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 24, 1999

                      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 2, 1999, 1,295,004 shares of the Company's common stock were held
by non-affiliates, having an aggregate market value of $7,446,000. The number of
common shares outstanding as of December 2, 1999 was 1,698,617.

                       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 8, 2000 (the "Company's 2000 Proxy  Statement")
are incorporated by reference into Part III hereof.


<PAGE>



                                     PART I

ITEM 1 - BUSINESS
(A) GENERAL

Except for historical  information  contained  herin,  report  contains  ceritan
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 thime to
time.

Olympic Cascade Financial Corporation,  a De;aware corporation organized in 1997
("Olympic" or the "Company"),  is a financial services  organization,  operating
through its two wholly-owned  subsidiaries,  National Securities Corporation,  a
Washington   corporation   organized  in  1947  ("National"),   and  WestAmerica
Investment Group, a California  corporation  organized in 1974  ("WestAmerica").
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 and
trade clearance operations.

In November 1996, the shareholders of National approved a restructuring whereby,
National's shareholders exchanged their shares on a one-for-one basis for shares
of Olympic resulting in National becoming a wholly-owned  subsidiary of Olympic.
This restructuring  became effective in February 1997, and accordingly,  Olympic
is the successor Registrant to National.

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
provided for the payment of bonus compensation to certain brokers.

During fiscal year 1998, the Company  redirected its focus on retail  operations
by divesting its ownership in two of its  subsidiaries,  L.H. Friend,  Weinress,
Franksen & Presson,  Inc. ("Friend") and Travis Capital,  Inc.  ("Travis").  The
Company had acquired each subsidiary in fiscal year 1997.

National  conducts a national  securities  brokerage  business  through its main
office in  Seattle,  Washington  and in 43 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  concentrates  upon  retail  brokerage  with an  emphasis on
personalized service.  National's  operations,  and its largest sales office, is
located in Seattle, Washington. The majority of National's transactions with the
public involve  solicited trades and approximately 70% of these involve sales of
securities to customers.

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 24, 1999, the Company and its subsidiaries had approximately 100
employees and 250 independent  contractors.  Of these totals,  approximately 300
were  registered  representatives.  Persons who have  entered  into  independent
contractor  agreements are not considered  employees for purposes of determining
the Company's  obligations for federal and state  withholding,  unemployment and
social security taxes. The Company's independent contractor arrangements conform
with accepted industry practice and therefore the Company does not believe there
is a material risk of an adverse  determination  from the tax authorities  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 brokerage business
and the  introduction of online  investing  services.  Management  believes that
consolidation  within the industry is inevitable.  Concerns  attributable to the
strength of the 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.

(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."

(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")  the  Securities  Investor  Protection   Corporation
("SIPC"), and the Chicago Stock Exchange ("CHX").

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 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 40% 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.

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 and files of customers,  and other market
data. During the second and third quarter of fiscal 1999, National converted its
data  processing  system to a new third party  vendor,  BETA Systems  Inc.  This
conversion  was completed and  operational  in the third quarter of fiscal 1999.
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 92% of its own securities transactions and posts
its books and records daily, with the remaining 8% 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 36
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.

(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.

In fiscal 1998,  WestAmerica was approved to engage in underwriting by the NASD,
and participated as an underwriter of one public offering.

 (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 two traders and  assistants  in its Spokane,  Washington  office,  manage an
inventory of securities,  and conduct market-making  activities. As of September
24, 1999,  National made a market in approximately  100 equity  securities,  the
majority of which were quoted on the NASDAQ  stock  market.  This  includes  all
companies for which National managed or co-managed a public offering.

The Company's trading departments  require a substantial  commitment of capital.
Most principal  transactions  place the Company's  capital at risk.  Profits and
losses are dependent  upon the skill of the traders,  price  movements,  trading
activity and the size of inventories.  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.

(F) ONLINE TRADING

The Company through NSCdirect (a division of National),  is planning to commence
online  investing  services for its  customers in the first  quarter of calendar
year 2000.  The Company has various  third party vendor  agreements  in place to
develop,   host  and   manage   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.  Traders  and  other  personnel  review  each
investment  executive's order tickets to ensure compliance with the NASD Conduct
Rules including mark-up guidelines.

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.

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.

       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.

2.     COMPLETE MANAGEMENT, INC. National has been named together with others as
       a defendant  in several  class action  lawsuits  filed  against  Complete
       Management,  Inc.  Although,  National  has not yet been served in any of
       these actions it intends to vigorously  defend itself  against any claims
       that may be brought.

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  $1,600,000.  The  Company  believes  that  the
resolution of these matters will not have a material 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 24, 1999.

ITEM 4(A)- EXECUTIVE OFFICERS OF REGISTRANT

The following sets forth the names, ages and positions of all executive officers
of the Company:
<TABLE>
<CAPTION>
<S>                              <C>           <C>
Steven A. Rothstein              49            Chairman, Chief Executive Officer and President
                                               Chairman and Chief Executive Officer of National

                                               Director of WestAmerica

Robert H. Daskal                 58            Senior Vice President, Chief Financial Officer, Treasurer and Secretary
                                               Secretary of National
                                               Director of WestAmerica

Michael A. Bresner               55            President of National

David M. Williams                30            Corporate Controller and Chief Accounting Officer
                                               Chief Operating Officer of National

Craig M. Gould                   29            Vice-Chairman of Technology
                                               Managing Director of National
</TABLE>

                                     PART II

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

           STOCKHOLDER MATTERS

The Company's  common stock trades on The NASDAQ SmallCap Market and The Chicago
Stock Exchange using the symbol NATS and OLY, respectively.  As of September 24,
1999,  the  Company  had  approximately   900   shareholders,   including  those
shareholders holding stock in street name and trust accounts.  Currently,  there
are four market makers in the Company's stock, including National.

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
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. The Company did, however,  declare 5% stock dividends for all shareholders
of record on January 27,  1997,  May 20,  1997,  August 29, 1997 and December 8,
1997.

High and low closing bid  quotations  from  September  27, 1997 to September 24,
1999 have been obtained from NASDAQ. The range of market prices for each quarter
of fiscal years ended September 24, 1999 and September 25, 1998 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 27, 1997/December 31, 1997                    $6.75             $4.37
January 1, 1998/March 27, 1998                          $4.75             $3.88
March 28, 1998/June 26, 1998                            $4.88             $3.75
June 27, 1998/September 25, 1998                        $3.88             $1.38

The  closing bid price of the  Company's  common  stock on December 2, 1999,  as
reported on the NASDAQ SmallCap Market, was $5.75 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 1999,  1998,  1997, 1996 and 1995.  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.
<TABLE>
<CAPTION>

                                                                                FISCAL YEAR

                                            1999              1998              1997              1996             1995
                                         ------------------------------------------------------------------------------------------
<S>                                     <C>               <C>              <C>               <C>              <C>
Net revenues                            $   43,330        $   45,694       $    39,994       $   34,899       $    14,275
Net income (loss) after tax                    118            (4,666)              101            1,735               257
Net income (loss) per common share               0.08             (3.12)             0.07             1.66              0.30
Total assets                                86,697            73,116            63,774           57,955            41,891
Long-term obligations                        2,150             2,770                 -                -                 -
Stockholders' equity                         4,039             2,948             7,604            5,316             3,180
Cash dividends                                   -                 -                 -                -                 -



</TABLE>

ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

RESULTS OF OPERATIONS

FISCAL YEAR 1999 COMPARED WITH FISCAL YEAR 1998

The private securities  litigation reform act of 1995 provides a safe harbor for
forward-looking  statements. This annual report contains 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  forwad-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
thoseexpressed  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. Any forward-looking statements
comtained in or incorporated into this report speak only as of the dated of this
report.  The  Company  undertakes  no  obligation  to update  publicly  any such
forward-looking statement, whether as a result of new information, future events
or otherwise.

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
retail commissions and net dealer inventory gains.

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,
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. 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.

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 (See Part I Item 3). 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.

FISCAL YEAR 1998 COMPARED WITH FISCAL YEAR 1997

During fiscal year 1998, the Company  redirected its focus on retail  operations
by divesting its ownership in two of its  subsidiaries,  Friend and Travis.  The
Company had acquired each subsidiary in fiscal year 1997.

The Company's fiscal year 1998 resulted in a net loss of $4,666,000 or $3.12 per
share  diluted as compared  to net income of $101,000 or $.07 per share  diluted
for fiscal year 1997.  Revenues increased 14% in fiscal 1998 to $45,694,000 from
$39,994,000 in fiscal 1997;  however,  expenses  increased 28% in fiscal 1998 to
$50,984,000 from $39,800,000 in fiscal 1997. This increase in expenses is due to
additional costs relating to the increased level of operations, operating losses
at  the  two  former   subsidiaries,   losses  related  to  the  sale  of  these
subsidiaries,  closure of two branch offices and the write-down and write-off of
certain receivables and investments.

The  Company's  fiscal 1998 results  were  impacted by the write down of certain
receivables and investments,  totaling $2.5 million, including those relating to
the  disposition of the two  subsidiaries.  Additionally,  the Company  incurred
operating losses of $950,000 relating to the two subsidiaries that were incurred
prior to their respective  dispositions and losses relating to two closed branch
offices.

The  Company  recognizes  deferred  tax  assets  and  liabilities  based  on the
difference between the financial statement 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, based on the weight of available evidence,  it
is more likely than not that some or all of the  deferred  tax asset will not be
realized.  The Company recorded a valuation  allowance of $1.0 million in fiscal
1998.

During  fiscal year 1998 the Company  through  National  closed two large branch
offices in Melville, New York and in Southern California which it had opened the
previous year. In addition to operational losses from these offices,  management
felt the type of business these offices  produced,  were different than its core
business. Due to weakness in corporate finance activities and the decline in the
stock market during the summer of 1998,  management has restructured back to its
core retail brokerage business and significantly reduced fixed overhead costs.

During  fiscal  year 1998  commission  revenue  increased  $6,140,000  or 35% to
$23,636,000  from  $17,496,000 in 1997.  National and WestAmerica were primarily
responsible  for the increase in commission  revenue.  Inventory gains increased
$730,000 or 15% to $5,512,000 from $4,782,000. This increase was entirely due to
an  increase  at  National  of  $915,000,  which  was  greater  than  the  total
consolidated increase.

Underwriting  revenue  decreased  $2,111,000 or 16% to  $10,726,000 in 1998 from
$12,837,000 in 1997.  National's  underwriting revenue decrease of $5,128,000 to
$5,178,000 in 1998 from  $10,306,000  in 1997 was  partially  offset by Friend's
increase of $3,008,000  to $5,460,000 in 1998 from  $2,452,000 in 1997. In 1998,
the Company managed four underwritings that totaled approximately $64 million of
gross proceeds  raised,  compared with eight  underwritings in 1997 that totaled
approximately $161 million of gross proceeds raised.

The decrease in  underwritings  is due primarily to the weakened capital markets
from  November  1997 through the 1998 fiscal year end.  During that period,  the
Company managed only one underwriting.  Additionally, in December 1997, National
terminated its relationship with Ray Dirks

Research,  a  New  York  branch  office.  This  negatively  impacted  National's
underwriting revenues and net income in fiscal 1998.

The overall increase in expenses was due in large part to increases in revenues.
The largest  components of expense are (i) commission  expense (ii) salaries and
benefits expense and (iii) other.  Commission  expense and salaries and benefits
expense varies directly with securities  related revenues.  In fiscal 1998 these
expenses  totaled  $33,791,000  or a 19%  increase  from  $28,381,000  in  1997.
Commission expense increased  $3,028,000 or 14% in 1998 from $22,017,000 in 1997
to  $25,045,000.  Commission  expense  as a  percentage  of  commission  related
revenues (commissions, inventory gains and underwriting fees), was approximately
63% in both  1998 and  1997.  Conversely,  employee  compensation  and  benefits
increased  $2,382,000  or 37% to  $8,746,000  in 1998  from  $6,364,000  in 1997
because  certain  commission  salespeople  with  a  lower  payout  also  receive
salaries,  as well as the increase in management,  operating and  administrative
salaries for Olympic and the additional  subsidiaries.  The additional  salaries
for Olympic and the newly acquired subsidiaries totaled approximately $4,430,000
in 1998 an increase of $2,298,000 from $2,132,000 in fiscal 1997.

Interest  expense  increased  $575,000  in  1998,  or  25%  to  $2,840,000  from
$2,265,000 in 1997,  primarily because of increased customer deposits,  on which
the Company pays interest and the interest on debt incurred  during fiscal 1998.
This expense was offset by the increased interest income of $605,000,  or 16% to
$4,380,000 from  $3,775,000.  The Company realized record levels of net interest
income  (interest  income less  interest  expense) of  $1,540,000  in 1998, a 2%
increase from the prior record levels reached a year earlier.  The Company earns
the majority of this  interest  through  National from its  investments  in U.S.
Government  obligations  and U.S.  Government  agency  obligations  and interest
received on customer margin debits. National earns a spread between what it pays
customers on free credit balances and what it earns investing these balances. As
a result of this spread,  as the overall  customer debits and credits  increase,
the Company is able to earn more interest income.

With the additional  subsidiaries  the Company has acquired,  and the additional
branch offices opened by National during the year,  communications and occupancy
expenses  increased  $1,232,000  or  28%  to  $5,658,000  in  fiscal  1998  from
$4,426,000 in fiscal 1997.

Clearing  expenses  increased  $600,000  or 62% in  1998.  These  increases  are
attributable to Friend and WestAmerica, which combined, accounted for a $467,000
increase to $821,000 in fiscal 1998 compared with $354,000 of clearing  expenses
in fiscal 1997.

Finally,  other expenses increased $2,829,000 or 123% to $5,129,000 in 1998 from
$2,300,000 in 1997. The largest component of this increase totaling  $2,521,000,
relates to the  write-down of certain  receivables  and  investments,  including
those relating to the disposition of the two subsidiaries.

Total other expenses for WestAmerica and Friend, combined, were $820,000 in 1998
compared with  $465,000 in 1997.  This increase of $355,000 was due to 12 months
and 11 months of operations for WestAmerica and Friend in fiscal 1998,  compared
with  4  months  and 7  months  of  operations  in  fiscal  1997,  respectively.
Additionally, other expenses (net of write-downs and losses on dispositions) for
Olympic increased $237,000 or 56% to $662,000 in 1998 from $425,000 in 1997.

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 unsecured credit facility with Seafirst Bank and may borrow
up to 70% of  the  market  value  of  eligible  securities  pledged  through  an
unrelated  broker-dealer.  These borrowings are short-term and have not extended
beyond a few days. At September 24, 1999 borrowings outstanding were $2,100,000.
This balance was repaid within three business days.

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  24, 1999,
National's net capital exceeded the requirement by $2,525,000.

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,  1999,  WestAmerica's  net  capital
exceeded the requirement by $94,000.

Advances,  dividend  payments  and other  equity  withdrawals  from  National or
WestAmerica 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.

As of the fiscal year ended  September 24, 1999,  total assets were  $86,697,000
compared to total  assets of  $73,116,000  as of the fiscal year  September  25,
1998,  which  represents a 19% increase in total assets for the 12-month period.
As of fiscal year ended  September  25,  1998,  total  assets were  $73,116,000,
compared  to total  assets  of  $63,774,000  as of  September  26,  1997,  which
represents a 15% increase in total assets for the 12-month period.

The objective of liquidity  management is to ensure the Company has ready access
to  sufficient  funds  to  meet  commitments,   fund  deposit   withdrawals  and
efficiently provide for the credit needs of customers.  Historically,  cash flow
from operations and earnings has contributed significantly to liquidity.

The Company believes its internally generated liquidity, together with access to
external  capital and debt  resources  will be  sufficient  to satisfy  existing
operations.  However,  as the Company expands its operations,  including its new
online trading services,  or acquires other businesses,  the Company will likely
require additional capital.

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.

IMPACT OF THE YEAR 2000 ISSUE

The Company  defines a system as Year 2000 compliant if it is capable of correct
identification,  manipulation  and  calculation  when processing data during the
year change from December 31, 1999 to January 1, 2000.

The  Company is  addressing  the Year 2000 issue in the  following  two  phases.
During phase one,  completed in October 1998, the Company  prepared an inventory
of all Information  Technology ("IT") and non-IT systems,  which are critical to
operations. The Company tested all of its internal IT systems and concluded that
not all  systems  were  compliant  under the above  definition.  The Company has
determined the remedies  necessary to achieve Year 2000 compliance.  The Company
finished testing and remediation by November 1999.

In  phase  two,  the  Company  replaced  hardware  chips,  software  and  entire
components in those systems deemed to be  non-compliant.  The Company  completed
phase two in November  1999 for  National and in June 1999 for  WestAmerica.  As
required by the NASD,  National and  WestAmerica  completed and filed,  in April
1999,  Year 2000 readiness  reports.  Additionally,  National was audited by the
NASD and completed all recommendations from the NASD audit in November 1999.

The majority of the Company's trade processing  information is handled through a
third party vendor. In the first quarter of fiscal 1999, the Company  negotiated
an agreement to change to BETA Systems,  Inc. from its prior vendor. The Company
implemented this conversion at the end of March 1999. As part of this agreement,
BETA Systems,  Inc. has  represented  to the Company that they will be Year 2000
compliant.  Additionally,  the Company initiated formal  communications with all
other  significant data processing and  telecommunications  vendors to determine
the extent to which the Company is vulnerable to those third parties  failure to
remediate  their own Year 2000 Issue.  These  vendors  have  represented  to the
Company they will be compliant with the requirements of the Year 2000.

The  Company  has  determined  that  material  costs and  resources  will not be
required to modify or replace  portions of its hardware and software so that its
computer  systems will properly utilize dates beyond December 31, 1999. To date,
the Company has spent $160,000 and estimates it will spend less than $200,000 in
total regarding the Year 2000 issue.

The  Company  has  developed  a  contingency  plan for  unanticipated  Year 2000
exposure as part of its overall efforts to ensure that its systems are Year 2000
compliant  on a timely  basis.  National has  clearing  arrangements  with other
brokerage firms and if its internal  systems incur Year 2000 problems,  National
will clear its business through these other firms.

The costs of the project and the date on which the Company plans to complete the
Year 2000  modifications  are based on management's  best estimates,  which were
derived utilizing numerous  assumptions of future events including the continued
availability  of certain  resources,  third party  modification  plans and other
factors.  However,  even if the Company's systems and the Company's  significant
vendors are  compliant,  the  potential  impact of the Year 2000  problem on the
securities  industry as a whole could be material,  as virtually every aspect of
the sales of securities and processing of transactions could be affected. Due to
the size of the problem  facing the securities  industry and the  interdependent
nature of the business, the Company may be materially adversely affected by this
issue. IMPACT OF THE YEAR 2000 ISSUE (Continued)

The foregoing represents a Year 2000 readiness disclosure entitled to protection
as provided in the Year 2000 Information and Readiness Disclosure Act.

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 24, 1999:

                              LONG            SHORT             NET

Corporate stocks           $294,000         $134,000        $  160,000 (long)
Stock options              $  4,000         $  5,000        $    1,000 (short)

<PAGE>


ITEM 8 - FINANCIAL STATEMENTS

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

<PAGE>
                          INDEPENDENT AUDITORS' REPORT

To the Stockholders and
Board of Directors

Olympic Cascade Financial Corporation

We have audited the accompanying  consolidated statements of financial condition
of Olympic Cascade  Financial  Corporation and  Subsidiaries as of September 24,
1999  and  September  25,  1998  and  the  related  consolidated  statements  of
operations,  changes in stockholders'  equity, and cash flows for the years then
ended.  These  consolidated  financial  statements are the responsibility of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
financial statements based on our 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 24, 1999 and September
25, 1998, and the results of their operations and their cash flows for the years
then ended in conformity with generally accepted accounting principles.

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

New York, New York
November 29, 1999

                                       F-1
<PAGE>

                          INDEPENDENT AUDITOR'S REPORT

To the Stockholders and
    Board of Directors

Olympic Cascade Financial Corporation

We have audited the accompanying consolidated statements of operations,  changes
in stockholders' equity, and cash flows of Olympic Cascade Financial Corporation
and  subsidiaries  for the year ended  September  26, 1997.  These  consolidated
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is to express an opinion on these financial  statements based on
our audit.

We conducted our audit in accordance with 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 audit provides a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all material  respects,  the results of operations and cash flows of
Olympic  Cascade  Financial  Corporation  and  subsidiaries  for the year  ended
September 26, 1997, in conformity with generally accepted accounting principles.

                               /s/ Moss Adams LLP

Seattle, Washington
November 14, 1997
                                      F-1A
<PAGE>
<TABLE>
<CAPTION>
             OLYMPIC CASCADE FINANCIAL CORPORATION AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION


                                                                   September 24,   September 25,
                                                                       1999            1998
                                                                   ------------    ------------
                                     ASSETS

<S>                                                                <C>             <C>
CASH, subject to immediate withdrawal ..........................   $    384,000    $    551,000

CASH, CASH EQUIVALENTS AND SECURITIES ..........................     41,416,000      27,348,000

DEPOSITS .......................................................      1,679,000       2,024,000

RECEIVABLES:
     Customers .................................................     38,038,000      39,680,000
     Brokers and dealers .......................................      2,342,000         826,000
     Other .....................................................        976,000         315,000
     Refundable federal income tax .............................           --           654,000

SECURITIES HELD FOR RESALE, at market ..........................        298,000         235,000

FIXED ASSETS, net ..............................................      1,176,000       1,292,000

GOODWILL, net ..................................................         45,000          61,000

OTHER ASSETS ...................................................        343,000         130,000
                                                                   ------------    ------------
                                                                   $ 86,697,000    $ 73,116,000
                                                                   ============    ============


                      LIABILITIES AND STOCKHOLDERS' EQUITY

PAYABLES:
     Customers .................................................   $ 67,158,000    $ 60,548,000
     Brokers and dealers .......................................      7,581,000       1,714,000

SECURITIES SOLD, BUT NOT YET PURCHASED, at market ..............        139,000          73,000

ACCOUNTS PAYABLE, ACCRUED EXPENSES AND
     OTHER LIABILITIES .........................................      3,167,000       2,073,000

REVOLVING CREDIT LINE ..........................................      2,100,000       2,700,000

NOTES PAYABLE ..................................................      1,648,000       1,948,000

CAPITAL LEASES PAYABLE .........................................        865,000       1,112,000
                                                                   ------------    ------------
                                                                     82,658,000      70,168,000
                                                                   ------------    ------------
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,
        1,694,595 and 1,463,007 shares issued and outstanding ..         34,000          29,000
     Additional paid-in capital ................................      6,375,000       5,407,000
     Accumulated Deficit .......................................     (2,370,000)     (2,488,000)
                                                                   ------------    ------------
                                                                      4,039,000       2,948,000
                                                                   ------------    ------------
                                                                   $ 86,697,000    $ 73,116,000
                                                                   ============    ============
</TABLE>

                 See notes to consolidated financial statements.
                                       F-2
<PAGE>
<TABLE>
<CAPTION>
                      OLYMPIC CASCADE FINANCIAL CORPORATION
                      CONSOLIDATED STATEMENTS OF OPERATIONS

                                                                                                    For the Years Ended
                                                                                                   -------------
                                                                                     September 24,  September 25,    September 26,
                                                                                          1999          1998             1997
                                                                                     ------------   ------------    -------------

REVENUES:
<S>                                                                                  <C>            <C>             <C>
     Commissions .................................................................   $ 24,565,000   $ 23,636,000    $ 17,496,000
     Net dealer inventory gains ..................................................      9,057,000      5,512,000       4,782,000
     Underwriting ................................................................      2,459,000     10,726,000      12,837,000
     Interest and dividends ......................................................      5,557,000      4,380,000       3,775,000
     Transfer fees and clearance services ........................................        869,000        735,000         620,000
     Other .......................................................................        823,000        705,000         484,000
                                                                                     ------------   ------------    -------------
                                                                                       43,330,000      45,694,000     39,994,000
                                                                                     ------------   ------------    -------------

EXPENSES:
     Commissions .................................................................     25,735,000     25,045,000      22,017,000
     Employee compensation and related expenses ..................................      4,882,000      8,746,000       6,364,000
     Occupancy and equipment costs ...............................................      2,548,000      3,736,000       2,927,000
     Interest ....................................................................      3,764,000      2,840,000       2,265,000
     Clearance fees ..............................................................      1,773,000      1,565,000         965,000
     Communications ..............................................................      1,133,000      1,922,000       1,499,000
     Taxes, licenses, registration ...............................................        106,000        620,000         874,000
     Professional fees ...........................................................      1,956,000      1,381,000         589,000
     Other operating expenses ....................................................      1,319,000      5,129,000       2,300,000
                                                                                     ------------   ------------    -------------
                                                                                       43,216,000      50,984,000     39,800,000
                                                                                     ------------   ------------    -------------

INCOME (LOSS) BEFORE INCOME TAXES ................................................        114,000     (5,290,000)        194,000

BENEFIT (PROVISION) FOR INCOME TAXES .............................................          4,000        624,000         (93,000)
                                                                                     -----------    ------------    -------------

NET INCOME (LOSS) ................................................................   $    118,000   $ (4,666,000)   $    101,000
                                                                                     ============   ============    =============

EARNINGS (LOSS) PER SHARE OF COMMON STOCK
     Basic .......................................................................   $       0.08   $      (3.12)   $       0.08
                                                                                     ============   ============    =============
     Diluted .....................................................................   $       0.08   $      (3.12)   $       0.07
                                                                                     ============   ============    =============

WEIGHTED AVERAGE NUMBER OF COMMON SHARES
     Basic .......................................................................      1,563,499      1,496,634       1,195,403
                                                                                     ============   ============    =============
     Diluted .....................................................................      1,563,499      1,496,634       1,425,119
                                                                                     ============   ============    =============




</TABLE>

                 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 24, 1999, SEPTEMBER 25, 1998 AND
                               SEPTEMBER 26, 1997

<TABLE>
<CAPTION>


                                                               Common Stock          Additional       Retained
                                                       --------------------------      Paid-In        Earnings
                                                          Shares         Amount        Capital        (Deficit)       Total
                                                       -----------    -----------    -----------    -----------    -----------
<S>                                                        <C>        <C>         <C>            <C>               <C>
BALANCE, September 28, 1996 ........................       845,248    $    17,000 $    1,825,000 $      3,474,000  $ 5,316,000
     Exercise of stock options, including
       $78,000 income tax benefit ..................       153,978          3,000        719,000           --          722,000
     Stock dividends ...............................       174,979          4,000      1,041,000     (1,045,000)          --
     Common stock issuance in
       connection with acquisitions ................       270,000          5,000      1,460,000           --        1,465,000
     Net income ....................................          --             --             --          101,000        101,000
                                                       -----------    -----------    -----------    -----------    -----------

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
                                                       ===========    ===========    ===========    ===========    ===========


</TABLE>


                 See notes to consolidated financial statements.
                                       F-4
<PAGE>
<TABLE>
<CAPTION>
             OLYMPIC CASCADE FINANCIAL CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                                     For the Years Ended
                                                                         --------------------------------------------
                                                                         September 24,   September 25,  September 26,
                                                                              1999           1998            1997
                                                                         ------------    ------------    ------------
<S>                                                                      <C>             <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net income (loss) ...............................................   $    118,000    $ (4,666,000)   $    101,000
     Adjustments to reconcile net income (loss) to net cash
         provided by (used in) operating activities
     Depreciation and amortization ...................................        408,000         716,000         498,000
     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 ...............         38,000               -               -
     Loss (gain) on sale of subsidiaries .............................         (5,000)      1,114,000               -
     Loss on disposal of fixed assets ................................              -               -           2,000
     Deferred income tax benefit .....................................         (2,000)          6,000         (45,000)
     Gain on foreign currency translation ............................              -               -         (43,000)
     Changes in assets and liabilities:
         Decrease (increase) in cash, cash equivalents and securities     (14,068,000)      3,586,000       2,071,000
         Decrease (increase) in deposits .............................        345,000        (732,000)       (515,000)
         Increase in receivables .....................................       (535,000)    (16,379,000)     (6,900,000)
         Decrease (increase) in federal income tax receivable ........        654,000         (57,000)       (948,000)
         Decrease (increase) securities held for resale ..............        (63,000)      1,831,000       1,350,000
         Increase in other assets ....................................       (211,000)       (413,000)       (439,000)
         Increase in payables ........................................     12,477,000      11,682,000       2,105,000
         Increase (decrease) in securities sold, but not yet purchased         66,000        (974,000)       (290,000)
         Increase (decrease) in accounts payable, accrued expenses
             and other liabilities ...................................      1,195,000        (320,000)      1,181,000
                                                                         ------------    ------------    ------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES ..................      1,038,000      (4,606,000)     (1,872,000)
                                                                         ------------    ------------    ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
     Purchase of fixed assets ........................................       (276,000)       (371,000)     (1,313,000)
     Sale of fixed assets ............................................             -          124,000               -
     Purchase of goodwill ............................................             -             --           (83,000)
     Proceeds from sale of subsidiary ................................             -          500,000              -
                                                                         ------------    ------------    ------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES ..................       (276,000)        253,000      (1,396,000)
                                                                         ------------    ------------    ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
     Issuance of common stock ........................................              -               -         724,000
     Exercise of stock options .......................................        319,000           8,000         644,000
     Borrowings (repayments) on line of credit .......................       (600,000)      2,700,000               -
     Proceeds from notes payable .....................................              -       1,925,000       1,805,000
     Payments on capital lease .......................................       (348,000)       (108,000)              -
     Payments on notes payable .......................................       (300,000)       (600,000)     (1,653,000)
                                                                         ------------    ------------    ------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES ..................       (929,000)      3,925,000       1,520,000
                                                                         ------------    ------------    ------------
DECREASE IN CASH .....................................................       (167,000)       (428,000)     (1,748,000)

CASH, beginning of year ..............................................        551,000         979,000       2,727,000
                                                                         ------------    ------------    ------------
CASH, end of year ....................................................   $    384,000    $    551,000    $    979,000
                                                                         ============    ============    ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
     Cash paid during the year for:
         Interest ....................................................   $  3,727,000    $  2,783,000    $  2,265,000
                                                                         ============    ============    ============
         Income taxes ................................................   $          -    $          -    $  1,117,000
                                                                         ============    ============    ============
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND
     FINANCING ACTIVITIES
         Tax effect of common stock issued and stock options
             exercised ...............................................   $          -    $          -    $     78,000
                                                                         ============    ============    ============
         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    $          -
                                                                         ============    ============    ============
     Acquisitions of subsidiaries:
         Fair value of assets acquired ...............................              -               -       1,596,000
         Liabilities assumed .........................................              -               -         855,000
                                                                         -----------    ------------    ------------
         Common stock issued .........................................   $          -    $          -    $    741,000
                                                                         ============    ============    ============
</TABLE>
                 See notes to consolidatd financial statements.
                                       F-5
<PAGE>



                      OLYMPIC CASCADE FINANCIAL CORPORATION
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

          SEPTEMBER 24, 1999, SEPTEMBER 25, 1998 AND SEPTEMBER 27, 1997

1.      ORGANIZATION:

OLYMPIC  CASCADE  FINANCIAL  CORPORATION  ("OLYMPIC"  OR  THE  "COMPANY")  is  a
diversified  financial services  organization,  operating through its two wholly
owned subsidiaries, National Securities Corporation ("National") and WestAmerica
Investment  Group  ("WestAmerica").  Olympic  is  committed  to  establishing  a
significant  presence in the financial services industry by providing  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 & Persson, Inc. ("Friend") and Travis Capital,
Inc. ("Travis").

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.

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

                                       F-6


<PAGE>



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. All shares used in the basic and diluted
calculations  have been  restated to show the effect of the stock  dividends  as
described in Note 14.

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 24, 1999
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.

3.       CORPORATE RESTRUCTURING AND ACQUISITIONS AND DISPOSALS

CORPORATE  RESTRUCTURING - In November 1996, the Company's stockholders approved
a restructuring whereby National's stockholders exchanged their shares of common
stock on a one-for-one basis for shares of common stock of the Company resulting
in National becoming a wholly owned subsidiary of the Company. The restructuring
became  effective  in  February  1997  and was  accounted  for as a  pooling  of
interests.

ACQUISITIONS - In March 1997, the Company acquired all of the outstanding  stock
of Friend, a Southern California based broker-dealer, specializing in investment
banking,  institutional  brokerage,  research and trading  activities for middle
market  companies.  Friend was  acquired  in exchange  for 250,000  unregistered
shares of the  Company's  common stock valued at  $1,375,000  and  $1,000,000 in
cash.  The  Company  recorded  this  transaction  under the  purchase  method of
accounting  and has recorded  goodwill of $1,300,000  for the purchase price and
direct costs in excess of the net fair value of the assets acquired.

Effective  August 31,  1998,  the Company  sold its  investment  in Friend 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.

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.

                                       F-8


<PAGE>



In June 1997, the Company  acquired all of the  outstanding  stock of Travis,  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.  Travis was acquired in exchange for 20,000 unregistered shares
of the  Company's  common stock  valued at $90,000.  The Company  recorded  this
transaction  under the purchase  method of accounting  and recorded  goodwill of
$45,000 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 in exchange for a note receivable of $281,000 which is included in other
assets. 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 $216,000.  Under the terms of the note, the
Company collected approximately $66,000, through September 24, 1999 and received
1,025 shares of the Company's common stock.

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
acquisition is 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:
<TABLE>
<CAPTION>

                                                          September 24,                    September 25,
                                                              1999                             1998
                                                     -----------------------           ---------------------
United States Government
<S>                                             <C>                                  <C>
obligations                                     $                 40,521,000         $            24,547,000
Reverse repurchase agreements                                              -                       2,530,000
Cash                                                                 895,000                         271,000
                                                     -----------------------           ---------------------
                                                $                 41,416,000         $            27,348,000
                                                     =======================           =====================
</TABLE>

The United States  Government  obligations  mature at various dates through June
2028 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.

                                       F-9


<PAGE>



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.  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 $109,000 at September 24, 1999 and $466,000 at September
25, 1998 respectively.

  6.      BROKER-DEALER RECEIVABLES AND PAYABLES

Amounts receivable from and payable to brokers and dealers include:
<TABLE>
<CAPTION>

                                                         September 24,                    September 25,
                                                              1999                             1998

                                                     ----------------------           ----------------------
<S>                                            <C>                                 <C>
Due from clearing organization                 $                  1,231,000        $                 314,000
Deposits paid for securities borrowed                               720,000                           99,000
borrowed
borrowed

borrowed

Commissions receivable                                              327,000                          278,000
Interest and dividends                                                5,000                                -
Securities failed to deliver                                         59,000                          135,000
                                                     ----------------------           ----------------------
          Total receivable                     $                  2,342,000        $                 826,000
                                                     ======================           ======================

Due to clearing organization                   $                  6,819,000        $               1,345,000
Securities failed to receive                                        762,000                   369,000
                                                     ----------------------
           Total payable                       $                  7,581,000        $               1,714,000
                                                     ======================           ======================
</TABLE>

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:
<TABLE>
<CAPTION>

                                 September 24, 1999                               September 25, 1998
                      -------------------------------------            ------------------------------------
                          Securities             Sold , But                   Securities             Sold, But
                           Held For               Not Yet                      Held For               Not Yet
                            Resale               Purchased                      Resale               Purchased
                       -----------------      ----------------             ----------------      -----------------
<S>                <C>                      <C>                         <C>                    <C>
Corporate
stocks             $             294,000    $          134,000          $           230,000    $            46,000
U.S.
Government
obligations                            -                     -                            -                 27,000
Corporate
obligations                            -                     -                        5,000                      -
Stock
options                            4,000                 5,000                            -                      -
                       -----------------      ----------------             ----------------      -----------------
                   $             298,000    $          139,000          $           235,000    $            73,000
                       =================      ================             ================      =================
</TABLE>

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

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

                                      F-11


<PAGE>





8.      FIXED ASSETS

Fixed assets, at cost, consist of the following:
<TABLE>
<CAPTION>

                                                    September 24,                  September 25,
                                                         1999                           1998

                                                 --------------------          ----------------------
<S>                                         <C>                              <C>
Office machines                             $                 320,000        $                274,000
Furniture and fixtures                                        561,000                         679,000
Electronic equipment                                          383,000                         916,000
Leasehold improvements                                        935,000                          55,000
Assets under capital leases                                 1,180,000                       1,180,000
                                                 --------------------          ----------------------
                                                            3,379,000                       3,104,000
Less accumulated depreciation and

amortization                                                2,203,000                       1,812,000
                                                 --------------------          ----------------------
                                            $               1,176,000        $              1,292,000
                                                 ====================          ======================
</TABLE>

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:
<TABLE>
<CAPTION>
<S>                                                           <C>
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                                 368,000

                                                                   -------------------
                                                              $                812,000
                                                                   ===================
</TABLE>







                                      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 24, 1999:

    Fiscal year ended

                      2000                                 $             340,000
                      2001                                               340,000
                      2002                                               357,000
Total minimum lease payments                                           1,037,000
Less: Amount representing taxes                                           62,000
                                                                ----------------
Net minimum lease payments                                               975,000
Less amount representing interest                                        110,000
                                                                ----------------
Present value of net minimum lease payments                $             865,000
                                                                ================


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 2000. Borrowings bear interest at the bank's prime
rate which is  approximately  8.50% at September  24, 1999.  Interest is payable
monthly.  At  September  24, 1999,  the Company has  $2,100,000  in  outstanding
borrowings on 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 have been recorded as a discount to the notes.

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 have been recorded as a discount to the note.

                                      F-13


<PAGE>



       The following is a schedule by years of debt maturity as of September 24,
1999:

Fiscal year ended

2001                                              $               802,000
2002                                                              963,000
2003                                                              160,000
                                                                1,925,000

Less: discount on notes                                         (277,000)

                                                       ------------------
                                                  $             1,648,000
                                                       ==================


11.    FEDERAL INCOME TAX

The income tax benefit (provision) consists of:
<TABLE>
<CAPTION>

                                                           For the Years Ended
                             -------------------------------------------------------------------------------
                                  September 24,                September 25,               September 26,
                                      1999                          1998                       1997
                             -----------------------       ----------------------      ---------------------
<S>                     <C>                              <C>                         <C>
Current federal
   income tax           $                      8,000     $                626,000    $               (56,000)
Deferred federal
   income tax                                      -                       (2,000)                    45,000
Current state
   income tax                                 (4,000)                           -                    (82,000)
                             -----------------------       ----------------------      ---------------------
                        $                      4,000     $                624,000    $               (93,000)
                             =======================       ======================      =====================

</TABLE>













                                      F-14


<PAGE>



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

                                   September 24,               September 25,               September 26,
                                       1999                        1998                        1997
                               ---------------------       ---------------------       ---------------------
<S>                         <C>                          <C>                         <C>
Statutory federal
rate                        $                (39,000)    $             1,852,000     $               (66,000)
State income
taxes, net of
federal income
tax benefit                                   (4,000)                          -                     (54,000)
Losses for
which no benefit
is provided                                        -                  (1,230,000)                          -
Tax benefit of
net operating
losses                                        47,000                           -                           -
Other                                              -                       2,000                      27,000
                               ---------------------       ---------------------       ---------------------
                       $                       4,000     $               624,000     $               (93,000)
                               =====================       =====================       =====================
</TABLE>

The Company has net operating  loss (NOL)  carryforwards  for Federal income tax
purposes of  approximately  $1,700,000,  substantially  all of which  expires in
2018.

Significant  components of the  Company's  deferred tax assets are as follows at
September 24, 1999, September 25, 1998 and September 26, 1997:
<TABLE>
<CAPTION>

                                                   1999                   1998                   1997
                                            ------------------      -----------------       --------------
<S>                                  <C>                       <C>                     <C>
Net Operating losses                 $                 578,000 $            1,017,000  $            34,000
Other                                                  125,000                 41,000               11,000
                                            ------------------      -----------------       --------------
Total                                                  703,000              1,058,000               45,000
Valuation allowance                                  (662,000)            (1,017,000)                    -
   Total deferred tax asset          $                  41,000   $             41,000    $          45,000
                                            ==================      =================       ==============




</TABLE>





                                      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.

             LEASES - As of September 24, 1999,  the Company is committed  under
             operating leases for future minimum lease payments as follows:

       FISCAL YEAR ENDING

             2000                                                    $ 1,418,000
             2001                                                      1,605,000
             2002                                                      1,325,000
             2003                                                      1,109,000
             THEREAFTER                                                  911,000
                                                                 ---------------
                                                                    $  6,368,000

           Rental expense for operating leases for the years ended September 24,
           1999,  September  25,  1998,  and  September  26, 1997 was  $933,000,
           $1,661,000 and $1,113,000, respectively.

           UNDERWRITINGS  - During  fiscal  1999,  the Company  participated  in
           underwriting securities for private placements, initial and secondary
           public  offerings.   At  September  24,  1999,  the  Company  has  no
           outstanding commitments relating to underwriting transactions.

13.    CONTINGENCIES

           In May 1997, a minority  stockholder  of Olympic  commenced a lawsuit
           alleging  that the  Company  breached  its  fiduciary  duties  to the
           plaintiff  and that the  proxy  statement  by which the  Company  and
           Olympic effected their merger was materially false and misleading. In
           June 1999, the litigation was settled whereby the plaintiff  received
           25,000  shares of common stock of Olympic,  and a warrant to purchase
           50,000 shares of Olympic common stock at $4.00 per share. The warrant
           expires on May 25, 2004.

           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 Securities in their

                                      F-16


<PAGE>



           entirety  and  granted   National   Securities   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.

           In September  1997,  a  corporation  commenced a lawsuit  against the
           Company  alleging  breach of contract on an alleged  promise to raise
           capital  for the  plaintiff  through an initial  public  offering  of
           stock.  In February  1999,  the  litigation  was settled  whereby the
           plaintiff received 40,000 shares of common stock of Olympic.

           In October  1998,  a  corporation  commenced  a lawsuit  against  the
           Company  relating to the  unsuccessful  effort to complete an initial
           public  offering  of  the  plaintiff's   stock.  In  June  1999,  the
           litigation was settled  whereby the plaintiff  received 50,000 shares
           of common stock of Olympic,  a warrant to purchase  20,000  shares of
           Olympic common stock at $4.00 per share,  and cash payments  totaling
           $75,000. The warrant expires on June 3, 2004.

           The Company  has been named  together  with others as a defendant  in
           several class action  lawsuits filed against an unrelated third party
           in 1999. The Company has not yet been served in any of these actions

           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 $1,600,000.
           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 $705,000,
           or $.45 per share in 1999, $761,000, or $0.51

                                      F-17


<PAGE>



           per share in 1998,  $779,000,  or $0.54  per share in 1997.  The fair
           value of the options granted during 1999, 1998, and 1997 is estimated
           as $946,000,  $1,153,000, and $960,000,  respectively, on the date of
           grant using the Black-Scholes option-pricing model with the following
           assumptions:
<TABLE>
<CAPTION>

                                              1999                   1998                  1997
                                        -----------------      ----------------      ----------------
<S>                                               <C>                    <C>                   <C>
Volatility                                        144.00%                63.87%                63.39%
Risk-free interest rate                             5.00%                 6.17%                 6.31%
Expected life                                     5 years               5 years               5 years
</TABLE>

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

                                                                                                      Weighted
                                                                                                       Average
                                                                                                        Price
                                                                                                         Per
                                    Authorized              Granted              Available              Share
                                ------------------      ----------------      ---------------       -------------
Balance,

<S>                                        <C>                   <C>                  <C>      <C>
September 27, 1996                         807,357               639,068              168,289  $             3.60
  Creation of new plan                     538,126                     -              538,126                   -
  Granted                                        -               303,739             (303,739) $             5.79
  Exercised                               (161,677)             (161,677)                   -  $             3.41
                                ------------------      ----------------      ---------------
Balance,

September 26, 1997                       1,183,806               781,130              402,676  $             4.88
  Granted                                        -               148,500             (148,500)
  Exercised                                 (2,012)               (2,012)                   -  $             3.73
  Forfeitures                             (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)
  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
                                ==================      ================      ===============
</TABLE>

           The  following  table  summarizes  information  about  stock  options
           outstanding at September 24, 1999:
<TABLE>
<CAPTION>

                 Options Outstanding                              Options Exercisable
-----------------------------------------------------      ----------------------------------
                                                 WEIGHTED              WEIGHTED                                   WEIGHTED
    RANGE OF                                      AVERAGE               AVERAGE                                    AVERAGE
    EXERCISE                NUMBER               REMAINING             EXERCISE              NUMBER               EXERCISE
     PRICES               OUTSTANDING           CONT. LIFE              PRICES            EXERCISABLE              PRICES
-----------------      -----------------      ---------------        -------------      ----------------        -------------
<S>                              <C>               <C>            <C>                            <C>         <C>
$3.39-3.73                       290,214           1.96           $      3.58                    290,214     $      3.58
$4.00-4.69                       476,038           4.24           $      4.37                    246,904     $      4.15
$5.36-5.64                       163,356           2.91           $      5.29                    159,497     $      5.42
$7.12                            138,914           2.38           $      7.12                    138,914     $      7.12
                       -----------------                                                ----------------
                               1,068,522                                                         835,529
                       =================                                                ================
</TABLE>

           STOCK  WARRANTS  - During  1997,  the  Company  issued  33,075  stock
           warrants  with an  exercise  price of $4.76 per share  expiring  five
           years from the award date to the lender.  The warrants were valued at
           $20,000, net of tax benefit, which has been recorded as a discount on
           the note payable.  Such note was paid in 1998 and,  accordingly,  the
           discount was amortized to operations.

           In addition,  stock  warrants were issued in  conjunction  with notes
           issued by the  Company in November  1997 and  January  1998 (see Note
           10). In 1999 the Company issued stock  warrants in  conjunction  with
           lawsuit settlements (see Note 13).

           STOCK  DIVIDENDS - On December  22, 1997,  the Company  declared a 5%
           stock  dividend  to  all  common  shareholders.  The  stock  dividend
           increased  the  number of issued  and  outstanding  shares by 72,299.
           During  fiscal  year  1997,  the  Company  declared  three  5%  stock
           dividends to all common stockholders. The stock dividends were issued
           on January 27, 1997,  May 30, 1997 and September 10, 1997.  The stock
           dividends  in 1997  increased  the number of issued  and  outstanding
           shares by  174,979.  All  references  in the  accompanying  financial
           statements to the number of stock options and warrants,  and earnings
           per share have been restated to reflect the dividends.

                                      F-18


<PAGE>


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  24, 1999,  National's  net
           capital exceeded the requirement by $2,525,000.

           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
           24,  1999,  WestAmerica's  net capital  exceeded the  requirement  by
           $94,000.

           Advances,   dividend  payments  and  other  equity  withdrawals  from
           National or WestAmerica 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 24, 1999 and September
           25, 1998, the Company made no such contributions.  During fiscal year
           September  26, 1997,  the Company  charged  $53,000 to  operations in
           connection with the plans.

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-19
<PAGE>
<TABLE>
<CAPTION>
                      OLYMPIC CASCADE FINANCIAL CORPORATION
                        STATEMENTS OF FINANCIAL CONDITION

                                     ASSETS


                                                           September 24, September 25,
                                                                1999         1998
                                                             ----------   ----------
<S>                                                        <C>          <C>
Cash, subject to immediate withdrawal .................... $     15,000 $      8,000
Receivable from subsidiaries .............................      197,000       14,000
Other receivables ........................................       50,000       53,000
Capital leases ...........................................      812,000    1,078,000
Investment in subsidiaries ...............................    5,757,000    5,355,000
Other assets .............................................       87,000       30,000
                                                             ----------   ----------
                                                           $  6,918,000 $  6,538,000
                                                             ==========   ==========

                      LIABILITIES AND STOCKHOLDERS' EQUITY


Accounts payable, accrued expenses and other liabilities . $    110,000 $    271,000
Payable to subsidiaries ..................................      256,000      259,000
Capital lease payable ....................................      865,000    1,112,000
Note payable .............................................    1,648,000    1,948,000
                                                             ----------   ----------
                                                              2,879,000    3,590,000
                                                             ----------   ----------
Stockholders' equity .....................................    4,039,000    2,948,000
                                                             ----------   ----------
                                                           $  6,918,000 $  6,538,000
                                                             ==========   ==========

</TABLE>




                                      F-20
<PAGE>
                      OLYMPIC CASCADE FINANCIAL CORPORATION

                            STATEMENTS OF OPERATIONS



<TABLE>
<CAPTION>

                                                                                                                  Period from
                                                                                                                February 6, 1997
                                                        Fiscal Year Ended           Fiscal Year Ended            (Inception) to
                                                        September 24, 1999          September 25, 1998         September 26, 1997
                                                     -------------------------   -------------------------   -----------------------

<S>                                               <C>                            <C>                         <C>
Operating expenses                                $                   624,000    $              2,609,000    $              696,000
Other income (expenses)
         Gain on foreign currency translation                               -                           -                    43,000
         Interest and other income                                     20,000                     151,000                         -
         Gain (loss) on investment in subsidiaries                    717,000                  (1,094,000)                 (159,000)
         Gain (loss) on sale of investments                             5,000                  (1,114,000)                        -
                                                     -------------------------   -------------------------   -----------------------
Net income (loss) before income tax                                   118,000                  (4,666,000)                 (812,000)
                                                     -------------------------   -------------------------   -----------------------

Income tax benefit                                                          -                           -                   270,000
                                                     -------------------------   -------------------------   -----------------------
                                                  $                   118,000    $              (4,666,000)  $             (542,000)
                                                     =========================   =========================   =======================
</TABLE>



                                      F-21
<PAGE>
<TABLE>
<CAPTION>
                      OLYMPIC CASCADE FINANCIAL CORPORATION
                  STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY


                                                                                         Additional
                                                               Common Stock               Paid-In       Accumulated
                                                           Shares          Amount         Capital        Deficit           Total
                                                       ------------    ------------    ------------    ------------    ------------
<S>                                                    <C>             <C>             <C>             <C>             <C>
FORMATION, February 6, 1997 ........................           --      $       --      $       --      $       --      $          0
     Common Stock issued in
     connection with acquisitions ..................      1,203,930          24,000       7,648,000            --         7,672,000
     Exercise of stock options, including
     $25,000 income tax benefit ....................        109,175           2,000         472,000            --           474,000
     Stock dividends ...............................        131,100           3,000         701,000        (704,000)              0
     Net loss ......................................           --              --              --          (542,000)       (542,000)
                                                       ------------    ------------    ------------    ------------    ------------
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 stock options ........................         82,613           2,000         297,000               0         299,000
     Exercise 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
                                                       ============    ============    ============    ============    ============
</TABLE>


*    Additional  paid-in  capital and retained  earnings for the parent  company
     differ  from  consolidated  amounts due to  accounting  for the merger with
     National  using  the  pooling  of  interests  method  in  the  consolidated
     financial statements.





                                      F-22
<PAGE>
<TABLE>
<CAPTION>
                      OLYMPIC CASCADE FINANCIAL CORPORATION
                            STATEMENTS OF CASH FLOWS

                                                                                                   Period from
                                                                                                 February 6, 1997
                                                              For Year Ended    For Year Ended   (Inception) to
                                                               September 24,     September 25,    September 26,
                                                                   1999              1998              1997
                                                                -----------       -----------      -----------
<S>                                                             <C>               <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES
       Net income (loss) ....................................   $   118,000       $(4,666,000)    $  (542,000)
       Adjustments to reconcile net income (loss) to net cash
            provided by (used in) from operating activities
            Gain on foreign currency translation ............          --                  --         (43,000)
            Loss on investment in subsidiaries ..............       232,000          1,094,000        159,000
            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        38,000                --             --
            Depreciation and amortization ...................       285,000             169,000           --
            Changes in assets and liabilities ...............      (720,000)          1,196,000        632,000
                                                                -----------         -----------     -----------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES .........       569,000          (1,093,000)       206,000
                                                                -----------         -----------     -----------

CASH FLOWS FROM INVESTING ACTIVITIES
            Acquisition of subsidiaries .....................          --                   --        (443,000)
            Capital contributions to subsidiaries ...........      (233,000)          (135,000)     (1,177,000)
                                                                -----------         -----------     -----------
NET CASH USED IN INVESTING ACTIVITIES .......................      (233,000)          (135,000)     (1,620,000)
                                                                -----------         -----------     -----------

CASH FLOWS FROM FINANCING ACTIVITIES
            Exercise of stock options .......................       319,000              8,000         474,000
            Proceeds from notes payable .....................          --            1,925,000       1,805,000
            Payments on capital lease .......................      (348,000)          (108,000)           --
            Payments on note payable ........................      (300,000)          (600,000)       (854,000)
                                                                 -----------        -----------     -----------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES .........      (329,000)         1,225,000       1,425,000
                                                                 -----------        -----------     -----------

NET INCREASE (DECREASE) IN CASH .............................         7,000             (3,000)         11,000

CASH BALANCE
            Beginning of year ...............................         8,000             11,000            --
                                                                 -----------        -----------    -----------
            End of year .....................................   $    15,000        $     8,000    $     11,000
                                                                 ===========        ===========    ===========

</TABLE>





                                      F-23
<PAGE>

ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON

           ACCOUNTING AND FINANCIAL DISCLOSURE

On August 26, 1998 Moss Adams LLP resigned as principal  accountant to audit the
Registrant's financial statements.

The reports of Moss Adams LLP on the Registrant's  financial  statements for the
fiscal years ended  September 26, 1997 and September 27, 1996 did not contain an
adverse opinion or a disclaimer of opinion,  or a qualification  or modification
as to uncertainty, audit scope or accounting principles.

In connection with its audits for the  Registrant's two most recent fiscal years
and through August 26, 1998 there were no  disagreements  with Moss Adams LLP on
any  matter  of  accounting   principles  or  practices,   financial   statement
disclosure, or auditing scope or procedure.

During the Registrant's  fiscal years ended September 26, 1997 and September 27,
1996 and through August 26, 1998 there were no reportable events.

The Registrant  engaged  Feldman Sherb  Horowitz & Co., P.C. as its  independent
accountant as of August 31, 1998. During the Registrant's two most recent fiscal
years,  and through August 31, 1998, the Registrant did not consult with Feldman
Sherb Horowitz & Co., P.C. as to either the application of accounting principles
to a specified  transaction,  either  completed or proposed or the type of audit
opinion that might be rendered on the Registrant's  financial statements and the
Registrant  did not consult with Feldman  Sherb  Horowitz & Co.,  P.C. as to any
matter that was either the subject of a disagreement or reportable event.

                                    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  2000
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  2000
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  2000
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  2000
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 24, 1999 and September 25, 1998
Statements of Operations, Years Ended September 24, 1999, September 25, 1998 and
     September 26, 1997
Statements of Changes in  Stockholders'  Equity, Years ended September 24, 1999,
     September 25, 1998 and September 26, 1997
Statements of Cash Flows, Years ended September 24, 1999, September 25, 1998 and
     September 26, 1997
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 24, 1999.

(C)      EXHIBITS

         See Exhibit Index


<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, 1999         BY:   /S/STEVEN A. ROTHSTEIN
      ------------------------     --------------------------------------------
                                   Steven A. Rothstein, Chairman,
                                   Chief Executive Officer and President

DATE:    DECEMBER 20, 1999         BY:    /S/ROBERT H. DASKAL
      ------------------------     --------------------------------------------
                                   Robert H. Daskal, Senior Vice President,
                                   Chief Financial Officer, Treasurer and
                                   Secretary

DATE:    DECEMBER 20, 1999         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, 1999         BY:    /S/STEVEN A. ROTHSTEIN
      ------------------------     --------------------------------------------
                                   Steven A. Rothstein, Chairman,
                                   Chief Executive Officer and President

DATE:    DECEMBER 20, 1999         BY:    /S/GARY A. ROSENBERG
      ------------------------     --------------------------------------------
                                   Gary A. Rosenberg, Director

DATE:    DECEMBER 20, 1999         BY:    /S/JAMES C. HOLCOMB, JR.
      ------------------------     --------------------------------------------
                                   James C. Holcomb, Jr., Director

DATE:    DECEMBER 20, 1999         BY:    /S/D.S. PATEL
      -------------------------    --------------------------------------------
                                   D.S. Patel, Director


<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.

     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 on Form
               S-8 in February 1999 and hereby incorporated by reference.

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

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

    10.15*     Employment contract dated July 1999.

    10.16*     Employment contract dated July 1999.

    10.17*     Employment contract dated July 1999.

    10.18*     Employment contract dated July 1999.

    10.19*     Employment contract dated July 1999.

    10.20      Office lease, Seattle, Washington.


    11.        Computation of Earnings per Share.

    16.1       Change in Certifying Accountant,  previously filed on 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 on
               Form S-8 in February 1999 and Forms S-3 in May 1999 and June 1999
               and hereby incorporated by reference.


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

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

    27.        Financial Data Schedule.

    *Compensatory agreements