<PAGE>

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

                                    FORM 10-Q


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

For the Quarter Ended March 26, 1999           Commission File Number 001-12629

                      OLYMPIC CASCADE FINANCIAL CORPORATION
                      -------------------------------------
                     (Exact name of registrant as specified)


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


         875 North Michigan Avenue, Suite 1560, Chicago, Illinois 60611
         --------------------------------------------------------------
              (Address of principal executive offices) (Zip code)

Registrant's telephone number, including area code:           (312)   751-8833

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
                                    ---

The number of shares outstanding of registrant's Common stock, par value $0.02
per share, at May 7, 1999 was 1,581,447.

<PAGE>

                      OLYMPIC CASCADE FINANCIAL CORPORATION
                           CONSOLIDATED BALANCE SHEETS

                                     ASSETS

<TABLE>
<CAPTION>

                                                                                               March 26,          September 25,
                                                                                                 1999                 1998
                                                                                              (unaudited)           (audited)
                                                                                             -------------        -------------
<S>                                                                                         <C>                  <C>

CASH, subject to immediate withdrawal                                                        $   2,493,000        $     551,000
CASH, CASH EQUIVALENTS AND SECURITIES                                                           59,659,000           27,348,000
DEPOSITS                                                                                         2,396,000            2,024,000
RECEIVABLES
              Customers                                                                         32,419,000           39,680,000
              Brokers and dealers                                                                1,742,000              826,000
              Other                                                                                649,000              315,000
              Income tax receivable                                                                634,000              654,000
SECURITIES HELD FOR RESALE, at market                                                              520,000              235,000
FIXED ASSETS, net                                                                                1,200,000            1,292,000
GOODWILL, net                                                                                       53,000               61,000
OTHER ASSETS                                                                                       397,000              130,000
                                                                                             -------------        -------------
                                                                                             $ 102,162,000        $  73,116,000
                                                                                             -------------        -------------
                                                                                             -------------        -------------


                      LIABILITIES AND STOCKHOLDERS' EQUITY

BANK LINE OF CREDIT                                                                          $   3,000,000        $   2,700,000
PAYABLES
              Customers                                                                         78,460,000           60,548,000
              Brokers and dealers                                                               11,449,000            1,714,000
SECURITIES SOLD, BUT NOT YET PURCHASED, at market                                                  510,000               73,000
ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER LIABILITIES                                         2,965,000            2,073,000
NOTES PAYABLE                                                                                    1,648,000            1,948,000
CAPITAL LEASE PAYABLE                                                                              988,000            1,112,000
                                                                                             -------------        -------------
                                                                                                99,020,000           70,168,000
                                                                                             -------------        -------------


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, 1,581,447 and
                 1,463,007 shares issued and outstanding, respectively                              32,000               29,000
              Additional paid-in capital                                                         5,841,000            5,407,000
              Deficit                                                                           (2,731,000)          (2,488,000)
                                                                                             -------------        -------------
                                                                                                 3,142,000            2,948,000
                                                                                             -------------        -------------
                                                                                             $ 102,162,000        $  73,116,000
                                                                                             -------------        -------------
                                                                                             -------------        -------------
</TABLE>

                                       2
   The accompanying notes are an integral part of these financial statements.

<PAGE>

                      OLYMPIC CASCADE FINANCIAL CORPORATION
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                                        -----For The Quarter Ended-----        ------The Six Months Ended------
                                                          March 26,          March 27,           March 26,           March 27,
                                                            1999               1998                1999                1998
                                                        ------------       ------------        ------------        ------------
<S>                                                    <C>                <C>                 <C>                 <C>
REVENUES:
Commissions                                             $  7,202,000       $  5,489,000        $ 12,838,000        $ 11,292,000
Net dealer inventory gains                                   790,000          1,917,000           1,256,000           3,062,000
Interest                                                   1,239,000            984,000           2,408,000           2,033,000
Transfer fees                                                226,000            183,000             437,000             390,000
Underwriting                                                 574,000          1,310,000           1,138,000           8,276,000
Other                                                        324,000            290,000             437,000             521,000
                                                        ------------       ------------        ------------        ------------

TOTAL REVENUES                                            10,355,000         10,173,000          18,514,000          25,574,000
                                                        ------------       ------------        ------------        ------------

EXPENSES:
Commissions                                                5,960,000          5,443,000          10,547,000          13,757,000
Salaries                                                   1,119,000          1,894,000           2,077,000           4,789,000
Clearing fees                                                385,000            415,000             710,000             844,000
Communications                                               295,000            475,000             574,000             974,000
Occupancy costs                                              580,000            912,000           1,237,000           1,811,000
Interest                                                     888,000            667,000           1,711,000           1,358,000
Professional fees                                            687,000            164,000           1,066,000             498,000
Taxes, licenses, registration                                107,000            251,000             220,000             492,000
Other                                                        315,000            824,000             613,000           1,614,000
                                                        ------------       ------------        ------------        ------------

TOTAL EXPENSES                                            10,336,000         11,045,000          18,755,000          26,137,000
                                                        ------------       ------------        ------------        ------------

Income (loss) from operations before income taxes             19,000           (872,000)           (241,000)           (563,000)
Income tax (expense) benefit                                   1,000            295,000              (2,000)            178,000
                                                        ------------       ------------        ------------        ------------

NET INCOME (LOSS)                                       $     20,000       $   (577,000)       $   (243,000)       $   (385,000)
                                                        ------------       ------------        ------------        ------------
                                                        ------------       ------------        ------------        ------------

EARNINGS (LOSS) PER COMMON SHARE
              Basic Earnings (Loss) Per Share           $       0.01       $      (0.38)       $      (0.16)       $      (0.26)
                                                        ------------       ------------        ------------        ------------
                                                        ------------       ------------        ------------        ------------
              Diluted Earnings (Loss) Per Share         $       0.01       $      (0.38)       $      (0.16)       $      (0.26)
                                                        ------------       ------------        ------------        ------------
                                                        ------------       ------------        ------------        ------------


WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING -BASIC FOR THE PERIOD                          1,505,799          1,517,674           1,482,992           1,482,496
                                                        ------------       ------------        ------------        ------------
                                                        ------------       ------------        ------------        ------------

WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING-DILUTED FOR THE PERIOD                         1,507,276          1,517,674           1,482,992           1,482,496
                                                        ------------       ------------        ------------        ------------
                                                        ------------       ------------        ------------        ------------
</TABLE>

                                       3
   The accompanying notes are an integral part of these financial statements.

<PAGE>

                      OLYMPIC CASCADE FINANCIAL CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                                                               --For The Six Month's Ended--
                                                                                  March 26,          March 27,
                                                                                    1999               1998
CASH FLOWS FROM OPERATING ACTIVITIES                                           ------------        ------------
<S>                                                                           <C>                 <C>
   Net loss                                                                    $   (243,000)       $   (385,000)
   Adjustments to reconcile net loss to net
   cash from operating activities
              Depreciation and amortization                                         197,000             392,000
              Issuance of common stock in lawsuit settlement                        135,000                   -
              Issuance of common stock as payment of expenses                       120,000                   -
   Changes in assets and liabilities
              Cash, cash equivalents and securities                             (32,311,000)          5,385,000
              Deposits                                                             (372,000)           (721,000)
              Receivables                                                         6,031,000          (9,002,000)
              Securities held for resale                                           (285,000)           (610,000)
              Other assets                                                         (267,000)           (421,000)
              Customer and broker payables                                       27,647,000           3,197,000
              Securities sold, but not yet purchased                                437,000            (370,000)
              Accounts payable, accrued expenses, and other liabilities             937,000            (593,000)
                                                                              -------------       -------------
                                                                                  2,026,000          (3,128,000)
                                                                              -------------       -------------

CASH FLOWS FROM INVESTING ACTIVITIES

              Purchase of fixed assets                                              (97,000)           (278,000)
                                                                              -------------       -------------

CASH FLOWS FROM FINANCING ACTIVITIES
              Borrowings on line of credit, net                                     300,000           1,200,000
              Payments on notes payable                                            (300,000)          1,925,000
              Payments on capital lease                                            (170,000)                  -
              Issuance of common stock through exercise of stock options            183,000               8,000
                                                                              -------------       -------------
                                                                                     13,000           3,133,000
                                                                              -------------       -------------

INCREASE (DECREASE) IN CASH                                                       1,942,000            (273,000)

CASH BALANCE
              Beginning of the period                                               551,000             979,000
                                                                              -------------       -------------

              End of the period                                                $  2,493,000        $    706,000
                                                                              -------------       -------------
                                                                              -------------       -------------

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
              Cash paid during the period for
              Interest                                                         $  1,675,000        $  1,309,000
                                                                              -------------       -------------
                                                                              -------------       -------------
              Income taxes                                                     $      2,000        $          -
                                                                              -------------       -------------
                                                                              -------------       -------------

SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND
                 FINANCING ACTIVITIES
              Warrants issued as a discount on notes payable                   $          -        $    293,000
                                                                              -------------       -------------
                                                                              -------------       -------------
              Note receivable from restructuring investment                    $          -        $    281,000
                                                                              -------------       -------------
                                                                              -------------       -------------
</TABLE>

                                       4

   The accompanying notes are an integral part of these financial statements.

<PAGE>

             OLYMPIC CASCADE FINANCIAL CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        MARCH 26, 1999 AND MARCH 27, 1998


THE ACCOMPANYING CONSOLIDATED FINANCIAL STATEMENTS OF OLYMPIC CASCADE 
FINANCIAL CORPORATION ("OLYMPIC" OR THE "COMPANY") HAVE BEEN PREPARED IN 
ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES FOR INTERIM 
FINANCIAL STATEMENTS AND WITH THE INSTRUCTIONS TO FORM 10-Q AND RULE 10-01 OF 
REGULATION S-X. ACCORDINGLY, THEY DO NOT INCLUDE ALL OF THE INFORMATION AND 
DISCLOSURES REQUIRED FOR ANNUAL FINANCIAL STATEMENTS. IN THE OPINION OF 
MANAGEMENT, ALL ADJUSTMENTS (CONSISTING OF NORMAL RECURRING ACCRUALS) 
CONSIDERED NECESSARY FOR A FAIR PRESENTATION HAVE BEEN INCLUDED. THE 
CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE PERIODS ENDED MARCH 26, 
1999 AND MARCH 27, 1998 ARE UNAUDITED. THE RESULTS OF OPERATIONS FOR THE 
INTERIM PERIODS ARE NOT NECESSARILY INDICATIVE OF THE RESULTS OF OPERATIONS 
FOR THE FISCAL YEAR. THESE FINANCIAL STATEMENTS SHOULD BE READ IN CONJUNCTION 
WITH THE CONSOLIDATED FINANCIAL STATEMENTS AND RELATED FOOTNOTES INCLUDED 
THERETO IN THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED 
SEPTEMBER 25, 1998.

NOTE 1 - OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING
         POLICIES

         NATURE OF BUSINESS - The Company is a 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 research, 
financial advisory services and investment banking services for both public 
offerings and private placements, and also provides retail brokerage and 
trade clearance operations.

         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 Olympic. This restructuring became effective in February 1997 
and was accounted for as a pooling of interests.

         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 $207,000 of bonus compensation to 
certain brokers.

                                       5

<PAGE>

         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"). Friend was an institutional firm and Travis was a small 
private placement firm. Neither of these firms had retail brokerage 
operations, which is the Company's primary focus. The Company had acquired 
each subsidiary in fiscal year 1997. Upon the sale of Friend, the Company 
received cash of $500,000, 55,509 shares of its common stock and potential 
fees resulting from pending corporate finance transactions in exchange for 
all of the common stock of Friend. Upon the sale of Travis, the Company 
received a note receivable of $281,000 in exchange for all of the common 
stock of Travis.

NOTE 2 - LINE OF CREDIT

         National has an unsecured line of credit of $3,000,000. The line is 
subject to renewal on August 1, 1999. Borrowings bear interest at the bank's 
prime rate. Historically, these borrowings are short-term and have not 
extended beyond a few days. Although at times National has not satisfied, and 
may not in the future satisfy, a minor loan covenant, the bank has continued 
to provide all necessary borrowings. Interest is payable monthly. At March 
26, 1999, National had $3,000,000 of borrowings outstanding.

NOTE 3 - CONTINGENCIES

         In April 1997, a Trust and three individuals, commenced an action 
against National as discussed 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.

         In May 1997, a minority stockholder of the Company commenced a 
lawsuit against the Company as discussed in the Company's Form 10-Q for the 
quarter ended December 31, 1998. In April 1999, all parties agreed to a 
settlement of this matter that is in the process of being finalized. As part 
of the settlement, the Company will issue to the plaintiff 25,000 shares of 
restricted common stock valued at approximately $100,000 and a five year 
warrant to acquire 50,000 shares of the Company's common stock at a price of 
$4.00 per share.

         In September 1997, a corporation commenced an action against 
National as discussed in the Company's Form 10-Q for the quarter ended 
December 31, 1998. In February 1999, all parties agreed to settle this 
litigation. As part of the settlement, the Company issued to the plaintiff 
40,000 shares of common stock valued at $135,000. In April 1999, the court 
dismissed this litigation with prejudice.

                                       6

<PAGE>

         In October 1998, a corporation commenced an action against National 
claiming that during the unsuccessful effort to complete an initial public 
offering of the plaintiff's stock National breached the terms of two letters 
of intent concerning the offering, breached their fiduciary duties, and 
engaged in both intentional and negligent misrepresentation. Compensatory 
damages of $650,000 are being sought in this matter as well as an unspecified 
amount of punitive damages.

         The Company 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.

         The Company's subsidiaries are defendants in various other 
arbitrations and administrative proceedings, lawsuits and claims, which in 
the aggregate seek general and punitive damages. 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.

ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
         AND RESULTS OF OPERATIONS

         THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 PROVIDES A SAFE 
HARBOR FOR FORWARD-LOOKING STATEMENTS. THIS QUARTERLY REPORT MAY CONTAIN 
CERTAIN STATEMENTS OF A FORWARD-LOOKING NATURE RELATING TO FUTURE EVENTS OR 
FUTURE BUSINESS PERFORMANCE. ANY SUCH STATEMENTS THAT REFER TO THE COMPANY'S 
ESTIMATED OR ANTICIPATED FUTURE RESULTS OR OTHER NON-HISTORICAL FACTS ARE 
FORWARD-LOOKING AND REFLECT THE COMPANY'S CURRENT PERSPECTIVE OF EXISTING 
TRENDS AND INFORMATION. THESE STATEMENTS INVOLVE RISKS AND UNCERTAINTIES THAT 
CANNOT BE PREDICTED OR QUANTIFIED AND, CONSEQUENTLY, ACTUAL RESULTS MAY 
DIFFER MATERIALLY FROM THOSE EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING 
STATEMENTS. SUCH RISKS AND UNCERTAINTIES INCLUDE, AMONG OTHERS, RISKS AND 
UNCERTAINTIES DETAILED IN THE COMPANY'S REGISTRATION STATEMENT ON FORM S-3 
(REGISTRATION NO. 333-74243), FILED WITH THE SECURITIES AND EXCHANGE 
COMMISSION ON MARCH 11, 1999, AS AMENDED, AND THE COMPANY'S OTHER SECURITIES 
AND EXCHANGE COMMISSION FILINGS, INCLUDING THE COMPANY'S ANNUAL REPORT ON 
FORM 10-K AND QUARTERLY REPORTS ON FORM 10-Q. THE FORWARD-LOOKING STATEMENTS 
SPEAK ONLY AS OF THE DATE OF THIS QUARTERLY REPORT. THE COMPANY UNDERTAKES NO 
OBLIGATION TO UPDATE PUBLICLY ANY FORWARD-LOOKING STATEMENT, WHETHER AS A 
RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE.

     QUARTER ENDED MARCH 26, 1999 COMPARED TO QUARTER ENDED MARCH 27, 1998

         The Company's second quarter of fiscal 1999 resulted in a slight 
increase in revenues and a decrease in expenses compared with the same period 
of fiscal 1998. The increase in revenue is due to growth in retail brokerage 
operations causing a significant increase in commission revenue.

                                       7

<PAGE>

         Revenues increased $182,000, or 2%, to $10,355,000 from $10,173,000. 
During the fourth quarter fiscal 1998, the Company sold its subsidiary, L.H. 
Friend, Weinress, Franksen & Presson, Inc. ("Friend"). Revenues increased 
$1,657,000 or 19% during the second quarter fiscal 1999 compared with the 
second quarter fiscal 1998, exclusive of Friend. The increase in revenues is 
due mainly to increased commission revenue. Commission revenue increased 
$1,713,000, or 31%, to $7,202,000 from $5,489,000 during the second quarter 
fiscal 1999 compared with the second quarter fiscal 1998. Commission revenue 
increased $1,888,000, or 36%, during the second quarter fiscal, exclusive of 
Friend. This increase is due to favorable market conditions and the addition 
of registered representatives.

         This increase in commission revenue almost offset the total decrease 
in net dealer inventory gains and underwriting revenues. Net dealer inventory 
gains decreased $1,127,000, or 59%, to $790,000 from $1,917,000 during the 
second quarter fiscal 1999 compared with the second quarter fiscal 1998. Net 
dealer inventory gains decreased $734,000, or 48%, exclusive of Friend. This 
decrease is due to reduced trading margins in stocks where the Company makes 
a market. Underwriting revenue decreased $736,000, or 56%, to $574,000 from 
$1,310,000 during the second quarter fiscal 1999 compared to the second 
quarter fiscal 1998. Underwriting revenue increased $163,000, or 40%, to 
$574,000 from $411,000 during the second quarter fiscal 1999 compared with 
the second quarter fiscal 1998, exclusive of Friend. Friend had underwriting 
revenue of $899,000 during the second quarter fiscal 1998 from participation 
in public offerings and various private placement fees. During the second 
quarter fiscal 1999 and the second quarter fiscal 1998, the Company did not 
manage a public underwriting. Underwriting revenue during the second quarter 
fiscal 1999 was generated primarily from the close of several private 
placement transactions and advisory fees.

         Although revenues increased expenses decreased $709,000, or 6%, to 
$10,336,000 from $11,045,000 during the second quarter fiscal 1999 from the 
second quarter fiscal 1998. This decrease in expenses is due to the expenses 
generated at Friend during the second quarter fiscal 1998. Expenses increased 
$1,173,000, or 13%, to $10,336,000 from $9,163,000 during the second quarter 
fiscal 1999 compared with the second quarter fiscal 1998, exclusive of 
Friend. Concurrent with the 36% increase in commission revenues, commission 
expenses increased 22%, or $1,088,000, to $5,960,000 from $4,872,000 during 
the second quarter fiscal 1999 compared with second quarter fiscal 1998, 
exclusive of Friend. Salaries decreased $775,000, or 41%, to $1,119,000 from 
$1,894,000. This decrease is due to the sale of Friend, which had salaries of 
$773,000 during the second quarter fiscal 1998. Overall, combined commissions 
and salaries as a percentage of revenue decreased 4% to 68% in the second 
quarter fiscal 1999 compared with 72% in the second quarter fiscal 1998.

         As anticipated, with the sale of Friend expenses regarding 
communications, occupancy, clearing, taxes, licenses and registration and 
other have decreased from the second quarter fiscal 1998 to the second 
quarter fiscal 1999. Communications expenses, 

                                       8

<PAGE>

mainly telephone, telequote and mailing decreased $180,000, or 38%, to 
$295,000 from $475,000. Friend had communications expenses of $99,000 in the 
second quarter fiscal 1998. Occupancy expense, consisting mainly of rent, 
office supplies and depreciation decreased $332,000, or 36%, to $580,000 from 
$912,000. Friend had occupancy expenses totaling $165,000 during the second 
quarter fiscal 1998. The additional decrease in communications and occupancy 
relates to National closing a branch office in New York and subletting excess 
office space in Chicago. Clearing fees decreased $30,000, or 7%, to $385,000 
from $415,000. This relates to the sale of Friend, which accounted for 
$94,000 of clearing expenses in the second quarter fiscal 1998. Exclusive of 
Friend, clearing fees actually increased $64,000 due to the increased volume 
of transactions. Taxes, licenses and registration decreased $144,000, or 57%, 
to $107,000 from $251,000. Finally, other expenses decreased $509,000, or 
62%, to $315,000 from $824,000 in the second quarter of fiscal 1999 and 1998, 
respectively. The sale of Friend and closure of the branch office in New York 
contributed $247,000 to this decrease. Additionally, in second quarter fiscal 
1998, the Company incurred receivable write-offs of $97,000 and additional 
travel and moving expenses of $93,000 at Olympic and National. During the 
second quarter fiscal 1999, amortization expenses decreased $57,000 from the 
second quarter fiscal 1998. 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 and professional fees increased during second 
quarter fiscal 1999 as compared with the second quarter fiscal 1998. Interest 
expense increased $221,000, or 33%, to $888,000 from $667,000. 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 $255,000, or 
26%, to $1,239,000 from $984,000.

         Professional fees increased $523,000, or 319%, to $687,000 from 
$164,000. After adjusting for professional fees paid at Friend, professional 
fees increased $551,000, or 406%, in the second quarter fiscal 1999 compared 
with second first quarter fiscal 1998 due to increased litigation (See Part 
II, Item 1). As part of this litigation, the Company settled a lawsuit in 
February 1999, whereby the Company issued 40,000 shares of common stock 
valued at $135,000. This settlement is included in professional fees for the 
1999 quarter.

         Overall, the Company reported net income of $20,000 or $.01 per 
share for the second quarter fiscal 1999 compared with a loss of $577,000 or 
$.38 per share in the second quarter fiscal 1998.

SIX MONTHS ENDED MARCH 26, 1999 COMPARED TO SIX MONTHS ENDED MARCH 27, 1998

         The Company's first six months of fiscal 1999 resulted in 
significant decreases in both revenues and expenses compared with the same 
period of fiscal 1998. These decreases were primarily due to the sale of two 
subsidiaries, Friend and Travis Capital, Inc. 

                                       9

<PAGE>

("Travis"). For the six months total revenues decreased 27% to $18,514,000 in 
fiscal 1999 from $25,574,000 in fiscal 1998. This decrease in revenue is due 
primarily to the decrease in underwriting revenue and dealer inventory gains 
as the weak capital markets for initial public offerings by small cap issuers 
continued.

         For the first six months of fiscal 1999 underwriting revenue 
decreased $7,138,000 or 86% to $1,138,000 from $8,276,000 as compared with 
the same period for fiscal 1998. National participated in two private 
placements raising approximately $7 million in gross proceeds in the first 
six months of fiscal 1999. During the first six months fiscal 1998, National, 
through the management of two underwritings and co-management of one 
underwriting with Friend, as well as three successful private placements, 
generated $4,284,000 of underwriting revenue. Friend managed its first 
underwriting during the first six months of fiscal 1998 and participated in 
several other underwritings and private placements, generating $3,903,000 of 
underwriting revenue.

         Net dealer inventory gains decreased $1,806,000, or 59%, to 
$1,256,000 from $3,062,000 during the first six months of fiscal 1999 
compared with the same period of fiscal 1998. Exclusive of Friend and Travis, 
net dealer inventory gains decreased $1,369,000 or 52%. This decrease is due 
to reduced trading margins in stocks where the Company makes a market.

         Although overall revenue decreased during the first six months of 
fiscal 1999, commission revenue increased $1,546,000, or 14%, to $12,838,000 
from $11,292,000. Exclusive of Friend and Travis, commission revenue 
increased $2,272,000, or 22%, during the first six months of fiscal 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 $7,382,000, or 28%, to $18,755,000 from $26,137,000 in fiscal 1998. 
This decrease in expenses was anticipated due to significant decreases in 
revenues. The most significant decreases were commission expense and salaries.

         Commission expense decreased $3,210,000, or 23%, to $10,547,000 
during the first six months fiscal 1999 from $13,757,000 in the first six 
months fiscal 1998. Salaries decreased $2,712,000, or 57%, to $2,077,000 from 
$4,789,000. Friend and Travis had combined commission and salary expense of 
$4,235,,000 in the first six months of fiscal 1998. The remaining decrease in 
salary expense was $601,000 or 22% in the first six months of fiscal 1999, as 
management incurred salary reductions in an effort to reduce overhead 
expenses. Overall, combined commissions and salaries as a percentage of 
revenue decreased 5% to approximately 68% from approximately 73% in the first 
six months of fiscal 1999 and 1998, respectively.

         As anticipated, with the sale of Friend and Travis expenses 
regarding communications, occupancy, clearing, taxes, licenses and 
registration and other have decreased from the first six months of fiscal 
1998 to the first six months of fiscal 1999. 

                                       10

<PAGE>

Communications expenses, mainly telephone, telequote and mailing decreased 
$400,000, or 41%, to $574,000 from $974,000. Friend and Travis had combined 
communications expenses of $210,000 in fiscal 1998. Occupancy expense, 
consisting mainly of rent, office supplies and depreciation decreased 
$574,000, or 32%, to $1,237,000 from $1,811,000. This decrease relates to the 
sale of the two subsidiaries as well as National closed a branch office in 
New York and subletting excess office space in Chicago. Clearing fees 
decreased $134,000, or 16%, to $710,000 from $844,000. This relates to the 
sale of Friend, which accounted for $242,000 of clearing expenses in the 
first six months of fiscal 1998. Exclusive of Friend, clearing fees actually 
increased $108,000 due to the increased volume of transactions. Taxes, 
licenses and registration decreased $272,000, or 55%, to $220,000 from 
$492,000. Finally, other expenses decreased $1,001,000, or 62%, to $613,000 
from $1,614,000 during the first six months of fiscal 1999 and 1998, 
respectively. The sale of the two subsidiaries and closure of a branch office 
in New York contributed $497,000 to this decrease. Additionally, during the 
first six months of fiscal 1998, the Company incurred receivable write-offs 
of $97,000 and additional travel and moving expenses of $273,000 at Olympic 
and National. During the first six months of fiscal 1999, amortization 
expenses decreased $117,000 from the first six months of fiscal 1998. 
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 and professional fees increased during first six 
months of fiscal 1999 as compared with the first six months of fiscal 1998. 
Interest expense increased $353,000, or 26%, to $1,711,000 from $1,358,000. 
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 $375,000, 
or 18%, to $2,408,000 from $2,033,000.

         Professional fees increased $568,000, or 114%, to $1,066,000 from 
$498,000. After adjusting for professional fees paid at Friend and Travis, 
professional fees increased $623,000, or 141%, during the first six months of 
fiscal 1999 compared with the first six months of fiscal 1998 due to 
increased litigation (See Part II, Item 1). As part of this litigation, the 
Company settled a lawsuit in February 1999, whereby the Company issued 40,000 
shares of common stock valued at $135,000. This settlement is included in 
professional fees for the six months ended March 26, 1999.

         Overall, the Company reported a loss of $243,000, or $.16 per share, 
during the first six months of fiscal 1999 compared with a loss of $385,000, 
or $.26 per share, during the same period fiscal 1998.

LIQUIDITY AND CAPITAL RESOURCES

         As with most financial 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 

                                       11

<PAGE>

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. 
Historically, these borrowings are short-term and have not extended beyond a 
few days. Although at times National has not satisfied and may not in the 
future satisfy a minor loan covenant, the bank has continued to provide all 
necessary borrowings. The line of credit agreement expires August 1, 1999. At 
March 26, 1999 National had $3,000,000 of borrowings outstanding.

         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 
March 26, 1999, National's net capital exceeded the requirement by $1,457,000.

         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 the company maintain minimum net capital equal to the greater of 
$100,000 or 6-2/3% of aggregate indebtedness. At March 31, 1998, 
WestAmerica's net capital exceeded the requirement by $79,000.

         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.

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

         Unlike WestAmerica, National requires its registered representatives 
to be responsible for substantially all of the overhead expenses associated 
with their sales efforts, including their office furniture, sales assistants, 
telephone service and supplies.

         The Company believes its internally generated liquidity, together 
with access to external capital and debt resources will be sufficient to 
satisfy existing operations. However, if the Company continues to expand its 
operations and acquire other businesses the Company will require additional 
capital.

                                      12

<PAGE>

YEAR 2000 UPDATE

         The Company defines a system as Year 2000 compliant as one 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, critical 
to operations. The Company tested all of its internal IT systems and 
concluded that not all systems are compliant under the above definition. The 
Company has determined the remedies necessary to achieve Year 2000 
compliance. The Company has retained an outside consulting firm, Washington 
Web Site Services, which works on site and will continue working with the 
Company, at a minimum, until all IT systems are Year 2000 compliant.

         In phase two, the Company has begun replacing hardware chips, 
software and entire components in those systems deemed to be non-compliant. 
The Company expects to complete phase two by September 1999 for National and 
by May 1999 for WestAmerica. As required by the NASD, National and 
WestAmerica will be completing a Year 2000 readiness report. As part of this 
report, the Company engaged its independent accounting firm to perform 
certain agreed upon procedures and report on the Company's process for 
addressing Year 2000 problems. These reports were filed by April 30, 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 has 
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 approximately $100,000 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.

                                       13

<PAGE>


         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 will 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.

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

                                    PART II

The Company is not required to respond to Items 1 though 6 in Part II, except 
as follows:

ITEM 1 - 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.       MAYNARD MALL REALTY TRUST V. NATIONAL SECURITIES CORPORATION, ET AL.,
         United States District Court, Western District of Washington, Case No.
         97-CV-00967. See disclosure in the Company's Form 10-Q for the quarter
         ended December 31, 1998.

         In April 1999, all parties agreed to a settlement of this matter that
         is in the process of being finalized. As part of the settlement, the
         Company will issue to the plaintiff 25,000 shares of restricted common
         stock valued at approximately $100,000 and a five year warrant to
         acquire 50,000 shares of the Company's common stock at a price of $4.00
         per share.

3.       CASULL ARMS CORPORATION V. NATIONAL SECURITIES CORP. AND ROBERT A.
         SHUEY, III, United States District Court, District of Wyoming,
         97CV-229B. See disclosure in the Company's Form 10-Q for the quarter
         ended December 31, 1998.

                                       14

<PAGE>

         In February 1999, all parties settled this litigation. As part of the
         settlement, the Company issued to the plaintiff 40,000 shares of common
         stock valued at $135,000. In April 1999, the court dismissed this
         litigation with prejudice.

4.       THERMOENERGY CORPORATION V. NATIONAL SECURITIES CORPORATION, ET AL.,
         United States District Court, Eastern District of Arkansas, Docket No.
         LR-C-98.657. This action was commenced in October 1998 against the
         Company, National and an officer of the Company relating to purported
         attempts to underwrite a public offering on behalf of the plaintiff.
         The plaintiff alleges that in the course of the ultimately unsuccessful
         efforts to complete an initial public offering, National breached the
         terms of two letters of intent, breached fiduciary duties to the
         plaintiff and engaged in both intentional and negligent
         misrepresentation. The complaint also seeks relief based on a
         quasi-contractual theory of "promissory estoppel." The plaintiff seeks
         $650,000 in compensatory damages, plus an unspecified amount of
         punitive damages. The Company denies all liability to the plaintiff and
         believes it has meritorious defenses to plaintiff's claims. The Company
         presently intends to continue its vigorous defense of this action.

5.       LITIGATION INVOLVING COMPLETE MANAGEMENT, INC. The Company 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.

ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS

         In February 1999, the Company issued 40,000 unregistered shares of 
its common stock in settlement of a lawsuit. The common stock was valued at 
$135,000. The issuance of these securities was exempt from registration under 
the Securities Act pursuant to Section 4(2) thereof on the basis that the 
transaction did not involve a public offering.

         In March 1999, the Company issued 20,000 unregistered shares of its 
common stock to a law firm that represents the Company in various matters. 
These shares were issued in payment of balances owed for past services 
rendered. The common stock was valued at $80,000. The issuance of these 
securities was exempt from registration under the Securities Act pursuant to 
Section 4(2) thereof on the basis that the transaction did not involve a 
public offering.

         In March 1999, the Company issued 10,000 unregistered shares of its 
common stock to a law firm that represents the Company in various matters. 
These shares were issued in payment of balances owed for past services 
rendered. The common stock was valued at $40,000. The issuance of these 
securities was exempt from registration under the Securities Act pursuant to 
Section 4(2) thereof on the basis that the transaction did not involve a 
public offering.

                                       15

<PAGE>

ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         The Company held its annual meeting of shareholders on March 25, 
1999. The shareholders elected for the ensuing year all of the nominees for 
the Board of Directors as follows: Steven A. Rothstein, Gary A. Rosenberg, 
James C. Holcomb, Jr. and D.S. Patel. Also, the shareholders ratified the 
appointment of Feldman Sherb Ehrlich & Co., P.C. as independent accountants 
for the fiscal year ending September 24, 1999.

The voting results are as follows:

<TABLE>
<CAPTION>

                                                         Number of Shares
                                                         ----------------
                                                                                       Broker
                                      For            Against        Abstentions       Non-Votes
<S>                                <C>               <C>              <C>              <C>
Election of the Board
of Directors                        814,594           23,726           12,139           49,107



Ratify the appointment of
Feldman Sherb Ehrlich
& Co., P.C. as independent
accountants                         844,427            5,797              235           49,107
</TABLE>

                                       16

<PAGE>

                                   SIGNATURES


Pursuant to the requirements of the Securities 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 AND SUBSIDIARIES



May 7, 1999                By: /s/ Steven A. Rothstein
Date                           Steven A. Rothstein, Chairman,
                               President and Chief Executive Officer




May 7, 1999                By: /s/ Robert H. Daskal
Date                           Robert H. Daskal, Senior Vice
                               President, Chief Financial Officer,
                               Secretary and Treasurer




May 7, 1999                By: /s/ David M. Williams
Date                           David M. Williams
                               Controller

                                       17