<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 December 31, 2000         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, IL 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 February 9, 2001 was 2,220,449.


<PAGE>

                      OLYMPIC CASCADE FINANCIAL CORPORATION

                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

                                     ASSETS
<TABLE>
<CAPTION>

                                            December 31,           September 29,
                                               2000                    2000
                                           (unaudited)              (audited)
                                         ---------------         ---------------

<S>                                       <C>                    <C>

CASH, subject to immediate withdrawal       $ 1,563,000             $ 3,020,000
CASH, CASH EQUIVALENTS AND SECURITIES        42,328,000              29,517,000
DEPOSITS                                      4,017,000               1,792,000
RECEIVABLES

  Customers                                  35,839,000              54,243,000
  Brokers and dealers                           773,000               1,994,000
  Other                                         695,000                 394,000
SECURITIES HELD FOR RESALE, at market         1,106,000                 376,000
FIXED ASSETS, net                             1,063,000               1,112,000
GOODWILL, net                                    65,000                  74,000
OTHER ASSETS                                  1,035,000                 393,000
                                         ---------------         ---------------
                                           $ 88,484,000            $ 92,915,000
                                         ===============         ===============


                      LIABILITIES AND STOCKHOLDERS' EQUITY

PAYABLES

            Customers                      $ 69,663,000            $ 74,183,000
            Brokers and dealers               4,192,000               5,329,000
SECURITIES SOLD, BUT NOT YET PURCHASED,
  at market                                     141,000                 192,000
ACCOUNTS PAYABLE, ACCRUED EXPENSES AND
  OTHER LIABILITIES                           2,937,000               3,976,000
REVOLVING CREDIT LINE                         3,000,000                       -
NOTES PAYABLE                                   614,000                 614,000
CAPITAL LEASE PAYABLE                           513,000                 582,000
                                         ---------------         ---------------
                                             81,060,000              84,876,000
                                         ---------------         ---------------

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, 2,163,846 and
      2,153,846 shares issued and outstanding,
         respectively                            43,000                  43,000
  Additional paid-in capital                  8,868,000               8,810,000
  Accumulated deficit                        (1,487,000)               (814,000)
                                         ---------------         ---------------
                                              7,424,000               8,039,000
                                         ---------------         ---------------
                                           $ 88,484,000            $ 92,915,000
                                         ===============         ===============
</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>

                                                  --------Quarter Ended---------
                                                 December 31,       December 31,
                                                     2000               1999
                                             ----------------   ----------------
<S>                                            <C>               <C>

REVENUES:
Commissions                                      $ 6,240,000        $ 9,382,000
Net dealer inventory gains                         5,131,000          1,782,000
Interest                                           1,757,000          1,661,000
Transfer fees                                        275,000            292,000
Investment banking                                   584,000          1,216,000
Other                                                444,000            138,000
                                             ----------------   ----------------

TOTAL REVENUES                                    14,431,000         14,471,000
                                             ----------------   ----------------
EXPENSES:
Commissions                                        8,127,000          8,528,000
Salaries                                           2,219,000          1,606,000
Clearing fees                                      1,010,000            622,000
Communications                                       564,000            326,000
Occupancy costs                                    1,167,000            716,000
Interest                                             976,000            953,000
Professional fees                                    438,000            506,000
Taxes, licenses, registration                        247,000            208,000
Other                                                355,000            601,000
                                             ----------------   ----------------
TOTAL EXPENSES                                    15,103,000         14,066,000
                                             ----------------   ----------------
NET INCOME (LOSS)                                 $ (672,000)         $ 405,000
                                             ================   ================
EARNINGS (LOSS) PER COMMON SHARE
  Basic Earnings (loss) Per Share                    $ (0.31)            $ 0.24
                                             ================   ================
  Diluted Earnings (loss) Per Share                  $ (0.31)            $ 0.23
                                             ================   ================
BASIC COMMON SHARES OUTSTANDING
FOR THE PERIOD                                     2,159,760          1,701,794
                                             ================   ================
DILUTED SHARE OUTSTANDING
FOR THE PERIOD                                     2,159,760          1,778,455
                                             ================   ================

</TABLE>

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

                                       3


<PAGE>
                      OLYMPIC CASCADE FINANCIAL CORPORATION

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                   (UNAUDITED)
<TABLE>
<CAPTION>

                                                                                --------------Quarter Ended---------------
                                                                                  December 31,            December 31,
                                                                                      2000                    1999
                                                                                ------------------      ------------------
<S>                                                                                 <C>                       <C>

CASH FLOWS FROM OPERATING ACTIVITIES
   Net income (loss)                                                            $        (672,000)      $         405,000
   Adjustments to reconcile net income (loss) to net
   cash used in operating activities
             Depreciation and amortization                                                160,000                 113,000
             Compensation related to issuance of stock options                             22,000                  20,000
   Changes in assets and liabilities
             Cash, cash equivalents and securities                                    (12,811,000)             (3,208,000)
             Deposits                                                                  (2,225,000)             (1,180,000)
             Receivables                                                               19,324,000              (5,979,000)
             Securities held for resale                                                  (730,000)                (38,000)
             Other assets                                                                (661,000)               (356,000)
             Payables                                                                  (6,681,000)             13,785,000
             Securities sold, but not yet purchased                                       (51,000)                 71,000
                                                                                ------------------      ------------------
                                                                                       (4,325,000)              3,633,000
                                                                                ------------------      ------------------

CASH FLOWS FROM INVESTING ACTIVITIES
             Purchase of fixed assets                                                     (84,000)                (78,000)
                                                                                ------------------      ------------------


CASH FLOWS FROM FINANCING ACTIVITIES
             Borrowings on line of credit                                               3,000,000              (1,900,000)
             Payments on capital lease                                                    (85,000)                (85,000)
             Exercise of stock options and warrants                                        37,000                 224,000
                                                                                ------------------      ------------------
                                                                                        2,952,000              (1,761,000)
                                                                                ------------------      ------------------

INCREASE (DECREASE) IN CASH                                                            (1,457,000)              1,794,000

CASH BALANCE

             Beginning of the period                                                    3,020,000                 384,000
                                                                                ------------------      ------------------

             End of the period                                                  $       1,563,000       $       2,178,000
                                                                                ==================      ==================

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
             Cash paid during the period for
             Interest                                                           $         968,000       $         953,000
                                                                                ==================      ==================
             Income taxes                                                       $         324,000       $               -
                                                                                ==================      ==================
</TABLE>

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

                                       4

<PAGE>



             OLYMPIC CASCADE FINANCIAL CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     DECEMBER 31, 2000 AND DECEMBER 31, 1999

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 DECEMBER 31, 2000 AND DECEMBER 31, 1999 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 29, 2000.

NOTE 1 - OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

               NATURE  OF  BUSINESS  -  The  Company  is  a  financial  services
organization,  operating through its three wholly owned  subsidiaries,  National
Securities    Corporation    ("National"),    WestAmerica    Investment    Group
("WestAmerica") and Canterbury Securities Corporation ("Canterbury"). 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  (i)
research,  financial  advisory  services  and  sales,  (ii)  investment  banking
services  for both public  offerings  and private  placements  and (iii)  retail
brokerage and trade clearance  operations.  In April 2000, the Company commenced
online  trading  services for its  customers on the Internet  through  NSCdirect
(www.nscdirect.com).

               EARNINGS  (LOSS)  PER SHARE - Basic  earnings  (loss)  per common
share is  based  upon the net  income  (loss)  for the  quarter  divided  by the
weighted average number of common shares outstanding during the quarter. For the
first  quarter of fiscal  2001 and 2000,  the number of shares used in the basic
earnings (loss) per share calculation was 2,159,760 and 1,701,794, respectively.
Diluted  earnings  (loss)  per  common  share  assumes  that  all  common  stock
equivalents have been converted to common shares using the treasury stock method
at the beginning of the quarter.  For the first quarter of fiscal 2001 and 2000,
the number of shares used in the diluted  earnings (loss) per share  calculation
was 2,159,760 and 1,778,455, respectively.

NOTE 2 - LINE OF CREDIT

At December  31,  2000,  National  had a secured  line of credit of  $3,000,000.
During  January  2001,  National  consummated  a new  secured  line of credit of
$5,000,000. The line is subject to renewal on December 31, 2001. Borrowings bear
interest at the call money rate plus 1%. Interest is payable  monthly.  The line
is secured by certain assets of National  excluding items  prohibited from being
pledged and assets included in the SEC Customer  Protection Rule 15c3-3 formula.
These  borrowings  are short-term and generally do not extend beyond a few days.
At December 31, 2000, National had $3,000,000 in borrowings outstanding.

<PAGE>

NOTE 3 - NOTES PAYABLE

Subsequent to December 31, 2000, the Company  executed two promissory notes each
in the  amount  of  $1,000,000.  The notes  bear  interest  annually  at 9% with
interest paid quarterly. The principal of each note matures on January 25, 2004.
In connection  with each note,  warrants were issued for the purchase of 100,000
shares of the  Company's  common stock at an exercise  price of $5.00 per share.
The warrants, which expire on January 25, 2004, were valued at $50,000 each, and
have been recorded as a discount to the respective notes.

Additionally,  on  February  1, 2001,  National  executed a secured  demand note
collateral  agreement with an employee of the Company,  to borrow  securities as
collateral  to be  pledged  through  an  unrelated  broker-dealer,  which have a
borrowing  value totaling  $1,000,000.  This note bears interest  annually at 5%
with  interest  paid  monthly.  The demand note matures on February 1, 2004.  In
connection with the note, a warrant was issued for the purchase of 75,000 shares
of the  Company's  common  stock at an  exercise  price of $5.00 per share.  The
warrant,  which expires on February 1, 2004,  was valued at $37,500 and has been
recorded as a discount to the note.

NOTE 4 - COMMITMENTS

During the quarter the Company entered into two employment agreements.  The term
of both of these  agreements  is two years,  expiring in October  2002,  with an
annual salary of $300,000 plus bonus based upon operating results of the Company
as defined in the agreement.  Additionally,  as part of each agreement,  100,000
options to acquire the Company's  common stock were  granted,  with vesting over
two years, at an exercise price of $5.75 per share.

NOTE 5 - CONTINGENCIES

In June 1997, a Trust and three individuals, commenced a lawsuit against Olympic
and  National.  The action  against  Olympic  was  subsequently  dismissed.  The
plaintiffs'  alleged the  defendants'  failure to purchase  securities from them
constitutes,  among other things, breach of contract, securities rule violations
and fraud.  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.  The United
States Court of Appeals for the Ninth  Circuit  affirmed  the  District  Court's
dismissal on December 20, 2000.

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

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

                                       6
<PAGE>

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. 333-80247), FILED
WITH THE  SECURITIES  AND EXCHANGE  COMMISSION ON JUNE 9, 1999 AND THE COMPANY'S
OTHER SECURITIES AND EXCHANGE COMMISSION FILINGS, INCLUDING THE COMPANY'S ANNUAL
REPORT ON FORM 10-K AND  QUARTERLY  REPORTS  ON FORM 10-Q.  ANY  FORWARD-LOOKING
STATEMENTS CONTAINED IN OR INCORPORATED INTO THIS QUARTERLY REPORT 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 DECEMBER 31, 2000 COMPARED TO QUARTER ENDED DECEMBER 31, 1999


The  Company's  first  quarter of fiscal 2001 resulted in little change in total
revenues,  but an increase in expenses  compared  with the same period of fiscal
2000.  During the first quarter of fiscal 2001, the Company,  through  National,
expanded  by adding a  significant  branch  office  in New York,  New York and a
retail  office  in Boca  Raton,  Florida.  As part of this  expansion,  National
realized non-recurring expenses of approximately $500,000.

The office in New York City  consists of employee  traders,  independent  retail
brokers, back office employees and compliance  personnel.  The office focuses on
principal  mark-ups  and  mark-downs  as well as agency  trading of fixed income
products,   OTC  and  Listed   equities   to  various   institutional   clients.
Additionally,  this office engages in proprietary trading of Listed equities and
retail   brokerage.   Beginning  in  February   2001,   National   expanded  its
market-making activities through this office. The office in Boca Raton, consists
of independent contractor retail brokers.

Revenues were  virtually  unchanged at $14,431,000 in fiscal 2001 as compared to
$14,471,000 in fiscal 2000.  Although total revenues did not change,  the mix of
commission  revenue,  net dealer inventory gains,  investment  banking and other
revenue did change from the first quarter of fiscal year 2000.

Commission revenue decreased $3,142,000 or 33% to $6,240,000 from $9,382,000 due
to the weaker  overall  market  compared with the strong market during the first
quarter of fiscal 2000. Net dealer inventory gains increased  $3,349,000 or 188%
to $5,131,000  from  $1,782,000 due to the additional of traders in the New York
City office and the addition of an  institutional  trader in Seattle  during the
second quarter of fiscal 2000.

Investment  banking revenue decreased $632,000 or 52% to $584,000 in fiscal 2001
from $1,216,000 in fiscal 2000. National  participated in two private placements
raising  approximately  $1 million in gross proceeds during the first quarter of
fiscal 2001.  During the same period in fiscal 2000,  National  participated  in
five private placements raising  approximately $10 million in gross proceeds for
clients.
                                       7
<PAGE>

Other revenues  increased  $306,000 or 222% to $444,000 from $138,000.  The main
reason for this increase is income from trading  activities  attributable to the
New York City office and increased asset management fees.

As a result of the increased  expansion at National,  total  expenses  increased
$1,037,000 or 7% to $15,103,000 in fiscal 2001 from $14,066,000 in fiscal 2000.

Commission expense,  which includes expenses related to commission revenue,  net
dealer  inventory  gains and  investment  banking,  decreased  $401,000 or 5% to
$8,127,000  in fiscal 2001 from  $8,528,000  in fiscal 2000.  This is consistent
with the 3% decrease in combined revenues from commissions, net dealer inventory
gains and investment banking during the same period. Salaries increased $613,000
or 38% to  $2,219,000  from  $1,606,000.  This increase was due to the increased
number of  employees  in New York City,  the  addition of new  employees  in the
latter part of fiscal 2000 and annual  raises given during the first  quarter of
fiscal 2001.  Overall,  combined  commissions  and  salaries as a percentage  of
revenue  increased  2% to 72% from 70% in the first  quarter of fiscal  2001 and
2000, respectively.

As anticipated with the increased expansion,  expenses regarding communications,
occupancy,  clearing fees, taxes,  licenses and registration have increased from
the  first  quarter  fiscal  2000 to the first  quarter  fiscal  2001.  The most
significant  expense increases were clearing fees,  communications and occupancy
costs.

Clearing fees  increased  $388,000 or 62% to $1,010,000  from  $622,000,  mainly
relating to the  increased  business  generated  from the New York City  office.
Communication  expenses  increased $238,000 to $564,000 or 73% from $326,000 due
to the New  York  City  office  as  well as  costs  associated  with  NSCdirect.
Occupancy  costs increased  $451,000 or 63% to $1,167,000  from $716,000,  again
mainly relating to the New York City office.

Other expenses  decreased $246,000 or 41% to $355,000 from $601,000 in the first
quarter of fiscal 2001 and 2000,  respectively.  In the first  quarter of fiscal
2001,  the most  significant  change was the decrease in customer  write-offs of
$370,000 from the first quarter of fiscal 2000.

Interest expense  increased  modestly during the first quarter of fiscal 2001 as
compared  with the first  quarter of fiscal  2000.  Interest  expense  increased
$23,000 or 2% to $976,000 from $953,000.  The interest expense increase was more
than offset by increased  interest  revenue of $96,000 or 6% to $1,757,000  from
$1,661,000.

Due to the  increased  costs  associated  with this  expansion and the continued
slumping  markets  the Company  reported a net loss of $672,000  compared to net
income of $405,000 for fiscal 2000. Overall, diluted earnings were a net loss of
$.31 per  share as  compared  with net  income  of $.23 per  share for the first
quarter ended December 31, 2000 and December 31, 1999, respectively.

                                       8
<PAGE>

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   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.  At December  31,  2000,
National  had a  $3,000,000  revolving  secured  credit  facility  with  Bank of
America.  During January 2001, National consummated a new secured line of credit
of $5,000,000 with American National Bank and Trust Company of Chicago, which is
guaranteed by the Company.  The line is subject to renewal on December 31, 2001.
Borrowings  bear  interest  at the call money rate plus 1%.  Interest is payable
monthly.  These  borrowings  are short-term and generally do not extend beyond a
few  days.  At  December  31,  2000,   National  had  $3,000,000  in  borrowings
outstanding.  Additionally, National may borrow up to 70% of the market value of
eligible securities pledged through an unrelated broker-dealer.

Subsequent to December 31, 2000, the Company  executed two promissory notes each
in the  amount  of  $1,000,000.  The notes  bear  interest  annually  at 9% with
interest paid quarterly. The principal of each note matures on January 25, 2004.
In connection  with each note,  warrants were issued for the purchase of 100,000
shares of the  Company's  common stock at an exercise  price of $5.00 per share.
The warrants, which expire on January 25, 2004, were valued at $50,000 each, and
have been recorded as a discount to the respective notes.

Additionally,  on  February  1, 2001,  National  executed a secured  demand note
collateral  agreement with an employee of the Company,  to borrow  securities as
collateral  to be  pledged  through  an  unrelated  broker-dealer,  which have a
borrowing  value totaling  $1,000,000.  This note bears interest  annually at 5%
with  interest  paid  monthly.  The demand note matures on February 1, 2004.  In
connection with the note, a warrant was issued for the purchase of 75,000 shares
of the  Company's  common  stock at an  exercise  price of $5.00 per share.  The
warrant,  which expires on February 1, 2004,  was valued at $37,500 and has been
recorded as a discount to the note.

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  December  31,  2000,
National's net capital exceeded the requirement by $3,648,000.

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 December 31, 2000, WestAmerica's net capital exceeded
the requirement by $186,000.

Canterbury,  as a  registered  broker-dealer,  is also  subject to the SEC's Net
Capital Rule 15c3-1, which, under the standard method,  requires that Canterbury
maintain minimum net capital equal to $5,000. At December 31, 2000, Canterbury's
net capital exceeded the requirement by $3,877.

Advances,   dividend  payments  and  other  equity  withdrawals  from  National,
WestAmerica  or Canterbury  are  restricted by the  regulations  of the SEC, and

                                       9
<PAGE>

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.

The Company believes its internally generated liquidity, together with access to
external  capital and debt  resources  will be  sufficient  to satisfy  existing
operations.  The  $3,000,000  of  additional  capital  raised  by  the  Company,
subsequent  to the first  quarter  of fiscal  2001,  will be used  primarily  to
support its expanded  market  making  activities.  Additionally,  as the Company
further expands its operations,  or acquires other businesses,  the Company will
likely require additional capital.

                                     PART II

ITEM 1 - LEGAL PROCEEDINGS

During the quarter, there was a development in the following proceeding:

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

On February 16, 1999, the District  Court  dismissed the  plaintiffs'  remaining
claims  against  National in their  entirety and granted  National's  motion for
summary  judgment.  A final  judgment was issued by the court on April 26, 1999.
The plaintiffs  filed a notice of appeal on May 4, 1999. The United States Court
of Appeals for the Ninth  Circuit  affirmed  the District  Court's  dismissal on
December 20, 2000.

ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K

a) Exhibits

10.25    Loan and security agreement January 2001.
27.      Financial Data Schedule
b) Reports on Form 8-K (None)












                                       10
<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

February 12, 2001                        By: Steven A. Rothstein
Date                                     Steven A. Rothstein, Chairman and
                                         Chief Executive Officer




February 12, 2001                        By: Robert H. Daskal
Date                                     Robert H. Daskal, Senior Vice
                                         President, Chief Financial Officer,
Secretary and Treasurer




February 12, 2001                        By:  David M. Williams
Date                                     David M. Williams, Corporate Controller
                                         and Chief Accounting Officer
000