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, 2001         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 8, 2002 was 2,236,449.

                                       1
<PAGE>
                      OLYMPIC CASCADE FINANCIAL CORPORATION
                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

                                     ASSETS
<TABLE>
<CAPTION>
                                                                              December 31,       September 28,
                                                                                2001                 2001
                                                                              (unaudited)       (see Note below)
                                                                             -------------        -------------
<S>                                                                             <C>                  <C>
CASH, subject to immediate withdrawal                                        $    877,000         $    150,000
CASH, segregated in escrow                                                        454,000              435,000
CASH, CASH EQUIVALENTS AND SECURITIES                                             243,000           37,188,000
DEPOSITS                                                                        2,309,000            4,654,000
RECEIVABLES
             Customers                                                            171,000           29,755,000
             Brokers and dealers                                                2,872,000              669,000
             Other                                                              1,289,000              836,000
SECURITIES HELD FOR RESALE, at market                                             516,000            1,131,000
FIXED ASSETS, net                                                                 725,000              841,000
OTHER ASSETS                                                                    1,969,000            1,940,000
                                                                             -------------        -------------
                                                                             $ 11,425,000         $ 77,599,000
                                                                             =============        =============

                      LIABILITIES AND STOCKHOLDERS' EQUITY

CASH OVERDRAFT                                                               $          -         $  1,556,000
PAYABLES
             Customers                                                            178,000           54,511,000
             Brokers and dealers                                                  594,000           10,020,000
SECURITIES SOLD, BUT NOT YET PURCHASED, at market                               1,011,000              792,000
ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER LIABILITIES                        3,210,000            1,963,000
BANK LINE OF CREDIT                                                                     -            3,500,000
NOTES PAYABLE                                                                   4,023,000            4,035,000
CAPITAL LEASE PAYABLE                                                             249,000              300,000
NET LIABILITIES FROM DISCONTINUED OPERATIONS                                            -              300,000
                                                                             -------------        -------------
                                                                                9,265,000           76,977,000
                                                                             -------------        -------------

CONTINGENCIES

STOCKHOLDERS' EQUITY
             Preferred stock, $.01 par value, 100,000 shares authorized,
               20,725 shares issued and outstanding at December 31, 2001                -                    -
             Common stock, $.02 par value, 6,000,000 shares authorized,
                2,236,449 shares issued and outstanding                            45,000               45,000
             Additional paid-in capital                                        11,285,000            9,313,000
             Accumulated deficit                                               (9,170,000)          (8,736,000)
                                                                             -------------        -------------
                                                                                2,160,000              622,000
                                                                             -------------        -------------
                                                                             $ 11,425,000         $ 77,599,000
                                                                             =============        =============


Note:  The balance sheet at September 28, 2001 has been derived from the audited
financial statements at that date.

</TABLE>
                                       2

                 See notes to consolidated financial statements
<PAGE>
                      OLYMPIC CASCADE FINANCIAL CORPORATION
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                        --------Quarter Ended---------
                                                                    December 31,              December 31,
                                                                        2001                      2000
                                                                   ---------------            --------------
REVENUES:
<S>                                                                   <C>                       <C>
Commissions                                                           $ 5,691,000               $ 5,666,000
Net dealer inventory gains                                              4,858,000                 5,131,000
Interest                                                                  740,000                 1,757,000
Transfer fees                                                             385,000                   275,000
Investment banking                                                        102,000                   529,000
Other                                                                     511,000                   440,000
                                                                   ---------------            --------------
                                                                       12,287,000                13,798,000
                                                                   ---------------            --------------
EXPENSES:
Commissions                                                             7,538,000                 7,784,000
Salaries                                                                1,278,000                 2,108,000
Clearing fees                                                           1,108,000                   964,000
Communications                                                            816,000                   531,000
Occupancy costs                                                           975,000                 1,088,000
Interest                                                                  392,000                   976,000
Professional fees                                                         282,000                   422,000
Taxes, licenses, registration                                              90,000                   229,000
Other                                                                     530,000                   296,000
                                                                   ---------------            --------------
                                                                       13,009,000                14,398,000
                                                                   ---------------            --------------
Loss from continuing operations before income
              taxes and discontinued operations                          (722,000)                 (600,000)

Income tax expense                                                        (12,000)                        -
                                                                   ---------------            --------------
Loss from continuing operations before
              discontinued operations                                    (734,000)                 (600,000)

Income (loss) from discontinued operations, net of tax                    300,000                   (72,000)
                                                                   ---------------            --------------
NET LOSS                                                              $  (434,000)              $  (672,000)
                                                                   ===============            ==============
EARNINGS (LOSS) PER COMMON SHARE

Loss per share from continuing operations
              Basic Loss Per Share                                        $ (0.32)                  $ (0.28)
                                                                   ===============            ==============
              Diluted Loss Per Share                                      $ (0.32)                  $ (0.28)
                                                                   ===============            ==============
Earnings (loss) per share from discontinued operations
              Basic Earnings (loss) Per Share                             $  0.13                   $ (0.03)
                                                                   ===============            ==============
              Diluted Earnings (loss) Per Share                           $  0.13                   $ (0.03)
                                                                   ===============            ==============
Loss per share
              Basic Loss Per Share                                        $ (0.19)                  $ (0.31)
                                                                   ===============            ==============
              Diluted Loss Per Share                                      $ (0.19)                  $ (0.31)
                                                                   ===============            ==============
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING FOR THE PERIOD: BASIC AND DILUTED                           2,236,449                 2,159,760
                                                                   ===============            ==============
</TABLE>
                                       3

                 See notes to consolidated financial statements
<PAGE>

                      OLYMPIC CASCADE FINANCIAL CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                                 --------------Quarter Ended---------------
                                                                                 December 31,           December 31,
                                                                                     2001                   2000
                                                                                 --------------         -------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                                                  <C>                  <C>
   Net loss                                                                      $    (434,000)         $   (672,000)
   Adjustments to reconcile net loss to net cash
   provided by (used in) operating activities
             Depreciation and amortization                                             137,000               157,000
             Compensation related to issuance of stock options                               -                22,000
             Change in net assets (liabilities) of discontinued operations            (300,000)                7,000

   Changes in assets and liabilities
             Cash, cash equivalents, securities and escrow                          36,926,000           (12,811,000)
             Deposits                                                                2,345,000            (2,188,000)
             Receivables                                                            26,928,000            19,323,000
             Securities held for resale                                                615,000              (733,000)
             Other assets                                                               29,000              (642,000)
             Payables                                                              (62,536,000)           (6,676,000)
             Securities sold, but not yet purchased                                    219,000               (51,000)
                                                                                 --------------         -------------
   Net cash provided by (used in) operating activities                               3,929,000            (4,264,000)
                                                                                 --------------         -------------
CASH FLOWS FROM INVESTING ACTIVITIES
             Purchase of fixed assets                                                  (21,000)              (84,000)
                                                                                 --------------         -------------
CASH FLOWS FROM FINANCING ACTIVITIES
             Borrowings (payments) on line of credit                                (3,500,000)            3,000,000
             Payments on capital lease                                                 (85,000)              (85,000)
             Proceeds from notes payable                                             1,000,000                     -
             Payments on notes payable                                                 (12,000)                    -
             Decrease in cash overdraft                                             (1,556,000)                    -
             Net proceeds from issuance of preferred stock                             972,000                     -
             Exercise of stock options and warrants                                          -                37,000
                                                                                 --------------         -------------
   Net cash provided by (used in) financing activities                              (3,181,000)            2,952,000
                                                                                 --------------         -------------
INCREASE (DECREASE) IN CASH                                                            727,000            (1,396,000)

CASH BALANCE
             Beginning of the period                                                   150,000             2,349,000
                                                                                 --------------         -------------
             End of the period                                                   $     877,000          $    953,000
                                                                                 ==============         =============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
             Cash paid during the period for
             Interest                                                            $     345,000          $    968,000
                                                                                 ==============         =============
             Income taxes                                                        $      12,000          $    324,000
                                                                                 ==============         =============
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND
                FINANCING ACTIVITIES
             Exchange of notes payable for preferred stock                       $   1,000,000          $          -
                                                                                 ==============         =============

</TABLE>
                                       4

                 See notes to consolidated financial statements
<PAGE>




             OLYMPIC CASCADE FINANCIAL CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     DECEMBER 31, 2001 AND DECEMBER 31, 2000

NOTE 1 - BASIS OF PRESENTATION

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, 2001 and December 31, 2000 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 28, 2001.

Cash and cash  segregated in escrow have been  reclassified  in prior periods to
conform to the current period's presentation.

NOTE 2 - LINE OF CREDIT

In January 2001,  National entered into a $5,000,000 secured line of credit with
American  National Bank and Trust Company of Chicago,  that is guaranteed by the
Company.  During  the first  quarter of fiscal  2002,  National  entered  into a
Forbearance  Agreement with American  National Bank based on an event of default
according to the original credit  agreement.  The Forbearance  Agreement amended
the line of credit to  $4,000,000.  Additionally,  Steven A.  Rothstein and Mark
Goldwasser  each  signed  a  Guaranty   unconditionally   guaranteeing   certain
indebtedness  of  the  Company  to  American  National  Bank.  These  guarantees
effectively  terminated in December 2001. At December 31, 2001,  National had no
borrowings outstanding on this line of credit.

NOTE 3 - INVESTMENT TRANSACTION

On December 28, 2001, the Company completed a series of transactions under which
certain  new  investors   (collectively,   the  "Investors")   have  obtained  a
significant  ownership  in the Company  through a $1,072,500  investment  in the
Company and by  purchasing a majority of the shares held by Steven A.  Rothstein
and  family,  the  former  Chairman,   Chief  Executive  Officer  and  principal
shareholder of the Company (the "Investment Transaction"). The Investors include
Triage  Partners LLC  ("Triage"),  an affiliate of Sands Brothers & Co., Ltd., a
New York Stock Exchange  ("NYSE")  member firm, and One Clark LLC ("One Clark"),
an  affiliate  of Mark  Goldwasser,  the  current  Chief  Executive  Officer and
President of the Company.  The Investors purchased an aggregate of $1,072,500 of
Series A Preferred  Stock from the  Company,  which is  convertible  into Common
Stock at a price of $1.50 per share.  The  Company  incurred  $100,000  of legal
costs related to these capital  transactions.  In connection with the Investment

                                       5
<PAGE>

Transaction,  Triage  also  purchased  285,000  shares of Common  Stock from Mr.
Rothstein  and his  affiliates at a price of $1.50 per share.  In addition,  Mr.
Rothstein and his affiliates  have granted  Triage a three-year  voting proxy on
the balance of their Common Stock (274,660 shares). The Investors have agreed to
purchase up to an  additional  $500,000 of Series A Preferred  Stock on the same
terms in the event  such  funds are  needed by the  Company.  The funds for this
additional purchase are being held in escrow.

Concurrent with the Investment Transaction, two unrelated individual noteholders
holding $2.0 million of the Company's debt have converted one-half of their debt
into the same class of Series A Preferred  Stock that was sold in the Investment
Transaction.  The  noteholders  also had  100,000 of their  200,000  warrants to
acquire  shares of common  stock  repriced  from an exercise  price of $5.00 per
share to $1.75 per share.

NOTE 4 - CLOSING OF WESTAMERICA INVESTMENT GROUP

In December 2001, WestAmerica  voluntarily withdrew its membership with the NASD
and  ceased to  conduct  business  as a  broker-dealer.  On  December  31,  2001
WestAmerica  filed for Chapter 7 Bankruptcy  protection in  accordance  with the
U.S. Bankruptcy Code.  WestAmerica has been operated as a separate legal entity,
and the Company  believes it will not have any ongoing  liability for any unpaid
obligations  of  WestAmerica.  Consequently,  the  Company  recorded  a gain  of
$300,000 from discontinued  operations related to the write-off of WestAmerica's
net liabilities. The accompanying financial statements have been reclassified to
reflect WestAmerica as discontinued operations for all periods presented.

NOTE 5 - CONTINGENCIES

National has been named,  together with others, as a defendant in a consolidated
class action lawsuit filed against Complete Management,  Inc. No specific amount
of damages has been sought against the Company in the  complaint.  In June 2000,
the Company  filed to dismiss  this  action.  In March 2001,  the United  States
District Court for the Southern District of New York denied the Company's motion
to dismiss.  In May 2001,  the Company  submitted its answer to the complaint in
which it set forth its defenses.  In November 2001, plaintiffs filed a motion to
certify the class. The Company will contest class  certification  and diligently
pursue its defenses.

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 $9,500,000. These matters arise out of the normal
course of business.

NOTE 6 - ISSUANCE OF WARRANTS

In November 2001 the Company granted 5,000 warrants to purchase its common stock
exercisable  at $5.00  per share to the  individual  retirement  account  of the
Company's former chairman and chief executive officer pursuant to the terms of a
$50,000 loan made in August 2001.

                                       6
<PAGE>

NOTE 7 - INCREASE IN AUTHORIZED SHARES OF COMMON STOCK

The Board of Directors of the Company has approved an amendment to the Company's
Certificate  of  Incorporation  to increase the number of  authorized  shares of
common  stock from  6,000,000 to  60,000,000  shares,  subject to  stockholders'
approval.

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 Annual Report on Form 10-K, filed with the Securities and Exchange
Commission on December 28, 2001. 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, 2001 Compared to Quarter Ended December 31, 2000
   ---------------------------------------------------------------------------

The results discussed below have been restated to reflect a  discontinuation  of
operations for the Company's subsidiary, WestAmerica.

The  Company's  first  quarter of fiscal  2002  resulted  in a decrease in total
revenues and expenses compared with the same period of fiscal 2001.

Total revenues decreased $1,511,000, or 11%, to $12,287,000 in the first quarter
of fiscal  2002  from  $13,798,000  in the first  quarter  of fiscal  2001.  The
decrease in total revenues is primarily  attributable  to a decrease in interest
income and  investment  banking  revenues.  Commission  revenues were  virtually
unchanged  at  $5,691,000  in the first  quarter of fiscal  2002 as  compared to
$5,666,000 in the first quarter of fiscal 2001.

Net dealer inventory gains decreased $273,000, or 5%, to $4,858,000 in the first
quarter of fiscal 2002 from $5,131,000 in the first quarter of fiscal 2001.

Investment banking revenue decreased $427,000,  or 81%, to $102,000 in the first
quarter of fiscal 2002 from  $529,000 in the first  quarter of fiscal 2001.  The
decrease is due to the  continued  down-turn  in the capital  markets  which has
limited the Company's ability to conduct private placements and other investment
banking advisory services.

Interest income decreased  $1,017,000,  or 58%, to $740,000 in the first quarter
of fiscal  2002  from  $1,757,000  in the first  quarter  of fiscal  2001.  This
decrease is offset by the  corresponding  decrease in  interest  expense,  which
decreased $584,000, or 60%, to $392,000 in the first quarter of fiscal 2002 from
$976,000 in the first  quarter of fiscal  2001.  The  decrease in both  interest

                                       7
<PAGE>

income and  interest  expense  is  attributable  to a decrease  in the amount of
customer credits and customer debits at National, the conversion of its clearing
business in December 2001 and a decrease in interest rates from 2002 to 2001.

Other revenues  increased  $71,000,  or 16%, to $511,000 in the first quarter of
fiscal 2002 from $440,000 in the first quarter of fiscal 2001.  The main reasons
for this  increase are income from trading  activities  attributable  to the New
York City office and increased asset management fees.

In proportion  with the decrease in total  revenues,  total  expenses  decreased
$1,389,000,  or 10%,  to  $13,009,000  in the first  quarter of fiscal 2002 from
$14,398,000 in the first quarter of fiscal 2001.

Commission expense,  which includes expenses related to commission revenue,  net
dealer inventory gains and investment  banking,  decreased  $246,000,  or 3%, to
$7,538,000  in the first  quarter of fiscal  2002 from  $7,784,000  in the first
quarter  of fiscal  2001.  This is  consistent  with the  decrease  in  combined
revenues from  commissions,  net dealer  inventory gains and investment  banking
during the same period.  Salaries decreased $830,000, or 39%, to $1,278,000 from
$2,108,000.  This decrease is due to a temporary  reduction in senior management
salaries  and a  reduction  in staff made  possible by  clearing  through  First
Clearing Corporation, as opposed to self-clearing. Overall, combined commissions
and salaries as a percentage  of revenue  remained  flat at 72% during the first
quarter of fiscal 2002 and 2001.

Clearing fees increased  $144,000,  or 15%, to $1,108,000 from $964,000,  mainly
relating to the  increased  trading  business  generated  from the New York City
office.  Communication  expenses  increased  $285,000 to $816,000,  or 54%, from
$531,000 due to office  expansions  in the New York City and Boca Raton  offices
that were not  fully  operational  until  the  second  quarter  of fiscal  2001.
Occupancy  costs  decreased  $113,000,  or 10%, to $975,000 from $1,088,000 as a
result of cost cutting efforts.

Professional fees decreased  $140,000,  or 33%, to $282,000 from $422,000 in the
first  quarter  of  fiscal  2002 and 2001,  respectively.  Taxes,  licenses  and
registrations  decreased $139,000, or 61%, to $90,000 from $229,000 in the first
quarter of fiscal 2002 and 2001, respectively. The decrease is a result of costs
incurred  in the prior  year when the New York City  office  was  opened.  Other
expenses  increased  $234,000,  or 79%, to $530,000  from  $296,000 in the first
quarter of fiscal 2002 and 2001,  respectively.  This increase primarily relates
to write-offs and amortization of advances paid to new brokers.

Due to the  continued  slumping  markets,  the Company  reported a net loss from
continuing  operations  of $734,000 in the first quarter of fiscal 2002 compared
to a net loss of $600,000 the first quarter of fiscal 2001. Overall, the diluted
loss from  continuing  operations was $.33 per share as compared with a net loss
of $.28 per share for the first quarter ended December 31, 2002 and December 31,
2001, respectively.

WestAmerica's realized a loss of $72,000 in the first quarter of fiscal 2001, on
revenues of  $635,000.  On December 31,  2001,  WestAmerica  filed for Chapter 7
Bankruptcy  protection in accordance with the U.S. Bankruptcy Code. In the first
quarter  of  fiscal  2002,  the  Company   recorded  a  gain  of  $300,000  from
discontinued   operations   related  to  the  write-off  of  WestAmerica's   net
liabilities.

                                       8
<PAGE>

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. While acting as a self-clearing firm, these assets were financed primarily
by  National's  interest  bearing  and  non-interest   bearing  customer  credit
balances,  other payables and equity capital.  National also utilized short-term
bank  financing to  supplement  its ability to meet  day-to-day  operating  cash
requirements.  Such  financing  was used to maximize  cash flow and is regularly
repaid.  In January  2001,  National  entered into a $5,000,000  secured line of
credit  with  American  National  Bank and  Trust  Company  of  Chicago  that is
guaranteed by the Company.  As of December 31, 2001,  National had no borrowings
outstanding on the line of credit, and it will not be renewed.

As a result of the losses  throughout  fiscal  year 2001,  notably  those of the
fourth quarter,  attributable in part to the  unprecedented  events in September
2001,  the Company  concluded  that existing  capital would not be sufficient to
satisfy  existing  operations.  The Company  explored  various  transactions  to
finance the Company's operations.  On December 28, 2001, the Company completed a
series of  transactions  under which  certain new investors  (collectively,  the
"Investors")  have  obtained a  significant  ownership in the Company  through a
$1,072,500  investment in the Company and by purchasing a majority of the shares
held by Steven A. Rothstein and family,  the former  Chairman,  Chief  Executive
Officer and principal shareholder of the Company (the "Investment Transaction").
The Investors  include  Triage  Partners LLC  ("Triage"),  an affiliate of Sands
Brothers & Co.,  Ltd., a New York Stock Exchange  ("NYSE")  member firm, and One
Clark LLC ("One  Clark"),  an affiliate of Mark  Goldwasser,  the current  Chief
Executive  Officer and  President of the  Company.  The  Investors  purchased an
aggregate of $1,072,500 of Series A Preferred  Stock from the Company , which is
convertible  into Common Stock at a price of $1.50 per share. In connection with
the Investment Transaction, Triage also purchased 285,000 shares of Common Stock
from  Mr.  Rothstein  and his  affiliates  at a price  of $1.50  per  share.  In
addition,  Mr.  Rothstein and his  affiliates  have granted  Triage a three-year
voting  proxy on the  balance  of  their  Common  Stock  (274,660  shares).  The
Investors  have  agreed to  purchase  up to an  additional  $500,000 of Series A
Preferred  Stock  upon the same  terms in the event such funds are needed by the
Company. The funds for this additional purchase are being held in escrow.

Concurrent with the Investment Transaction, two unrelated individual noteholders
holding $2.0 million of the Company's debt have converted one-half of their debt
into the same class of Series A Preferred  Stock that was sold in the Investment
Transaction.  The  noteholders  also had  100,000 of their  200,000  warrants to
acquire  shares of common  stock  repriced  from an exercise  price of $5.00 per
share to $1.75 per share.

In August  2001,  the Company  entered  into an  agreement  with First  Clearing
Corporation  ("First Clearing"),  an affiliate of First Union Securities,  Inc.,
under which First  Clearing  will  provide  clearing  and related  services  for
National.  The Clearing Agreement expands the products and services capabilities
for  National's   retail  and  institutional   business,   enables  National  to
consolidate  its  existing  clearing   operations  and  reduces  fixed  overhead
associated with its self-clearing activities.

                                       9
<PAGE>

The conversion to First Clearing began in December 2001. In connection  with the
Clearing Agreement,  the Company entered into a ten-year  $6,000,000  promissory
note  with  First  Clearing  under  which  the  Company   immediately   borrowed
$1,000,000. The funds were contributed by the Company to National, and are being
used as a deposit to secure National's performance under the Clearing Agreement.
The  amount  of the  note  that is  repayable  on each  anniversary  date is the
principal and interest  then  outstanding  divided by the remaining  life of the
note. The Clearing  Agreement also provided for another $1,000,000 loan that was
extended  to the  Company  upon  substantial  completion  of the  conversion  on
December 31, 2001.

Additional  borrowings  are  available  to the Company  upon the  attainment  by
National of certain volume and profitability  goals, none of which have been met
as of the date of filing  of this Form  10-Q.  Borrowings  under the  promissory
notes are forgivable based on certain  business  performance and trading volumes
of the Company over the life of the loan.

In  connection  with the  Clearing  Agreement,  National  is in the  process  of
terminating its clearing relationship with US Clearing.  Upon termination of the
agreement  and transfer of all customer and  proprietary  accounts,  National is
entitled to the return of its $1,000,000 clearing deposit.

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,  2001,
National's net capital exceeded the requirement by approximately $2.6 million.

In December 2001, WestAmerica  voluntarily withdrew its membership with the NASD
and  ceased to  conduct  business  as a  broker-dealer.  On  December  31,  2001
WestAmerica  filed for Chapter 7 Bankruptcy  protection in  accordance  with the
U.S. Bankruptcy Code.  WestAmerica has been operated as a separate legal entity,
and the Company  believes it will not have any ongoing  liability for any unpaid
obligations of WestAmerica.

Canterbury Securities Corporation  ("Canterbury"),  a wholly owned subsidiary of
the Company,  is a registered as a broker-dealer with the SEC and is licensed in
Illinois.  Canterbury is a member of the NASD, the MSRB and the SIPC. Canterbury
formerly  engaged in private  placement  transactions.  Canterbury has no retail
customer accounts and, therefore,  operates pursuant to the exemptive provisions
of SEC Rule 15c3-3(k)(2)(i).  Since acquisition in June 2000, Canterbury has had
no  activity.  The Company has agreed to sell  Canterbury  for its book value of
approximately $11,000 to Mr. Rothstein.  At December 31, 2001,  Canterbury's net
capital exceeded the requirement by $2,800.

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

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

As of the quarter  ended  December  31,  2001,  total  assets  were  $11,425,000
compared to total assets of  $77,599,000  as of the fiscal year ended  September
28, 2001. This material decrease in the Company's assets is due to the change in
the Company's clearing  arrangements.  Customer assets that were included in the

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<PAGE>

fiscal year end 2001 balance sheet are no longer  accounted for on the Company's
books.  These assets are now held at First  Clearing as part of the new clearing
arrangement.




                                     PART II

ITEM 1 - LEGAL PROCEEDINGS

During the quarter,  there were no  significant  developments  in the  Company's
legal proceedings. For a detailed discussion of the Company's legal proceedings,
please  refer to the  Company's  Annual  Report on Form 10-K for the fiscal year
ended September 28, 2001.


ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K

a) Exhibits

 3.3      The Company's By-Laws, as amended and restated on December 12, 2001.
10.28     Clearing Agreement
10.29     First Amendment to Clearing Agreement.
10.30     Purchase Agreement by and among Olympic Cascade Financial Corporation,
          Mark  Goldwasser  and Triage  Partners,  LLC dated as of December  14,
          2001,  previously  filed as Exhibit  10.30 to Form 8-K in January 2002
          and hereby incorporated by reference.
10.31     Stock Purchase  Agreement  between Steven A. Rothstein,  certain other
          persons or entities and Triage Partners,  LLC dated as of December 14,
          2001,  previously  filed as Exhibit  10.31 to Form 8-K in January 2002
          and hereby incorporated by reference.
10.32     Securities  Exchange  Agreement by and among Olympic Cascade Financial
          Corporation, Gregory P. Kusnick, Karen Jo Gustafson, Gregory C. Lowney
          and Maryanne K. Snyder dated as of December 14, 2001, previously filed
          as Exhibit  10.32 to Form 8-K in January 2002 and hereby  incorporated
          by reference.
10.33     Escrow   Agreement  by  and  made  among  Olympic  Cascade   Financial
          Corporation,  Mark  Goldwasser,  Triage  Partners,  LLC  and  National
          Securities Corporation dated as of December 28, 2001, previously filed
          as Exhibit  10.33 to Form 8-K in January 2002 and hereby  incorporated
          by reference.
10.34     Second Amendment to Clearing Agreement.

b) Reports on Form 8-K

The Company  filed a report on Form 8-K dated  January 11,  2002  regarding  the
Investment Transaction described in Note 3 hereto.


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                                   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 13, 2002                      By: /s/ Mark Goldwasser
Date                                       -------------------------
                                           Mark Goldwasser
                                           President and Chief Executive Officer




February 13, 2002                      By: /s/Robert H. Daskal
Date                                      -------------------------
                                           Robert H. Daskal
                                           Acting Chief Financial Officer




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