasehold improvements                   169,000                    935,000
     Assets under capital leases            1,180,000                  1,180,000
                                    -----------------         ------------------
                                            3,786,000                  3,379,000
     Less accumulated depreciation and
     amortization                           2,674,000                  2,203,000
                                    -----------------         ------------------
                                    $       1,112,000         $        1,176,000
                                    =================         ==================

     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.

     The following is a schedule of assets under capital leases:

     Office machines                                       $            180,000
     Furniture and fixtures                                             512,000
     Electronic equipment                                               352,000
     Leasehold improvements                                             136,000
                                                              ------------------
                                                                      1,180,000

     Less accumulated depreciation and amortization                    (634,000)
                                                              ------------------
                                                           $            546,000
                                                              ==================


                                      F-12
<PAGE>

     The following is a schedule by years of future minimum lease payments under
     these  capital  leases  together  with the present value of the net minimum
     lease payments as of September 29, 2000:

     Fiscal year ended


     2001                                                     $          340,000
     2002                                                                357,000
                                                                ----------------
     Total minimum lease payments                                        697,000
     Less: Amount representing taxes                                      39,000
                                                                ----------------
     Net minimum lease payments                                          658,000
     Less amount representing interest                                    76,000
                                                                ----------------
     Present value of net minimum lease payments              $          582,000
                                                                ================
9.   LINE OF CREDIT

     National has an unsecured line of credit of up to  $3,000,000.  The line is
     subject to renewal in January 2001.  Borrowings bear interest at the bank's
     prime rate  which was 9.50% at  September  29,  2000.  Interest  is payable
     monthly.  At September 29, 2000, the Company had no outstanding  borrowings
     under the line of credit.

10.  NOTES PAYABLE

     In November  1997,  the Company  executed  two  promissory  notes  totaling
     $925,000.  The notes bear  interest at 6% and 8% with the  principal  to be
     repaid in 24 monthly  installments  commencing  on December  31,  2000.  In
     connection  with the notes,  warrants for the purchase of 126,000 shares at
     an exercise  price of $5.36 per share of the  Company's  common  stock were
     issued.  The  warrants  were  valued at  $120,000  and were  recorded  as a
     discount  to the notes.  During  the year ended  September  29,  2000,  the
     Company  satisfied  one the above notes  which had a  remaining  balance of
     $425,000 with the proceeds from the exercise of 78,750 warrants.

     In January 1998,  the Company  executed a promissory  note for  $1,000,000.
     This note  bears  interest  at 8% 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.


                                      F-13
<PAGE>

     The  following is a schedule by years of debt  maturity as of September 29,
     2000:

                 Fiscal year ended

                 2001                                       $           275,000
                 2002                                                   330,000
                 2003                                                    55,000
                                                                ----------------
                                                                        660,000

                 Less: discount on notes                                (46,000)
                                                                ----------------
                                                             $           614,000
                                                                ================


11.  FEDERAL INCOME TAX


     The income tax (provision) benefit consists of:

                                                Years Ended
                      ----------------------------------------------------------
                        September 29,           September 24,      September 25,
                            2000                    1999                1998
                      ------------------     -----------------    --------------
     Current federal
     income tax       $       (392,000)      $          8,000     $     626,000

     Deferred federal
     income tax                 79,000                      -            (2,000)

     Current state
     income tax                (46,000)                 4,000                 -
                      -----------------      ----------------     --------------
                      $       (359,000)      $          4,000     $     624,000
                      =================      ================     ==============



                                      F-14
<PAGE>

     The income tax (provision)  benefit varies from the federal  statutory rate
     as follows:

                                            Years Ended
                      ----------------------------------------------------------
                      September 29, 2000 September 24, 1999   September 25, 1998
                      ------------------ ------------------- -------------------
     Statutory federal
     rate             $      (651,000)   $          (39,000) $        1,852,000

     State income taxes,
     net of federal
     income  tax benefit      (96,000)               (4,000)                  -


     Losses for which no
     benefit is provided            -                     -          (1,230,000)

     Tax benefit of net
     operating losses         642,000                47,000                   -

     Other                   (254,000)                    -               2,000
                     ----------------     ------------------   -----------------
                     $       (359,000)   $            4,000    $        624,000
                     ================     ==================   =================


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

                                           September 29,          September 24,
                                               2000                   1999
                                         ---------------    -------------------
     Net Operating losses                $             -    $           578,000

     Difference in depreciation and
     reserves for employee advances              117,000                125,000

                                         ---------------    --------------------
     Total                                       117,000                703,000
     Valuation allowance                               -              (662,000)
                                         ---------------    -------------------
       Total deferred tax asset          $       117,000    $            41,000
                                         ===============    ====================



                                      F-15
<PAGE>



12.  COMMITMENTS

     EMPLOYMENT  AGREEMENTS  - During  fiscal  1999  the  Company  entered  into
     employment agreements with five executive officers. Four of such agreements
     are for a term of three  years  expiring  in June 2002 at an annual  salary
     aggregating  $960,000.  The  agreements  provide  for payment of one year's
     salary upon  severance of employment by the Company and of two years salary
     if the  Company  or  executive  elects to  terminate  employment  after the
     occurrence  of a change in control of the  Company,  as defined.  The other
     agreement  is for a term of four years  expiring  in June 2003 at an annual
     salary of $350,000 plus incentive  compensation,  as defined, not to exceed
     $50,000.  Such agreement  provides for the same  compensation  terms in the
     event of termination of employment.

     During fiscal 2000 the Company entered into an employment agreement with an
     executive  officer.  The term of the  agreement is three years  expiring in
     June 2003 with an annual salary of $400,000 and immediately  vested options
     to acquire  150,000  shares of the  Company's  common  stock at an exercise
     price of $7.25 per share. The agreement  provides for payment of one year's
     salary upon severance of employment by the Company.

     LEASES - As of September 29, 2000, the Company is committed under operating
     leases for future minimum lease payments as follows:

               FISCAL YEAR ENDING

                             2001                          $           1,345,000
                             2002                                      1,065,000
                             2003                                        849,000
                             2004                                        602,000
                                                               -----------------
                                                           $           3,861,000
                                                               =================


     Rental expense for operating leases for the years ended September 29, 2000,
     September  24, 1999 and  September  25, 1998 was  $1,541,000,  $933,000 and
     $1,661,000, respectively.

     UNDERWRITINGS   -  During  fiscal  2000,   the  Company   participated   in
     underwriting  securities  for private  placements,  initial  and  secondary
     public  offerings.  At September 29, 2000,  the Company has no  outstanding
     commitments relating to underwriting transactions.

                                      F-16
<PAGE>

13.  CONTINGENCIES

     In June 1997, a Trust and three  individuals,  commenced a lawsuit  against
     Olympic  and  National.   The  action  against  Olympic  was   subsequently
     dismissed.  The  plaintiffs  alleged  the  defendants'  failure to purchase
     securities from them constitutes,  among other things,  breach of contract,
     securities  rule violations and fraud. In February 1999, the District Court
     dismissed plaintiffs' claims against National in their entirety and granted
     National's  motion for summary  judgement.  A final judgement was issued by
     the court in April  1999.  The  plaintiffs  filed a notice of appeal in May
     1999 and oral arguments were heard on December 6, 2000.

     The  Company  has been  named  together  with  others as a  defendant  in a
     consolidated  lawsuit  filed  against an unrelated  third party in 1999. No
     specific  amounts of damages  has been  sought  against  the Company in the
     complaint. In June 2000, the Company filed to dismiss the above action.

     The Company is a defendant in various other arbitrations and administrative
     proceedings,  lawsuits and claims which in the  aggregate  seek general and
     punitive damages approximating  $3,600,000.  These matters arise out of the
     normal course of business.

     The Company  intends to vigorously  defend itself in these actions,  and in
     any event, does not believe these actions singularly or combined would have
     a material adverse effect on the Company's financial statements or business
     operations.

14.  STOCKHOLDERS' EQUITY

     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.

     The Company  applies APB  Opinion  No. 25 and  related  Interpretations  in
     accounting  for  its  plans.   FASB  Statement  No.  123   "Accounting  for
     Stock-Based Compensation" ("SFAS 123") was issued by the FASB and, if fully
     adopted,  changes the methods for  recognition  of cost on plans similar to
     those of the Company.  Had compensation cost for the Company's stock option
     plans been determined base upon the fair value at the grant date for awards
     under these plans  consistent  with the methodology  prescribed  under SFAS
     123,  the  Company's  net income  and  earnings  per share  would have been
     reduced by approximately  $1,696,000 $.80 per share in 2000,  $705,000,  or
     $.45 per share in 1999,  $761,000,  or $0.50  per  share in 1998.  The fair
     value of the options  granted  during  2000,  1999 and 1998 is estimated at
     $1,696,000,  $946,000 and  $1,153,000,  respectively,  on the date of grant
     using  the   Black-Scholes   option-pricing   model   with  the   following
     assumptions:

                                      F-17
<PAGE>





                                     2000              1999            1998
                                --------------    ------------    --------------
        Volatility                 106.00%           144.00%          63.87%
        Risk-free interest rate      6.25%             5.00%           6.17%
        Expected life                5 years           5 years         5 years


A summary of the status of the Company's stock options is presented below:
<TABLE>
<CAPTION>

                                                                                            Weighted
                                                                                             Average
                                                                                              Price
                                   Authorized            Granted           Available         Per Share
                                ------------------    --------------     --------------    -------------
<S>                                   <C>                <C>                 <C>           <C>

Balance,
September 26, 1997                      1,183,806           781,130            402,676       $     4.88
  Creation of new plan                          -           148,500          (148,500)
  Granted                                 (2,012)           (2,012)                  -       $     3.73
  Exercised                             (161,640)         (161,340)                  -
                                ------------------    --------------     --------------
Balance,
September 25, 1998                      1,020,454           766,278            254,176       $     4.84
 Creation of new plan                     500,000                 -            500,000                -
  Granted                                       -           425,500          (425,500)             4.35
  Exercised                              (82,613)          (82,613)                  -       $     3.62
  Forfeitures                            (40,643)          (40,643)                  -       $        -
                                ------------------    --------------     --------------
Balance,
September 24, 1999                      1,397,198         1,068,522            328,676       $     4.65
 Creation of new plan                     500,000                 -            500,000                -
  Granted                                       -           383,600          (383,600)       $     6.82
  Exercised                             (139,063)         (139,063)                  -       $     4.14
  Forfeitures                            (75,918)          (75,918)                  -       $        -
                                ------------------    --------------     --------------
Balance,
September 29, 2000                      1,682,217         1,237,141            445,076       $     5.41
                                ==================    ==============     ==============
</TABLE>
                                      F-18


<PAGE>


The following table summarizes  information  about stock options  outstanding at
September 29, 2000:
<TABLE>
<CAPTION>

                                     Options Outstanding                            Options Exercisable

                    ------------------------------------------------------    ---------------------------------
                                            Weighted           Weighted                             Weighted
    Range of                                 Average            Average                              Average
 Exercise Prices          Number            Remaining          Exercise           Number            Exercise
                        Outstanding       Contract Life         Prices          Exercisable          Prices
------------------    ----------------   ----------------     ------------    ----------------     ------------
<S>                         <C>             <C>          <C>                        <C>       <C>

$3.39-3.81                    252,833         1.42         $     3.59                 227,633   $     3.60
$4.00-4.69                    341,538         3.12         $     4.32                 256,779   $     4.32
$5.36-5.64                    164,356         2.12         $     5.42                 149,497   $     5.42
$6.13-6.75                     95,000         4.88         $     6.32                  65,000   $     6.13
$7.12-7.50                     338,914         3.28         $     7.23                 338,914   $     7.23
   $8.00-8.50                  44,500         4.50         $     8.28                  35,000   $     8.21
                      ----------------                                        ----------------
                            1,237,141                                               1,072,823
                      ================                                        ================
</TABLE>


15.  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 2% of aggregate  debit items.  At September  29,
     2000, National's net capital exceeded the requirement by $4,575,000.

     WestAmerica, as a registered broker-dealer is also subject to the SEC's Net
     Capital Rule 15c3-1,  which, under the standard method,  requires that each
     company  maintain minimum net capital equal to the greater of $100,000 or 6
     2/3% of aggregate  indebtedness.  At September 29, 2000,  WestAmerica's net
     capital exceeded the requirement by $193,000.

                                      F-19
<PAGE>

     Canterbury  is also subject to the  Securities  and  Exchange  Commission's
     Uniform Net Capital Rule 15c3-1,  which requires the maintenance of minimum
     net capital.  Canterbury must meet a minimum capital requirement of $5,000.
     As of September 29, 2000,  Canterbury  was in  compliance  with the minimum
     capital requirement.

     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 these subsidiaries may dividend or advance to the Company.

16.  EMPLOYEE BENEFITS

     The Company's  subsidiaries  have defined 401(k) profit sharing plans which
     cover  substantially all of their employees.  Under the terms of the plans,
     employees can elect to defer up to 25% of eligible compensation, subject to
     certain limitations,  by making voluntary contributions to their respective
     plans.  Each company's annual  contributions  are made at the discretion of
     the respective  Board of Directors.  During the fiscal years  September 29,
     2000,  September 24, 1999 and September 25, 1998,  the Company made no such
     contributions.


17.  FINANCIAL INFORMATION - OLYMPIC CASCADE FINANCIAL CORPORATION

     Olympic was formed 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.

                                      F-20

<PAGE>
                      OLYMPIC CASCADE FINANCIAL CORPORATION
                        STATEMENTS OF FINANCIAL CONDITION

                                     ASSETS

<TABLE>
<CAPTION>
                                                                          September 29,        September 24,
                                                                              2000                 1999
                                                                        ------------------   ------------------
<S>                                                                    <C>                  <C>

Cash, subject to immediate withdrawal                                    $         31,000     $         15,000
Receivable from subsidiaries                                                      567,000              197,000
Other receivables                                                                  41,000               50,000
Capital leases                                                                    546,000              812,000
Investment in subsidiaries                                                      8,219,000            5,757,000
Other assets                                                                      122,000               87,000
                                                                         ------------------   ------------------
                                                                         $      9,526,000     $      6,918,000
                                                                         ==================   ==================

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Accounts payable, accrued expenses and other liabilities                 $        291,000      $       110,000
Payable to subsidiaries                                                                 -              256,000
Capital lease payable                                                             582,000              865,000
Note payable                                                                      614,000            1,648,000
                                                                         ------------------   ------------------
                                                                                1,487,000            2,879,000
                                                                         ------------------   ------------------
Stockholders' equity                                                            8,039,000            4,039,000
                                                                         ------------------   ------------------
                                                                         $      9,526,000     $      6,918,000
                                                                         ==================   ==================


</TABLE>





                                                       F-21
<PAGE>
                      OLYMPIC CASCADE FINANCIAL CORPORATION

                            STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>

                                                                                           Years Ended

                                                                --------------------------------------------------------------------
                                                                  September 29, 2000    September 24, 1999        September 25, 1998
                                                                ---------------------  ----------------------   --------------------
<S>                                                           <C>                    <C>                      <C>

Operating expenses                                              $     (1,164,000)      $      (624,000)         $     (2,609,000)
                                                                ---------------------  ----------------------   --------------------
Other income (expenses)
      Interest and other income                                           60,000                20,000                   151,000
      Gain on investment in subsidiaries(net of income taxes)          2,660,000               717,000                (1,094,000)
      Gain on sale of investments                                              -                 5,000                (1,114,000)
                                                                ---------------------   ---------------------    -------------------
Net income                                                       $     1,556,000        $      118,000           $    (4,666,000)
                                                                =====================   =====================    ===================







</TABLE>


















                                      F-22
<PAGE>

                      OLYMPIC CASCADE FINANCIAL CORPORATION

                  STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>


                                                                                Additional
                                                         Common Stock            Paid-In           Accumulated
                                                    Shares          Amount       Capital             Deficit             Total
                                                  -----------    ------------   ------------      --------------    ----------------
<S>                                             <C>          <C>            <C>                <C>                 <C>

BALANCE, September 26, 1997                       1,444,205    $     29,000   $  8,821,000       $  (1,246,000)      $   7,604,000

  Exercise of stock options, including
    income tax benefit                                2,012               -          8,000                   -               8,000
  Stock dividends                                    72,299           1,000        351,000            (352,000)                  0
  Stock redemption                                  (55,509)         (1,000)      (304,000)                  -            (305,000)
  Original discount on notes payable                      -               -        307,000                   -             307,000
  Net loss                                                -               -              -          (4,666,000)         (4,666,000)
                                                  ----------     -----------   ----------------    ----------------   --------------
BALANCE, September 25, 1998                       1,463,007          29,000      9,183,000          (6,264,000           2,948,000
                                                  ----------     -----------   ----------------    ----------------   --------------

  Exercise of stock options                          82,613           2,000        297,000                   0             299,000
  Exercise of stock warrants                          5,000               0         20,000                   0              20,000
  Treasury stock                                     (1,025)              0         (5,000)                  0              (5,000)
  Issuance of common stock in legal settlements
    and payment of services                         145,000           3,000        498,000                   0             501,000
  Warrants issued in conjunction with legal settlements   -               0        120,000                   0             120,000
  Options issued to consultants                           -               0         38,000                   0              38,000
  Net income                                              -               0              0             118,000             118,000
                                                 ------------    ------------  ----------------    ----------------   --------------
BALANCE, September 24, 1999                       1,694,595          34,000     10,151,000          (6,146,000)          4,039,000
                                                 ------------    ------------  ----------------    ----------------   --------------

  Exercise of stock options, including
   $150,000 income tax benefit                      144,063           3,000        744,000                                 747,000
  Exercise of stock warrants                        315,188           6,000      1,589,000                               1,595,000
  Options issued to consultants                                                     82,000                                  82,000
  Warrants issuance in connection with acquisition                                  20,000                                  20,000
  Net income                                                                                         1,556,000           1,556,000

                                                 -----------    ------------   ----------------    ----------------   --------------
  Balance, September 29, 2000                     2,153,846     $    43,000   $ 12,586,000        $ (4,590,000)      $   8,039,000
                                                 ===========    ============   ================    ================   ==============

</TABLE>



                                      F-23

<PAGE>
                      OLYMPIC CASCADE FINANCIAL CORPORATION

                            STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>

                                                                                         Years Ended

                                                          --------------------------------------------------------------------------
                                                           September 29, 2000         September 24, 1999          September 25, 1998
                                                          -------------------      -----------------------    ----------------------
<S>                                                          <C>                        <C>                  <C>

CASH FLOWS FROM OPERATING ACTIVITIES
  Net income                                                   $   1,556,000              $      118,000       $         (4,666,000)
  Adjustments to reconcile net income to net cash
     provided by (used in) from operating activities
     Gain on foreign currency translation                                  -                           -                          -
     Loss on investment in subsidiaries                           (1,602,000)                    232,000                  1,094,000
     Gain (loss) on sale of subsidiaries                                   -                      (5,000)                 1,114,000
     Issuance of common stock in lawsuit settlement                        -                     501,000                          -
     Issuance of common stock in payment of expenses                       -                     120,000                          -
     Compensation related to issuance of stock options                82,000                      38,000                          -
     Depreciation and amortization                                   290,000                     285,000                    169,000
     Changes in assets and liabilities                              (238,000)                   (720,000)                 1,196,000
                                                              ----------------           -----------------    ----------------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES                   88,000                     569,000                 (1,093,000)
                                                              ----------------           -----------------    ----------------------

CASH FLOWS FROM INVESTING ACTIVITIES
     Acquisition of subsidiaries                                     (30,000)                          -                          -
     Capital contributions to subsidiaries                          (860,000)                   (233,000)                  (135,000)
                                                              ----------------           -----------------    ----------------------
NET CASH USED IN INVESTING ACTIVITIES                               (890,000)                   (233,000)                  (135,000)
                                                              ----------------           ------------------   ----------------------

CASH FLOWS FROM FINANCING ACTIVITIES
     Exercise of stock options                                       597,000                     319,000                      8,000
     Proceeds from notes payable                                           -                           -                  1,925,000
     Exercise of stock warrants                                    1,595,000
     Payments on capital lease                                      (340,000)                   (348,000)                  (108,000)
     Payments on note payable                                     (1,034,000)                   (300,000)                  (600,000)
                                                              ----------------            ----------------    ----------------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES                  818,000                    (329,000)                 1,225,000
                                                              ----------------            ----------------    ----------------------

NET INCREASE IN CASH                                                  16,000                       7,000                     (3,000)

CASH BALANCE

     Beginning of year                                                15,000                       8,000                     11,000
                                                              ----------------            ----------------    ----------------------
     End of year                                           $          31,000           $          15,000           $          8,000
                                                              ================            ================    ======================

</TABLE>



                                      F-24
<PAGE>




                                  EXHIBIT INDEX

      3.1      Certificate  of  Incorporation,  previously  filed on Form S-4 in
               November 1996 and hereby incorporated by reference.

      3.2      The Company's  Bylaws,  previously  filed on Form S-4 in November
               1996 and hereby incorporated by reference.

      3.3      The Company's Amended and Restated  Bylaws


     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.
                                       22
<PAGE>


    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.

    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.

    11.        Computation of Earnings per Share.

    16.1       Change in Certifying Accountant,  previously filed to Form 8-K in
               August 1998 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 Form S-8 in
               June 2000 and hereby incorporated by reference.

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

    27.        Financial Data Schedule.

    *Compensatory agreements

                                       23