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, 2003         Commission File Number 001-12629
                      -----------------                                ---------

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


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


         875 North Michigan Avenue, Suite 1560, Chicago, 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 [ ]

Indicate by checkmark whether the registrant is an accelerated filer (as defined
in Rule 12b-2 of the Exchange Act). Yes [X] No [ ]

The number of shares  outstanding of registrant's  common stock, par value $0.02
per share, at February 11, 2004 was 3,367,558.

                                       1
<PAGE>
              OLYMPIC CASCADE FINANCIAL CORPORATION AND SUBSIDIARY

            CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

<TABLE>
<CAPTION>
                                                          ASSETS

                                                                                          December 31,      September 30,
                                                                                              2003              2003
                                                                                           (unaudited)     (see note below)
                                                                                          --------------   ----------------
<S>                                                                                           <C>                <C>
CASH                                                                                          $ 276,000          $ 451,000
DEPOSITS WITH CLEARING ORGANIZATIONS                                                            569,000          1,041,000
RECEIVABLES FROM BROKER-DEALERS AND CLEARING ORGANIZATIONS                                    3,153,000          3,724,000
OTHER RECEIVABLES, net of reserve for uncollectible accounts of $650,000
            at December 31, 2003 and September 30, 2003, respectively                           687,000            709,000
ADVANCES TO REGISTERED REPRESENTATIVES                                                          748,000            644,000
SECURITIES HELD FOR RESALE, at market                                                           906,000            374,000
FIXED ASSETS, net                                                                               246,000            247,000
SECURED DEMAND NOTE                                                                           1,000,000          1,000,000
OTHER ASSETS                                                                                    582,000            545,000
                                                                                          --------------   ----------------

TOTAL ASSETS                                                                                $ 8,167,000        $ 8,735,000
                                                                                          ==============   ================

                                      LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

BANK OVERDRAFT                                                                                $ 182,000                $ -
PAYABLE TO BROKER-DEALERS AND CLEARING ORGANIZATIONS                                            328,000            258,000
SECURITIES SOLD, BUT NOT YET PURCHASED, at market                                               578,000            116,000
ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER LIABILITIES                                      3,778,000          4,520,000
NOTES PAYABLE                                                                                 2,166,000          3,170,000
                                                                                          --------------   ----------------
TOTAL LIABILITIES                                                                             7,032,000          8,064,000
                                                                                          --------------   ----------------

SUBORDINATED BORROWINGS                                                                       1,000,000          1,000,000
                                                                                          --------------   ----------------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY (DEFICIT)
          Preferred stock, $.01 par value, 100,000 shares authorized; designated Series A
             9% cumulative convertible preferred stock, 30,000 shares authorized; 27,825
             shares issued and outstanding (liquidation preference: $2,782,500)                       -                  -
          Common stock, $.02 par value, 60,000,000 shares authorized, 3,367,558 issued
             and outstanding at December 31, 2003 and September 30, 2003, respectively           67,000             67,000
          Additional paid-in capital                                                         12,628,000         12,628,000
          Accumulated deficit                                                               (12,560,000)       (13,024,000)
                                                                                          --------------   ----------------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT)                                                            135,000           (329,000)
                                                                                          --------------   ----------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)                                        $ 8,167,000        $ 8,735,000
                                                                                          ==============   ================

Note: The balance sheet at September 30, 2003 has been derived from the audited consolidated financial statements at that date.
</TABLE>

            See notes to condensed consolidated financial statements

                                      2
<PAGE>

              OLYMPIC CASCADE FINANCIAL CORPORATION AND SUBSIDIARY

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                                            -------- Three Months Ended -----
                                                                            December 31,       December 31,
                                                                                2003               2002
                                                                          ------------------   --------------
REVENUES:
<S>                                                                            <C>               <C>
     Commissions                                                               $ 11,372,000      $ 6,008,000
     Net dealer inventory gains                                                   2,064,000        3,557,000
     Interest and dividends                                                         669,000          312,000
     Transfer fees and clearing services                                            583,000          375,000
     Investment banking                                                             332,000          106,000
     Other                                                                          124,000          235,000
                                                                          ------------------   --------------

TOTAL REVENUES                                                                   15,144,000       10,593,000
                                                                          ------------------   --------------

EXPENSES:
     Commissions                                                                 10,561,000        6,901,000
     Employee compensation and related expenses                                   1,277,000        1,021,000
     Clearing fees                                                                  711,000          682,000
     Communications                                                                 579,000          558,000
     Occupancy and equipment costs                                                  670,000          753,000
     Interest                                                                        51,000           45,000
     Professional fees                                                              355,000          231,000
     Taxes, licenses, registration                                                  100,000           85,000
     Other                                                                          351,000          476,000
                                                                          ------------------   --------------

TOTAL EXPENSES                                                                   14,655,000       10,752,000
                                                                          ------------------   --------------

INCOME (LOSS) FROM OPERATIONS                                                       489,000         (159,000)
                                                                          ------------------   --------------

OTHER INCOME (EXPENSE):
     Gain on extinguishment of debt                                                 375,000                -
     Litigation settlement                                                         (400,000)               -
                                                                          ------------------   --------------

TOTAL OTHER INCOME (EXPENSE), NET                                                   (25,000)               -
                                                                          ------------------   --------------

NET INCOME (LOSS)                                                                   464,000         (159,000)

Preferred stock dividends                                                           (63,000)         (63,000)
                                                                          ------------------   --------------

Net income (loss) attributable to common stockholders                             $ 401,000       $ (222,000)
                                                                          ==================   ==============

NET INCOME (LOSS) PER COMMON SHARE

Basic:
     Net income (loss) attributable to common stockholders                           $ 0.12          $ (0.08)
                                                                          ==================   ==============

Diluted:
     Net income (loss) attributable to common stockholders                           $ 0.07          $ (0.08)
                                                                          ==================   ==============

Weighted average number of shares outstanding
     Basic                                                                        3,367,558        2,624,085
                                                                          ==================   ==============
     Diluted                                                                      5,441,964        2,624,085
                                                                          ==================   ==============
</TABLE>

            See notes to condensed consolidated financial statements

                                      3

<PAGE>

              OLYMPIC CASCADE FINANCIAL CORPORATION AND SUBSIDIARY

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                              ----------Three Months Ended--------------
                                                                               December 31, 2003       December 31, 2002
                                                                             ---------------------   ----------------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                                                     <C>                     <C>
   Net income (loss)                                                                    $ 464,000               $ (159,000)
   Adjustments to reconcile net income (loss) to net
   cash provided by (used in) operating activities
           Depreciation and amortization                                                   45,000                   65,000
           Amortization of note discount                                                    8,000                    8,000
           Gain on extinguishment of debt                                                (375,000)                       -
           Forgiveness of loan                                                           (137,000)                 (99,000)
           Litigation settlement                                                          400,000                        -
   Changes in assets and liabilities
           Restricted cash                                                                      -                  305,000
           Deposits with clearing organizations                                           472,000                  401,000
           Receivables from broker-dealers, clearing organizations and others             489,000                 (336,000)
           Securities held for resale, at market                                         (532,000)                (419,000)
           Other assets                                                                   (37,000)                (127,000)
           Payables                                                                    (1,072,000)                  75,000
           Securities sold, but not yet purchased, at market                              462,000                   98,000
                                                                             ---------------------   ----------------------
   Net cash provided by (used in) operating activities                                    187,000                 (188,000)
                                                                             ---------------------   ----------------------

CASH FLOWS FROM INVESTING ACTIVITIES
           Purchase of fixed assets                                                       (44,000)                 (36,000)
                                                                             ---------------------   ----------------------

CASH FLOWS FROM FINANCING ACTIVITIES
           Payment of notes payable                                                      (500,000)                       -
           Increase (decrease) in cash overdraft                                          182,000                 (360,000)
           Net proceeds from issuance of common stock and warrants                              -                  554,000
                                                                             ---------------------   ----------------------
   Net cash provided by (used in) financing activities                                   (318,000)                 194,000
                                                                             ---------------------   ----------------------

NET DECREASE IN CASH                                                                     (175,000)                 (30,000)

CASH BALANCE
           Beginning of the period                                                        451,000                  325,000
                                                                             ---------------------   ----------------------

           End of the period                                                            $ 276,000                $ 295,000
                                                                             =====================   ======================

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
           Cash paid during the period for:
           Interest                                                                      $ 51,000                 $ 45,000
                                                                             =====================   ======================

SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND
              FINANCING ACTIVITIES
           Conversion of accounts payable to loan payable                                     $ -                $ 375,000
                                                                             =====================   ======================
           Gain on extinguishment of debt                                               $ 375,000                      $ -
                                                                             =====================   ======================
           Forgiveness of loan                                                          $ 137,000                 $ 99,000
                                                                             =====================   ======================

</TABLE>

            See notes to condensed consolidated financial statements

                                      4

<PAGE>

             OLYMPIC CASCADE FINANCIAL CORPORATION AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2003
                                   (UNAUDITED)

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, 2003 and December 31, 2002 are unaudited. The
results of operations for the interim periods are not necessarily  indicative of
the results of  operations  for the fiscal year.  These  consolidated  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 30, 2003.

Reclassifications  -  Certain  amounts  shown in the  prior  period's  condensed
consolidated  financial  statements  have been  reclassified to conform with the
current period's condensed consolidated financial statement presentation.  These
reclassifications  had no effect on net income  (loss) or  stockholders'  equity
(deficit) as previously presented.

NOTE 2 - RECENT ACCOUNTING PRONOUNCEMENTS

Stock-Based  Compensation - During the quarter ended March 31, 2003, the Company
adopted Statement of Financial Accounting Standard ("SFAS") No. 148, "Accounting
for  Stock-Based  Compensation  - Transition  and  Disclosure."  This  statement
amended SFAS No. 123,  "Accounting for Stock-Based  Compensation."  As permitted
under SFAS No. 123,  the Company  continues to apply the  Accounting  Principles
Board Opinion No. 25,  "Accounting  for Stock Issued to  Employees." As required
under SFAS No. 148, the  following  table  presents pro forma net income  (loss)
attributable to common  stockholders for basic and diluted net income (loss) per
share as if the fair value-based method had been applied to all awards.

                                       5
<PAGE>

<TABLE>
<CAPTION>

                                                                   Three Months Ended
                                                                   December 31, 2003   December 31, 2002
                                                                   ---------------------------------------
<S>                                                                         <C>                <C>
Net income (loss) attributable to common stockholders - as reported         $ 401,000          $ (222,000)

Stock-based employee compensation cost determined
  under fair value method, net of tax effects                                  (9,000)             (4,000)

                                                                   ---------------------------------------
Net income (loss) attributable to common stockholders - pro forma           $ 392,000          $ (226,000)
                                                                   =======================================

Earnings (loss) per share

Basic earnings (loss) per share:
Net income (loss) attributable to common stockholders - as reported            $ 0.12             $ (0.08)

Per share stock-based employee compensation cost
  determined under fair value method, net of tax effects                            -                   -

                                                                   ---------------------------------------
Net income (loss) attributable to common stockholders - pro forma              $ 0.12             $ (0.08)
                                                                   =======================================

Diluted earnings (loss) per share:
Net income (loss) attributable to common stockholders - as reported            $ 0.07             $ (0.08)

Per share stock-based employee compensation cost
  determined under fair value method, net of tax effects                            -                   -
                                                                   ---------------------------------------
Net income (loss) attributable to common stockholders - pro forma              $ 0.07             $ (0.08)
                                                                   =======================================
</TABLE>

The Black-Scholes  option valuation model was used to estimate the fair value of
the options  granted in the quarters ended December 31, 2003 and 2002. The model
includes  subjective input assumptions that can materially affect the fair value
estimates.  The model was  developed  for use in  estimating  the fair  value of
traded   options  that  have  no  vesting   restrictions   and  that  are  fully
transferable.  For example,  the expected  volatility is estimated  based on the
most recent  historical period of time equal to the weighted average life of the
options   granted.   Options  issued  under  the  Company's  option  plans  have
characteristics that differ from traded options. In management's  opinion,  this
valuation  model does not  necessarily  provide a reliable single measure of the
fair value of its employee stock options. Principal assumptions used in applying
the Black-Scholes model along with the results from the model were as follows:

                                        Three months ended December 31,
                                             2003           2002
                                        ===============================

Assumptions:
Risk-free interest rate                           4.01%         4.01%

Expected life, in years                            5.0           5.0

Expected volatility                                311%          311%

Results:
Fair value of options granted                    $ 0.52        $ 0.52

                                       6
<PAGE>

In January 2003,  the  Financial  Accounting  Standards  Board  ("FASB")  issued
Interpretation  Number 46,  "Consolidation of Variable Interest  Entities" ("FIN
No. 46"). This  interpretation  of Accounting  Research Bulletin ("ARB") No. 51,
"Consolidated   Financial  Statements,"  provides  guidance  for  identifying  a
controlling  interest in a variable interest entity ("VIE") established by means
other than voting interests.  FIN No. 46 also requires consolidation of a VIE by
an enterprise that holds such a controlling interest. In December 2003, the FASB
completed its  deliberations  regarding the proposed  modification to FIN No. 46
and issued  Interpretation  Number 46(R),  "Consolidation  of Variable  Interest
Entities - an  Interpretation  of ARB No. 51" ("FIN No.  46(R)").  The decisions
reached  included a deferral of the effective date and provisions for additional
scope exceptions for certain types of variable interests. Application of FIN No.
46(R) is required in financial statements of public entities that have interests
in VIEs or potential VIEs commonly referred to as  special-purpose  entities for
periods ending after December 15, 2003.  Application by public  entities  (other
than small  business  issuers)  for all other  types of  entities is required in
financial  statements  for periods  ending after March 15, 2004. The adoption of
FIN No.  46(R) is not expected to have an impact on the  Company's  consolidated
financial position, results of operations or cash flows.

NOTE 3 - SECURITIES HELD FOR RESALE AND SECURITIES SOLD, BUT NOT YET
         PURCHASED

The following  table shows the quoted market values of the Company's  securities
held for resale and  securities  sold,  but not yet purchased as of December 31,
2003:

                                      Securities held       Securities sold, but
                                         for resale           not yet purchased
                                     -------------------    --------------------
Corporate Stocks                              $ 328,000                $ 515,000
Corporate Bonds                                 348,000                   24,000
Government Obligations                          230,000                   39,000
                                     -------------------    --------------------
                                              $ 906,000                $ 578,000
                                     ===================    ====================

NOTE 4 - FIRST CLEARING CORPORATION

In the first quarter of fiscal year 2003,  First  Clearing  Corporation  ("First
Clearing") loaned the Company an additional $375,000 in the form of clearing fee
rebates. The loan was due to be repaid in January 2004.

In December  2003,  the  Company  engaged in various  discussions  with the NASD
relating to the Security Agreement between National and First Clearing,  and its
effect  on the  computation  of  National's  net  capital.  As a result of these
discussions,  on December 15,  2003,  the Company and First  Clearing  agreed in
principle to the  following:  (1) National's  clearing  deposit was reduced from
$1,000,000 to $500,000;  (2) the excess  $500,000  resulting from this reduction
was paid to First Clearing to reduce the Company's  outstanding  loan balance on
its promissory note to First Clearing;  and (3) the Security  Agreement  between
National and First Clearing was terminated.  Furthermore, First Clearing forgave
payment of $375,000 that was due to be paid in January 2004.

                                       7
<PAGE>

NOTE 5 - CONTINGENCIES

In April  2002,  a former  executive  officer of the  Company,  Craig M.  Gould,
commenced  an action  against  the Company  claiming a breach of his  employment
contract,  and  seeking  approximately  $850,000  in  damages.  The  arbitration
commenced in July 2003 and was completed in December  2003. On January 26, 2004,
the  arbitration  panel  awarded  damages  against the Company of  approximately
$400,000,  which has been accrued for in "Accounts Payable, Accrued Expenses and
Other  Liabilities" on the  accompanying  condensed  consolidated  statements of
financial   condition  at  December  31,  2003.  The  Company  believes  it  had
meritorious  defenses  and is  currently  considering  the filing of a motion to
vacate this arbitration award and/or filing an appeal of this decision.

In June 2002,  National was named,  together  with  others,  as a defendant in a
class action lawsuit relating to a series of private placements of securities in
Fastpoint Communications, Inc. in the Superior Court for the State of California
for the County of San Diego. Plaintiffs are seeking approximately $14.0 million,
but no  specific  amount of damages  has been  sought  against  National  in the
complaint.  National filed its answer, and believes it has meritorious  defenses
and intends to vigorously  defend this action,  although the ultimate outcome of
the matter cannot be determined at this time. In January 2004, the court entered
an order  denying  class  certification.  Accordingly,  the Company is unable to
predict the outcome of this  matter,  and no  adjustments  have been made in the
consolidated financial statements in response to this matter.

The Company is also a defendant in various other arbitrations and administrative
proceedings, lawsuits and claims, seeking damages aggregating approximately $3.0
million  (exclusive of specified punitive damages of approximately $4.0 million,
unspecified  punitive  damages related to certain claims and expected  insurance
coverage).  The Company has filed a counterclaim for  approximately  $200,000 in
one such  proceeding.  These matters arise out of the normal course of business.
The Company  intends to vigorously  defend itself in these actions,  however the
ultimate  outcome of these matters cannot be determined at this time. The amount
related to such matters that is reasonably estimable and which has been included
in  "Professional  fees" and in "Accounts  Payable,  Accrued  Expenses and Other
Liabilities"  on the  accompanying  condensed  consolidated  December  31,  2003
financial statements for $164,000.

NOTE 6 - CUMULATIVE DIVIDENDS ON CONVERTIBLE PREFERRED STOCK

The holders of the Company's Series A Convertible Preferred Stock are to receive
dividends  on a  quarterly  basis at a rate of 9% per  annum,  per  share.  Such
dividends  are  cumulative  and accrue  whether or not declared by the Company's
Board of  Directors,  but are  payable  only  when,  as and if  declared  by the
Company's  Board of Directors.  At December 31, 2003,  the amount of accumulated
dividends on the  Company's  27,825 issued and  outstanding  shares of preferred
stock was $481,000.

NOTE 7 - INCOME (LOSS) PER COMMON SHARE

Basic income  (loss) per share is computed on the basis of the weighted  average
number of common shares outstanding. Diluted income (loss) per share is computed
on the basis of the weighted  average number of common shares  outstanding  plus
the potential  dilution  that could occur if  securities  or other  contracts to
issue common shares were exercised or converted. Stock options and warrants, and
conversion of the cumulative convertible preferred stock, were excluded from the
diluted loss per share  computation for the  three-month  period ended December,
2002,  since the Company  incurred a loss for this period and the  inclusion  of
such securities would be antidilutive.

                                       8
<PAGE>

The following  table sets forth the  components  used in the  computation of
basic and diluted income (loss) per common share:

<TABLE>
<CAPTION>

                                                                Three Months Ended
                                                                 December 31, 2003     December 31, 2002
                                                               --------------------------------------------
<S>                                                                        <C>                  <C>
Net income (loss) attributable to common stockholders - basic              $ 464,000            $ (159,000)

Effect of dilutive securities - preferred stock dividends                    (63,000)              (63,000)

                                                               --------------------------------------------
Net income (loss) attributable to common stockholders - diluted            $ 527,000            $ (222,000)
                                                               ============================================

Basic-weighted average common shares outstanding                           3,367,558             2,624,085

Dilutive stock options and warrants                                          219,408                     -

Weighted average assumed conversion of 9%
   cumulative convertible preferred stock                                  1,854,998                     -

                                                               --------------------------------------------
Diluted-weighted average common shares outstanding                         5,441,964             2,624,085
                                                               ============================================

Net income (loss) attributable to common stockholders - basic                 $ 0.16               $ (0.08)
                                                               ============================================

Net income (loss) attributable to common stockholders - diluted               $ 0.10               $ (0.08)
                                                               ============================================
</TABLE>


For the  three-month  periods  ended  December 31, 2003 and 2002,  1,868,689 and
2,158,904  shares,  respectively,  attributable to outstanding stock options and
warrants  were excluded  from the  calculation  of diluted net income (loss) per
share because the effect was antildilutive.

NOTE 8 - THE AMERICAN STOCK EXCHANGE

In February 2003, the Company received a letter from The American Stock Exchange
(the  "Exchange")  indicating that it was not in compliance with certain listing
standards  relating to (1)  shareholders'  equity of less than $2.0  million and
losses from continuing operations and/or net losses in two out of its three most
recent  fiscal  years,  and (2) the  requirement  to have and  maintain an audit
committee  comprised  of at  least  three  independent  directors.  The  Company
submitted to the Exchange a plan that indicated  compliance with these items. In
May 2003,  the Exchange  notified the Company that it had accepted the Company's
plan of  compliance  and granted the Company an  extension  of time to August 5,
2004 to satisfy the  financial  standards,  and an extension of time to July 18,
2003 to comply  with the  independent  audit  committee  requirement,  which was
satisfied  in July 2003.  The  Company  will be subject  to  periodic  review by
Exchange Staff during the extension period.  Failure to make progress consistent
with the plan or to regain  compliance with the continued  listing  standards by
the end of the extension period could result in the Company's common stock being
delisted from The American Stock  Exchange.  In the event that the Company fails
to comply with the listing standards,  the Company's common stock could trade on
the OTC  Bulletin  Board or in the  "pink  sheets"  maintained  by the  National
Quotation  Bureau,  Inc. Such  alternatives are generally  considered to be less
efficient  markets,  and the Company's  stock price, as well as the liquidity of
the Company's common stock, may be adversely impacted as a result.

                                       9
<PAGE>

NOTE 9 - EXTENSION OF NOTES

In November 2003,  National and the holder of a $1.0 million secured demand note
that matures on February 1, 2004,  agreed that the note will be replaced  with a
note in a  principal  amount  equal to at least  $500,000  that  will  mature on
February 28, 2005. In January 2004, the holder agreed,  subject to NASD approval
that was received in February  2004,  to renew the entire $1.0 million due under
the secured demand note to March 1, 2005.  Upon  completion of the note renewal,
the noteholder's warrant to purchase 75,000 shares of the Company's common stock
at a price of $5.00 per share, expiring on February 1, 2004, will be repriced to
$1.25 per share,  and warrants to purchase an aggregate of 150,000 shares of the
Company's  common stock,  75,000 (with an exercise  price of $1.75 per share) of
which expire on January 25, 2004 and 75,000 of which expire on February 1, 2004,
will instead expire on July 31, 2005.

Additionally,  two other noteholders have agreed to extend the maturity dates on
$1.0  million of notes  issued to them by the Company  from  January 25, 2004 to
July 31, 2005.  Effective  February 1, 2004, the interest rate on each note will
be increased to 12% from 9% per annum. Additionally, upon completion of the note
extension,  each of the noteholders'  warrants to purchase 100,000 shares of the
Company's  common  stock at a price of $5.00 per share  expiring  on February 1,
2004 will be  repriced  to $1.25 per share,  and each  noteholders'  warrants to
purchase an aggregate of 200,000 shares (100,000 of which with an exercise price
of $1.75 per share) of the Company's  common stock  expiring on January 25, 2004
will instead expire on July 31, 2005.

NOTE 10 - SUBSEQUENT EVENTS

In February 2004,  the Company  agreed to pay First  Clearing  $250,000 to fully
repay its promissory note, that had an outstanding loan balance of approximately
$1,120,000  as of December 31, 2003.  As a result of the repayment of this note,
the  Company  will  realize a gain on  extinguishment  of debt of  approximately
$750,000,  after  reflecting  principal  reductions  attributable to January and
February 2004 trading volume. Additionally, National and First Clearing mutually
agreed to terminate their clearing  relationship  by June 30, 2004.  National is
actively  engaged in discussions with several other clearing firms regarding the
establishment of a new clearing relationship.

In January 2004, the Company issued an aggregate of $200,000 of three-year,  10%
promissory  notes  to  five  unaffiliated  parties.  Such  noteholders  received
three-year  warrants to purchase an aggregate of 50,000  shares of the Company's
common stock at an exercise price of $1.40 per share. The securities were issued
pursuant to the  exemption  provided in Section  4(2) of the  Securities  Act of
1933,  as amended,  on the basis that the  transaction  did not involve a public
offering.

On January 26, 2004, the arbitration panel in Gould (see Note 5) awarded damages
against the Company of  approximately  $400,000,  which has been  accrued for at
December 31, 2003. The Company is currently  considering  the filing of a motion
to vacate this arbitration award and/or filing an appeal of this decision.

                                       10
<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  Annual Report on Form 10-K,  filed with the  Securities  and Exchange
Commission on December 29, 2003. 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.

RESULTS OF OPERATIONS

Three Months Ended December 31, 2003 Compared to Three Months Ended
December 31, 2002
-------------------------------------------------------------------

The  Company's  first  quarter of fiscal  year 2004  resulted  in a  significant
increase in revenues,  and a comparatively  lesser increase in expenses compared
to the same period last year.  The increase in revenues is primarily  due to the
improved  securities  markets.  As a result  of this  improvement,  the  Company
reported net income  before  income taxes of $464,000  compared  with a net loss
before income taxes of $159,000 for the first  quarters of fiscal years 2004 and
2003,  respectively.  This  represents an improvement of $623,000 from the prior
period.

Total revenues increased $4,551,000, or 43%, in the first quarter of fiscal year
2004 to $15,144,000  from  $10,593,000 in the first quarter of fiscal year 2003.
This increase is mainly due to the improved  securities  markets that  increased
commission revenues, the number of commission tickets generated,  and the charge
per ticket that affects commission  revenue.  During the first quarter of fiscal
year 2004,  trading volume increased by approximately 37%, compared to the first
quarter of fiscal year 2003. Commission revenue increased $5,364,000, or 89%, to
$11,372,000  from  $6,008,000  during  the first  quarter  of  fiscal  year 2004
compared with the same period in fiscal year 2003. Net dealer  inventory  gains,
which includes  profits on  proprietary  trading,  market making  activities and
customer mark-ups and mark-downs,  decreased  $1,493,000,  or 42%, to $2,064,000
from  $3,557,000  during the first quarter of fiscal year 2004 compared with the
same  period  in  fiscal  year  2003.  The  decrease  is due to a  reduction  in
proprietary  trading in the bond market,  reflecting an overall  decline in this
market  compared to the strength that has been  realized in the equity  markets.
During the first quarter of fiscal year 2004,  revenues from proprietary trading
decreased $1,578,000, or 49% to $1,663,000 from $3,241,000 in the same period of
fiscal year 2003,  revenues from market making activities  increased $64,000, or
24%, to $335,000  from  $271,000 in the first  quarter of fiscal year 2004,  and
revenues from customer  mark-ups and mark-downs  increased  $21,000,  or 47%, to
$66,000 from $45,000 in the first quarter of fiscal year 2004.

Investment  banking  revenue  increased  $226,000,  or 213%,  to  $332,000  from
$106,000  in the first  quarter  of fiscal  year  2004  compared  with the first
quarter of fiscal year 2003.  The  increase in  investment  banking  revenues is
attributed  to the  Company's  completion  of a private  placement  during  this
quarter.  Interest and dividend income  increased  $357,000 or 114%, to $669,000
from  $312,000 in the first  quarter of fiscal year 2004  compared with the same

                                       11
<PAGE>

period last year. The increase in interest income is attributable to an increase
in the  amount of  customer  debits in  National's  customers'  accounts  and an
increase in the  interest  rate charged to such debits from the same period last
year. Transfer fees increased $208,000, or 55%, to $583,000 in the first quarter
of fiscal year 2004 from $375,000 in the first quarter of fiscal year 2003.  The
increase  is due to an  increase  in  transaction  volume  associated  with  the
Company's  retail  brokerage  business.  Other  revenue,   consisting  of  asset
management fees and miscellaneous  transaction fees and trading fees,  decreased
$111,000,  or 47%, to $124,000 from $235,000  during the first quarter of fiscal
year 2004 compared to the first quarter of fiscal year 2003. The decrease is due
to reduced  fees  attributable  to a  reduction  in the volume of  institutional
business, and lower asset management fees.

In comparison with the 43% increase in total revenues,  total expenses increased
36% or  $3,903,000  to  $14,655,000  for the first  quarter of fiscal  year 2004
compared to  $10,752,000  in the first quarter of fiscal year 2003. The increase
in total expenses is a result of greater commission expenses directly associated
with  commission  revenues.  The  increase in total  expenses  was  minimized by
management's efforts to streamline its operations and control the fixed expenses
associated with its business.

Commission expense,  which includes expenses related to commission revenue,  net
dealer inventory gains and investment banking,  increased $3,660,000, or 53%, to
$10,561,000  in the first  quarter of fiscal  year 2004 from  $6,901,000  in the
first  quarter of fiscal year 2003.  Commission  expense  related to  commission
revenue  increased  $4,539,000,  or 102%,  to $9,003,000 in the first quarter of
fiscal  year 2004 from  $4,464,000  in the first  quarter  of fiscal  year 2003;
commission  expense related to net dealer inventory gains decreased  $1,060,000,
or 45%, to $1,292,000  in the first quarter of fiscal year 2004 from  $2,352,000
in the first  quarter of fiscal year 2003;  and  commission  expense  related to
investment banking increased $181,000, or 213%, to $266,000 in the first quarter
of fiscal year 2004 from $85,000 in the first  quarter of fiscal year 2003.  The
increase of commission  expense as a percentage  of commission  revenues and the
decrease of commission expense as a percentage of net dealer inventory gains are
both attributable to changes in the production of particular brokers, not all of
whom  are  paid  at the  same  commission  rate.  The  commission  expense  as a
percentage  of investment  banking was  relatively  unchanged  between the first
quarter of fiscal year 2004 and the first quarter of fiscal year 2003.

Employee  compensation expense increased $256,000,  or 25%, to $1,277,000 in the
first quarter of fiscal year 2004 from $1,021,000 in the first quarter of fiscal
year 2003. This increase is attributable to the hiring of new employees,  salary
increases for certain employees and the establishment of a bonus pool for senior
management. Overall, combined commission and employee compensation expense, as a
percentage of revenue  increased to 78% from 75% in the first quarters of fiscal
year 2004 and 2003, respectively.

Clearing  fees  increased  $29,000,  or 4%, to $711,000 in the first  quarter of
fiscal  year 2004  from  $682,000  in the first  quarter  of fiscal  year  2003.
Although there was an increase in trading volume, clearing fees, as a percentage
of related revenues,  decreased due to an increase in the number of lower priced
tickets from the prior period. Communication expenses increased $21,000 or 4% to
$579,000  from $558,000 in the first quarter of fiscal year 2004 compared to the
first  quarter of fiscal year 2003.  The increase is due to an increase in voice
and data charges.  Occupancy costs decreased  $83,000,  or 11%, to $670,000 from
$753,000.   The  decrease  in  occupancy   expense  is  due  to  the   Company's
renegotiating  certain long-term office leases, and finding subtenants to occupy
unused space.  Professional  fees increased  $124,000,  or 54%, to $355,000 from
$231,000 in the first  quarter of fiscal year 2004 compared to the first quarter
of fiscal year 2003. The increase in professional  fees is due to an increase in
the legal fees relating to various lawsuits and arbitrations.

Interest expense  increased $6,000, or 13%, to $51,000 from $45,000 in the first
quarter of fiscal year 2004  compared to the first  quarter of fiscal year 2003.

                                       12
<PAGE>

Taxes,  licenses and registration  increased  $15,000,  or 18%, to $100,000 from
$85,000 in the first  quarter of fiscal year 2004  compared to the first quarter
of fiscal year 2003. Other expenses  decreased  $125,000 or 26% to $351,000 from
$476,000 in the first  quarter of fiscal year 2004 compared to the first quarter
of fiscal  year 2003.  The  decrease in other  expenses  is due to  management's
efforts to control its fixed operating expenses.

The Company  realized a gain of $375,000 on debt  forgiveness  from its clearing
firm, First Clearing, in the first quarter of fiscal year 2004. Additionally, on
January 26, 2004, an arbitration  panel awarded  damages  against the Company of
approximately  $400,000 related to an employment contract with a former employee
of the Company.  This amount has been accrued for in the first quarter of fiscal
year 2004.

The Company  reported  net income  before  income taxes of $464,000 in the first
quarter of fiscal year 2004  compared to a loss before  income taxes of $159,000
in the first quarter of fiscal year 2003.

Overall,  the diluted earnings  attributable to common stockholders in the first
quarter of fiscal year 2004 was $401,000,  or $.07 per common share, as compared
to the diluted loss attributable to common stockholders of $222,000, or $.08 per
common  share  in the  first  quarter  of  fiscal  year  2003.  The  net  income
attributable  to common  stockholders  for the first quarter of fiscal year 2004
and the net loss  attributable to common  stockholders  for the first quarter of
fiscal year 2003  reflects  $63,000 of  cumulative  but unpaid  preferred  stock
dividends,  in both fiscal  quarters,  on the Company's  Preferred  Stock issued
during fiscal year 2002.

LIQUIDITY AND CAPITAL RESOURCES

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 a specified amount per security based on the bid price of
each security for which  National is a market maker.  On December 12, 2003,  the
Company  was  advised by the NASD that,  pursuant  to  National's  pledge of its
assets as security  for loans to the  Company  from First  Clearing  (such loans
aggregated  $2,131,000 as of September 30, 2003), National was not in compliance
with its net capital requirements.  Accordingly, at September 30, 2003, National
reported  an  excess  net  capital  deficiency  of  $829,000.   This  compliance
requirement was corrected on December 15, 2003, upon termination of the security
agreement  with First  Clearing.  At December 31, 2003,  National's  net capital
exceeded the requirement by $724,000.

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

In March 2003, the Company filed a Registration  Statement on Form S-3 under the
Securities  Act for the resale of the  shares of common  stock and the shares of
common stock  issuable  upon  exercise of the  warrants.  In October  2003,  the
Company filed a Form RW withdrawing the filing of the Registration  Statement on
Form S-3. Currently the Company is eligible to file a Registration  Statement on
Form S-3, and management  believes it will file such statement in the near term,
that will  include  the shares of common  stock and the  shares of common  stock
issuable upon exercise of the warrants issued in the Private Offering.

                                       13
<PAGE>

In August 2001, the Company  entered into an agreement with First Clearing under
which First Clearing  provides  clearing and related services for National.  The
Clearing Agreement expands the products and services capabilities for National's
retail and  institutional  business,  and enables  National to  consolidate  its
existing clearing  operations and reduce the fixed overhead  associated with its
self-clearing activities.

The  conversion  to First  Clearing  began in December 2001 and was completed in
March 2002.  It is standard  business  practice in the  brokerage  industry  for
clearing firms to provide financial support to correspondent  clearing firms. As
such, in connection with the Clearing Agreement, the Company executed a ten-year
promissory  note in favor of 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 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 that was also contributed to National.  The amount of the note
that is repayable on each  anniversary  date is the  principal,  and interest if
any,  then  outstanding  divided by the remaining  life of the note.  Borrowings
under the  promissory  note are forgivable  annually based on achieving  certain
business  performance  and trading  volumes of the Company  over the life of the
loan. The Company would need to generate  approximately 250,000 tickets per year
over the ten-year  term of the note to satisfy the trading  volume  requirement,
which has been satisfied through December 31, 2003.

In connection with the Clearing Agreement,  additional borrowings were available
to  the  Company  upon  the   attainment  by  National  of  certain  volume  and
profitability  goals.  In finalizing the  conversion,  a dispute arose among the
Company,  US Clearing  (one of its former  clearing  firms) and First  Clearing,
regarding the responsibility for debit balances in certain trading accounts. The
three parties agreed to share the expense  equally.  The Company's share of this
settlement, $548,000, was advanced to the Company by First Clearing and added to
the existing  promissory  note. As part of the settlement,  the minimum level of
stockholders'  equity the Company is required to maintain  under the  promissory
note was reduced from  $2,000,000 to $1,000,000  and no further  borrowings  are
available under the promissory  note, as amended.  First Clearing has waived its
stockholders' equity covenant as of December 31, 2003.

In the first quarter of fiscal year 2003,  First Clearing  loaned the Company an
additional $375,000 in the form of clearing fee rebates.  The loan was due to be
repaid in January 2004.

In December  2003,  the  Company  engaged in various  discussions  with the NASD
relating to the Security Agreement between National and First Clearing,  and its
effect  on the  computation  of  National's  net  capital.  As a result of these
discussions,  on December 15,  2003,  the Company and First  Clearing  agreed in
principle to the  following:  (1) National's  clearing  deposit was reduced from
$1,000,000 to $500,000,  (2) the excess  $500,000 was paid to First  Clearing to
reduce the Company's outstanding loan balance on its promissory note and (3) the
Security   Agreement   between  National  and  First  Clearing  was  terminated.
Furthermore,  First Clearing  forgave payment of the $375,000 that was due to be
paid in January 2004.

In February 2004,  the Company  agreed to pay First  Clearing  $250,000 to fully
repay its promissory note, that had an outstanding loan balance of approximately
$1,120,000  as of December 31, 2003.  As a result of the repayment of this note,
the  Company  will  realize a gain on  extinguishment  of debt of  approximately
$750,000,  after  reflecting  principal  reductions  attributable to January and
February 2004 trading volume. Additionally, National and First Clearing mutually
agreed to terminate their clearing  relationship  by June 30, 2004.  National is
actively  engaged in discussions with several other clearing firms regarding the
establishment of a new clearing relationship.

                                       14
<PAGE>

In November 2003,  National and the holder of a $1.0 million secured demand note
that matures on February 1, 2004,  agreed that the note will be replaced  with a
note in a  principal  amount  equal to at least  $500,000  that  will  mature on
February 28, 2005. In January 2004, the holder agreed,  subject to NASD approval
that was received in February  2004,  to renew the entire $1.0 million due under
the secured demand note to February 28, 2005.

Additionally,  two other noteholders have agreed to extend the maturity dates on
$1.0  million of notes  issued to them by the Company  from  January 25, 2004 to
July 31, 2005.  Effective  February 1, 2004, the interest rate on each note will
be increased to 12% from 9% per annum.

In January 2004, the Company issued an aggregate of $200,000 of three-year,  10%
promissory  notes  to  five  unaffiliated  parties.  Such  noteholders  received
three-year  warrants to purchase an aggregate of 50,000  shares of the Company's
common stock at an exercise price of $1.40 per share.

ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The  Company's  primary  market  risk  arises  from the fact that it  engages in
proprietary trading and makes dealer markets in equity securities.  Accordingly,
the Company may be required to maintain  certain amounts of inventories in order
to facilitate  customer  order flow. The Company may incur losses as a result of
price movements in these  inventories due to changes in interest rates,  foreign
exchange rates,  equity prices and other political  factors.  The Company is not
subject to direct market risk due to changes in foreign exchange rates. However,
the Company is subject to market  risk as a result of changes in interest  rates
and equity prices, which are affected by global economic conditions. The Company
manages its exposure to market risk by limiting its net long or short positions.
Trading and inventory accounts are monitored daily by management and the Company
has instituted position limits.

Credit risk  represents the amount of accounting loss the Company could incur if
counterparties to its proprietary  transactions fail to perform and the value of
any  collateral  proves  inadequate.  Although  credit risk  relating to various
financing  activities  is reduced by the  industry  practice  of  obtaining  and
maintaining  collateral,  the Company  maintains more stringent  requirements to
further reduce its exposure.  The Company  monitors its exposure to counterparty
risk on a daily  basis by  using  credit  exposure  information  and  monitoring
collateral  values.  The Company  maintains a credit  committee,  which  reviews
margin  requirements  for  large  or  concentrated   accounts  and  sets  higher
requirements  or  requires a  reduction  of either  the level of margin  debt or
investment in high-risk securities or, in some cases,  requiring the transfer of
the account to another broker-dealer.

The Company  monitors its market and credit risks daily through internal control
procedures  designed to identify  and  evaluate  the various  risks to which the
Company is exposed. There can be no assurance,  however, that the Company's risk
management  procedures and internal  controls will prevent losses from occurring
as a result of such risks.

The following  table shows the quoted market values of the Company's  securities
held for resale ("long"),  securities sold, but not yet purchased  ("short") and
net positions as of December 31, 2003:

<TABLE>
<CAPTION>

                                               Long                       Short                      Net
                             -----------------------    ------------------------    ---------------------
<S>                                       <C>                         <C>                     <C>
Corporate Stocks                          $ 328,000                   $ 515,000               $ (187,000)
Corporate Bonds                             348,000                      24,000                  324,000
Government Obligations                      230,000                      39,000                  191,000
                             -----------------------    ------------------------    ---------------------
                                          $ 906,000                   $ 578,000                $ 328,000
                             =======================    ========================    =====================
</TABLE>

                                       15
<PAGE>

ITEM 4 - CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures. Based on the evaluation of the
Company's  disclosure  controls and  procedures  (as defined in the Exchange Act
Rules  13a-15(e) and 15d-15(e))  required by the Exchange Act Rules 13a-15(b) or
15d-15(b),  the Company's  Chief  Executive  Officer and Acting Chief  Financial
Officer have concluded that, as of the end of the period covered by this report,
the Company's disclosure controls and procedures were effective.

Changes in internal controls. There were no significant changes in the Company's
internal  controls or in other  factors  that could  significantly  affect those
controls subsequent to the date of our evaluation.

                           PART II - OTHER INFORMATION

ITEM 1 - LEGAL PROCEEDINGS

In April  2002,  a former  executive  officer of the  Company,  Craig M.  Gould,
commenced an action against the Company, in the matter Gould vs. Olympic Cascade
Financial  Corporation,  et al.,  NASD No.  02-03542.  On January 26, 2004,  the
arbitration  panel  in this  action  awarded  damages  against  the  Company  of
approximately  $400,000,  which has been accrued for at December  31, 2003.  The
Company  believes it had meritorious  defenses and is currently  considering the
filing of a motion to vacate this  arbitration  award and/or filing an appeal of
this decision.  During the quarter, there were no other significant developments
in the Company's legal proceedings.  For a detailed  discussion of the Company's
legal  proceedings,  please  refer to Note 5 herein,  and the  Company's  Annual
Report on Form 10-K for the fiscal year ended September 30, 2003.

ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS

None.

ITEM 3 - DEFAULTS UPON SENIOR SECURITIES

None.

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

None.

ITEM 5 - OTHER INFORMATION

None.

                                       16
<PAGE>

ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K

(a)   Exhibits

31.1  Chief Executive Officer's  Certificate  pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.
31.2  Acting Chief Financial Officer's  Certificate  pursuant to Section 302
      of the Sarbanes-Oxley Act of 2002.
32.1  Chief Executive Officer's  Certificate  pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002.
32.2  Acting Chief Financial Officer's  Certificate  pursuant to Section 906
      of the Sarbanes-Oxley Act of 2002.

(b)   Reports on Form 8-K

      The  Company  filed a  Report  on  Form  8-K  dated  October  9,  2003
      reporting   a   change   in   its   independent   public   accountants
      attributable  to the merger of Feldman  Sherb & Co.,  P.C. with Grassi
      & Co., CPAs, P.C. on April 17, 2002.

      The  Company  filed a  Report  on Form 8-K  dated  December  22,  2003
      reporting   amendments  to  its  clearing   arrangements   with  First
      Clearing Corporation.

                                       17
<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 SUBSIDIARY



February 23, 2004            By: /s/ Mark Goldwasser
                                 ---------------------------------
                                 Mark Goldwasser
                                 President and Chief Executive Officer




February 23, 2004            By: /s/ Robert H. Daskal
                                 ------------------------------------
                                 Robert H. Daskal
                                 Acting Chief Financial Officer

                                       18