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 June 29, 2001

                        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


As of August 20, 2001, the number of outstanding  shares of registrant's  common
stock, par value $0.02 per share, was 2,227,449.







<PAGE>
                      OLYMPIC CASCADE FINANCIAL CORPORATION
                           CONSOLIDATED BALANCE SHEETS

                                     ASSETS

<TABLE>
<CAPTION>
                                                                                      June 29,            September 29,
                                                                                        2001                   2000
                                                                                     (unaudited)            (audited)
                                                                                  ------------------     -----------------


<S>                                                                                     <C>                   <C>
CASH, subject to immediate withdrawal                                                   $ 1,821,000           $ 3,020,000
CASH, CASH EQUIVALENTS AND SECURITIES                                                    43,375,000            29,517,000
DEPOSITS                                                                                  4,076,000             1,792,000
RECEIVABLES
            Customers                                                                    31,575,000            54,243,000
            Brokers and dealers                                                           1,346,000             1,994,000
            Other                                                                           989,000               394,000
SECURITIES HELD FOR RESALE, at market                                                       998,000               376,000
FIXED ASSETS, net                                                                           965,000             1,112,000
GOODWILL, net                                                                                52,000                74,000
OTHER ASSETS                                                                              2,837,000               393,000
                                                                                  ------------------     -----------------
                                                                                       $ 88,034,000          $ 92,915,000
                                                                                  ==================     =================


                      LIABILITIES AND STOCKHOLDERS' EQUITY

PAYABLES
            Customers                                                                  $ 62,373,000          $ 74,183,000
            Brokers and dealers                                                           9,855,000             5,329,000
SECURITIES SOLD, BUT NOT YET PURCHASED, at market                                           208,000               192,000
ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER LIABILITIES                                  2,068,000             3,976,000
REVOLVING CREDIT LINE                                                                     4,750,000                     -
NOTES PAYABLE                                                                             3,046,000               614,000
CAPITAL LEASE PAYABLE                                                                       372,000               582,000
                                                                                  ------------------     -----------------
                                                                                         82,672,000            84,876,000
                                                                                  ------------------     -----------------

CONTINGENCIES

STOCKHOLDERS' EQUITY
            Preferred stock, $.01 par value, 100,000 shares authorized,
               none issued and outstanding                                                        -                     -
            Common stock, $.02 par value, 6,000,000 shares authorized, 2,227,449 and
               2,056,075 shares issued and outstanding, respectively                         45,000                43,000
            Additional paid-in capital                                                    9,284,000             8,810,000
            Deficit                                                                      (3,967,000)             (814,000)
                                                                                  ------------------     -----------------
                                                                                          5,362,000             8,039,000
                                                                                  ------------------     -----------------
                                                                                       $ 88,034,000          $ 92,915,000
                                                                                  ==================     =================


</TABLE>
   The accompanying notes are an integral part of these financial statements

                                       2
<PAGE>

                      OLYMPIC CASCADE FINANCIAL CORPORATION
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)

<TABLE>
<CAPTION>


                                                 -------- Quarter Ended---------    -------Nine Months Ended----------
                                                    June 29,          June 30,         June 29,         June 30,
                                                      2001              2000             2001             2000
                                                 ----------------   -------------   ---------------  ---------------

REVENUES:
<S>                                                  <C>             <C>              <C>              <C>
Commissions                                          $ 5,152,000     $ 7,718,000      $ 17,731,000     $ 29,750,000
Net dealer inventory gains                             3,933,000       2,291,000        15,550,000        8,652,000
Interest                                               1,396,000       1,970,000         4,689,000        5,716,000
Transfer fees                                            310,000         297,000           816,000        1,008,000
Investment banking                                       276,000         171,000         1,174,000        2,179,000
Other                                                    840,000         708,000         2,270,000        1,342,000
                                                 ----------------   -------------   ---------------  ---------------
TOTAL REVENUES                                        11,907,000      13,155,000        42,230,000       48,647,000
                                                 ----------------   -------------   ---------------  ---------------

EXPENSES:
Commissions                                            6,525,000       7,342,000        23,249,000       28,534,000
Salaries                                               2,237,000       1,620,000         7,020,000        5,553,000
Clearing fees                                          1,183,000         435,000         3,435,000        1,662,000
Communications                                           895,000         341,000         2,399,000          966,000
Occupancy costs                                        1,180,000         987,000         3,555,000        2,643,000
Interest                                                 790,000       1,243,000         2,719,000        3,730,000
Professional fees                                        320,000         355,000         1,227,000        1,240,000
Taxes, licenses, registration                            203,000         185,000           665,000          638,000
Other                                                    537,000         441,000         1,732,000        1,816,000
                                                 ----------------   -------------   ---------------  ---------------
TOTAL EXPENSES                                        13,870,000      12,949,000        46,001,000       46,782,000
                                                 ----------------   -------------   ---------------  ---------------
Income (loss) from operations before income taxes     (1,963,000)        206,000        (3,771,000)       1,865,000
  and extraordinary item

(Provision) benefit for income taxes                           -         (74,000)          200,000         (109,000)
                                                 ----------------   -------------   ---------------  ---------------
Income (loss) from operations before
  extraordinary item                                  (1,963,000)        132,000        (3,571,000)       1,756,000

 Income from extraordinary item- gain from
   extinguishment of debt, net of taxes                        -               -           418,000                -
                                                 ----------------   -------------   ---------------  ---------------
NET INCOME (LOSS)                                   $ (1,963,000)      $ 132,000      $ (3,153,000)     $ 1,756,000
                                                 ================   =============   ===============  ===============
EARNINGS (LOSS) PER COMMON SHARE

 Earnings (Loss) Per Share before extraordinary
   item
           Basic Earnings (Loss) Per Share               $ (0.88)         $ 0.06           $ (1.62)          $ 0.93
                                                 ================   =============   ===============  ===============
           Diluted Earnings (Loss) Per Share             $ (0.88)         $ 0.06           $ (1.62)          $ 0.81
                                                 ================   =============   ===============  ===============

 Earnings Per Share of extraordinary
   item
           Basic Earnings Per Share                      $     -          $    -            $ 0.19           $    -
                                                 ================   =============   ===============  ===============
           Diluted Earnings Per Share                    $     -          $    -            $ 0.19           $    -
                                                 ================   =============   ===============  ===============

 Earnings (Loss) Per Share after extraordinary
  item
           Basic Earnings (Loss) Per Share               $ (0.88)         $ 0.06           $ (1.43)          $ 0.93
                                                 ================   =============   ===============  ===============
           Diluted Earnings (Loss) Per Share             $ (0.88)         $ 0.06           $ (1.43)          $ 0.81
                                                 ================   =============   ===============  ===============
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING -BASIC FOR THE PERIOD                      2,227,449       2,078,821         2,200,021        1,894,755
                                                 ================   =============   ===============  ===============
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING-DILUTED FOR THE PERIOD                     2,227,449       2,377,931         2,200,021        2,165,863
                                                 ================   =============   ===============  ===============
</TABLE>
   The accompanying notes are an integral part of these financial statements


                                       3

<PAGE>

                      OLYMPIC CASCADE FINANCIAL CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                              --------------Nine Months Ended---------------
                                                                                    June 29,               June 30,
                                                                                      2001                   2000
                                                                              ------------------     ------------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                                                <C>                     <C>
   Net Income (loss)                                                               $ (3,153,000)           $ 1,756,000
   Adjustments to reconcile net income (loss) to net
   cash (used in) provided by operating activities
            Depreciation and amortization                                               527,000                360,000
            Compensation related to issuance of stock options                           104,000                 61,000
            (Gain) on extraordinary item-extinguishment of debt                        (418,000)                     -
   Changes in assets and liabilities
            Cash, cash equivalents and securities                                   (13,858,000)             7,869,000
            Deposits                                                                 (2,284,000)            (1,023,000)
            Receivables                                                              22,721,000             (9,273,000)
            Securities held for resale                                                 (622,000)              (242,000)
            Other assets                                                             (2,538,000)               (86,000)
            Customer and broker payables                                             (7,284,000)             3,700,000
            Securities sold, but not yet purchased                                       16,000                  9,000
            Accounts payable, accrued expenses, and other liabilities                (1,838,000)               476,000
                                                                              ------------------     ------------------
    NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES                              (8,627,000)             3,607,000
                                                                              ------------------     ------------------

CASH FLOWS FROM INVESTING ACTIVITIES
            Purchase of fixed assets                                                   (264,000)              (369,000)
            Purchase of goodwill                                                              -                (30,000)
                                                                              ------------------     ------------------

    CASH USED IN INVESTING ACTIVITIES                                                  (264,000)              (399,000)
                                                                              ------------------     ------------------

CASH FLOWS FROM FINANCING ACTIVITIES
            Borrowings (repayments) on line of credit                                 4,750,000             (2,100,000)
            Payments on capital lease                                                  (255,000)              (255,000)
            Payments on notes                                                           (78,000)            (1,034,000)
            Borrowings on notes                                                       3,000,000                      -
            Exercise of stock options and warrants                                      275,000              1,911,000
                                                                              ------------------     ------------------
     NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES                              7,692,000             (1,478,000)
                                                                              ------------------     ------------------

INCREASE IN CASH                                                                     (1,199,000)             1,730,000

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

            End of the period                                                       $ 1,821,000            $ 2,114,000
                                                                              ==================     ==================

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
            Cash paid during the period for
            Interest                                                                $ 2,671,000            $ 3,712,000
                                                                              ==================     ==================
            Income taxes                                                            $   324,000            $         -
                                                                              ==================     ==================

SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND
            FINANCING ACTIVITIES
            Warrants issued as a discount on notes payable                          $   138,000               $ 20,000
                                                                              ==================     ==================
</TABLE>

   The accompanying notes are an integral part of these financial statements


                                       4


<PAGE>



             OLYMPIC CASCADE FINANCIAL CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                         JUNE 29, 2001 AND JUNE 30, 2000

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 June 29, 2001 and June 30, 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 29, 2000.

NOTE 1 - OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business - The Company is a financial services organization, operating
through its three wholly owned  subsidiaries,  National  Securities  Corporation
("National"),   WestAmerica  Investment  Group  ("WestAmerica")  and  Canterbury
Securities  Corporation  ("Canterbury").  Olympic is committed to establishing a
significant  presence in the financial services industry by providing  financing
options for  emerging,  small and middle  capitalization  companies  both in the
United States and abroad through (i) research,  financial  advisory services and
sales,  (ii) investment  banking  services for both public offerings and private
placements  and  (iii)  retail  and  institutional  brokerage,  Over-the-Counter
("OTC") market making and trade clearance operations.

Earnings (Loss) Per Share - Basic earnings (loss) per common share is based upon
the net income (loss) for the period  divided by the weighted  average number of
common  shares  outstanding  during the period.  For the third quarter of fiscal
2001 and 2000, the number of shares used in the basic earnings  (loss) per share
calculation was 2,227,449 and 2,078,821, respectively. For the first nine months
of fiscal 2001 and 2000, the number of shares used in the basic earnings  (loss)
per share calculation was 2,200,021 and 1,894,755 respectively. Diluted earnings
(loss) per common  share  assumes that all common  stock  equivalents  have been
converted to common  shares using the treasury  stock method at the beginning of
the period.  For the third quarter of fiscal 2001 and 2000, the number of shares
used in the diluted  earnings  (loss) per share  calculation  was  2,227,449 and
2,377,931,  respectively. For the first nine months of fiscal 2001 and 2000, the
number of shares used in the diluted  earnings (loss) per share  calculation was
2,200,021 and 2,165,863, respectively.

                                       5
<PAGE>


Recent  Accounting  Pronouncements  - In July  2001,  the  Financial  Accounting
Standards Board issued Statement of Financial  Accounting Standards ("SFAS") No.
141 "Business  Combinations" and SFAS No. 142 "Goodwill and Intangible  Assets".
SFAS No. 141 requires that all business  combinations  initiated  after June 30,
2001 be accounted for using the Purchase  Method of accounting and prohibits the
use of Pooling-of-Interests  Method for such transactions.  SFAS No. 142 applies
to all goodwill and intangible assets acquired in a business combination.  Under
the new standard,  all goodwill,  including  goodwill  acquired  before  initial
application of the standard,  should not be amortized,  but should be tested for
impairment  annually.  Intangible assets other than goodwill should be amortized
over their useful lives and reviewed for impairment in accordance  with SFAS No.
121. The new standard is effective for fiscal years beginning after December 15,
2001. As of June 29, 2001, the Company had $52,000 of unamortized goodwill.

NOTE 2 - LINE OF CREDIT

In January 2001, National  consummated a new secured revolving line of credit of
$5,000,000. The line is subject to renewal on December 31, 2001. Borrowings bear
interest at the "call money rate" plus 1%. At June 29, 2001,  the interest  rate
was 6.50%. Interest is payable monthly. The line is secured by certain assets of
National  excluding items  prohibited from being pledged and assets set forth in
the U.S.  Securities and Exchange  Commission  ("SEC") Customer  Protection Rule
15c3-3  formula.  These  borrowings  are  short-term and generally do not extend
beyond a few days.  At June 29, 2001,  National  had  $4,750,000  in  borrowings
outstanding.

NOTE 3 - NOTES PAYABLE

In January 2001, the Company executed two promissory notes each in the amount of
$1,000,000. The notes bear interest annually at 9% with interest paid quarterly.
The principal of each note matures on January 25, 2004. In connection  with each
note,  warrants were issued for the purchase of 100,000  shares of the Company's
common stock at an exercise price of $5.00 per share. The warrants, which expire
on January 25, 2004,  were valued at $50,000  each,  and have been recorded as a
discount to the respective notes.

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

NOTE 4 - OTHER ASSETS

During the quarter ended March 30, 2001, the Company had its initial  closing of
Robotics Ventures Fund I, L.P., a venture capital fund dedicated to investing in

                                       6
<PAGE>

robotics and artificial intelligence companies.  The fund raised $5.1 million of
which the Company invested $265,000. The Company has recorded this investment in
other assets.

Additionally, the Company, through WestAmerica, invested $175,000 in the opening
of a branch office in Israel.  The Company has recorded such amount as a prepaid
expense, which is being amortized during the current fiscal year.

NOTE 5 - EXTRAORDINARY ITEM-EXTINGUISHMENT OF DEBT

In March  2001,  the  Company  settled  a note in full for  $52,000.  Under  the
original  terms of the note, it was to be repaid  monthly  through  November 30,
2002.  The debt was recorded on the books at $455,000  plus accrued  interest of
$15,000.  The Company has recorded the gain of $418,000 as an extraordinary item
on the Statements of Operations.

NOTE 6 - 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  National  in the  complaint.  In June 2000,
National filed to dismiss this action. In March 2001, the United States District
Court for the Southern District of New York denied National's motion to dismiss.
In May 2001,  National  submitted  its answer to the  complaint  in which it set
forth its  defenses.  National  believes  that its  defenses  are valid and will
vigorously defend this action.

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


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

The Private Securities  Litigation Reform Act of 1995 provides a safe harbor for
forward-looking statements. This Quarterly Report may contain certain statements
of a  forward-looking  nature  relating  to future  events  or  future  business
performance.  Any such  statements  that  refer to the  Company's  estimated  or
anticipated future results or other non-historical facts are forward-looking and
reflect the Company's  current  perspective of existing trends and  information.
These  statements  involve risks and  uncertainties  that cannot be predicted or
quantified and,  consequently,  actual results may differ  materially from those
expressed  or  implied  by  such  forward-looking  statements.  Such  risks  and
uncertainties  include,  among others,  risks and uncertainties  detailed in the
Company's Registration Statement on Form S-3 (Registration No. 333-80247), filed
with the  Securities  and Exchange  Commission on June 9, 1999 and the Company's
other Securities and Exchange Commission filings, including the Company's Annual
Reports on Form 10-K and  Quarterly  Reports on Form 10-Q.  Any  forward-looking

                                       7
<PAGE>

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 June 29, 2001 Compared to Quarter Ended June 30, 2000

The  Company's  third  quarter of fiscal 2001 resulted in a decrease in revenues
and an overall  net loss  compared  with net income in the same period of fiscal
2000.  The  decrease  in revenues is due to the  continued  slumping  securities
markets,  which  significantly  affected commission  revenues.  As a result, the
Company  reported a net loss of $1,963,000  compared with net income of $132,000
for the third quarter of fiscal 2000.

Total revenues decreased $1,248,000 or 9% to $11,907,000 from $13,155,000 during
fiscal 2001 compared with fiscal 2000. This decrease is due mainly to the weaker
overall  securities  market compared with the securities market during the third
quarter of fiscal 2000. The mix of commission  revenue and net dealer  inventory
gains  changed,  mainly due to  National's  New York  office,  which  focuses on
principal  mark-ups  and  mark-downs  as well as agency  trading of fixed income
products, OTC and listed equities to various institutional clients,  proprietary
trading and market making activities.  Commission revenue decreased in the third
quarter of fiscal 2001 while net dealer  inventory  gains  increased  during the
same period.  Commission revenue decreased $2,566,000 or 33%, to $5,152,000 from
$7,718,000  during the third quarter fiscal 2001 compared with the third quarter
of fiscal 2000. This decrease is due to the dramatic  downturn in the securities
market  during the  period  from a strong  market for the same  period of fiscal
2000.

Net dealer  inventory  gains  increased  $1,642,000 or 72%, to  $3,933,000  from
$2,291,000  during the third quarter fiscal 2001 compared with the third quarter
fiscal 2000. This increase was primarily due to the activities  derived from the
New York office, which opened in October 2000.

Investment  banking revenue increased $105,000 or 61% to $276,000 in fiscal 2001
from $171,000 in fiscal 2000. Investment banking revenues were comprised of fees
from  advisory  agreements  during the third  quarter of fiscal  2001 and fiscal
2000.

Other revenues  increased  $132,000 or 19% to $840,000 from  $708,000.  The main
reason for this increase is revenues  generated from the  proprietary  execution
system developed in our New York office.

Although total revenues  decreased,  total  expenses  increased.  Total expenses
increased $921,000, or 7%, to $13,870,000 from $12,949,000.  The reason for this
increase was primarily  due to expenses from the New York office,  which did not
exist in the third quarter of fiscal 2000.


                                       8
<PAGE>

As  anticipated  with  the  revenue  decrease   commission   expense  decreased.
Commission  expense  decreased 11%, or $817,000,  to $6,525,000  from $7,342,000
during  the third  quarter of fiscal  2001  compared  with the third  quarter of
fiscal  2000.  This  decrease is  consistent  with the  decrease  in  commission
revenue.  Although revenues decreased,  salaries increased $617,000,  or 38%, to
$2,237,000  from  $1,620,000.  This  increase was primarily due to the increased
number of employees in New York City. Overall, combined commissions and salaries
as a  percentage  of total  revenue  increased  6% to 74% from 68% in the  third
quarter of fiscal 2001 compared to fiscal 2000, due to the increased salaries.

As anticipated with the business expansion,  expenses regarding  communications,
occupancy,  and clearing  fees have  increased  from the third quarter of fiscal
2000 to the third quarter of fiscal 2001.  Clearing fees  increased  $748,000 or
172% to $1,183,000  from  $435,000,  mainly  relating to the increased  business
generated from the New York office. Communication expenses increased $554,000 to
$895,000  or 162%  from  $341,000  due to the New York  office  as well as costs
associated  with a branch office opened in Boca Raton,  Florida during the first
quarter of fiscal 2001.  Occupancy costs increased $193,000 or 20% to $1,180,000
from $987,000, again mainly relating to the New York office.

Interest  expense  decreased during the third quarter of fiscal 2001 as compared
with the third quarter of fiscal 2000.  Interest expense  decreased  $453,000 or
36% to $790,000 from $1,243,000. The decrease relates to lower customer balances
on which the Company pays interest and lower  interest  rates,  during the third
quarter  of fiscal  2001 as  compared  with the third  quarter  of fiscal  2000.
Customer  credits at the end of the third  quarter of fiscal  2001  totaled  $62
million  compared  with $72 million at the end the third quarter of fiscal 2000.
Interest  revenue  decreased  $574,000 or 29% to $1,396,000 from $1,970,000 as a
result of the decrease in margin debits from $49 million to $31 million from the
end of the third  quarter  of fiscal  2000 to the end of the  third  quarter  of
fiscal 2001, as well as the decrease in interest rates.

Overall,  the diluted loss was $0.88 per share as compared with diluted earnings
of $0.06 per share for the third quarters of fiscal 2001 and 2000, respectively.

Nine Months Ended June 29, 2001 Compared to Nine Months Ended June 30, 2000
---------------------------------------------------------------------------

The  Company's  first nine  months of fiscal  2001  resulted  in a  decrease  in
revenues and, to a lesser extent, a decrease in expenses  compared with the same
period of fiscal 2000. The decrease in revenue is due to the continued  slumping
securities markets,  which  significantly  affected  commission  revenues.  As a
result,  the Company reported a net loss of $3,153,000  compared with net income
of $1,756,000 for the first nine months of fiscal 2000. Included in the net loss
for fiscal 2001 was a gain on extinguishment of debt totaling $418,000.

Revenues  decreased  $6,417,000 or 13% to $42,230,000  from  $48,647,000  during
fiscal 2001 compared with fiscal 2000. This decrease is due mainly to the weaker
overall  securities market compared with the strong securities market during the
first nine months of fiscal 2000.  The mix of commission  revenue and net dealer

                                       9
<PAGE>

inventory gains changed, mainly due to National's New York office, which focuses
on principal  mark-ups and  mark-downs as well as agency trading of fixed income
products, OTC and listed equities to various institutional clients,  proprietary
trading and market making activities.  Commission revenue decreased in the first
nine months of fiscal 2001 while net dealer inventory gains increased during the
same period.  Commission  revenue  decreased  $12,019,000 or 40%, to $17,731,000
from  $29,750,000  during the first nine months of fiscal 2001 compared with the
first nine months of fiscal 2000. This decrease is due to the dramatic  downturn
in the securities  market during the period compared to a very strong securities
market for the same period of fiscal 2000.

Net dealer  inventory  gains  increased  $6,898,000 or 80%, to $15,550,000  from
$8,652,000  during the first nine months of fiscal 2001  compared with the first
nine months of fiscal 2000.  This increase was  primarily due to the  activities
derived from the New York office, which opened in October 2000.

Investment  banking  revenue  decreased  $1,005,000,  or 46% to $1,174,000  from
$2,179,000.  National earned fees from advisory  agreements and  participated in
two private placement raising  approximately  $1.0 million in gross proceeds for
clients during the first nine months of fiscal 2001 compared with  participating
in  seven  private  placements  raising  approximately  $13.0  million  in gross
proceeds for clients during the first nine months of fiscal 2000.

Transfer fees decreased $192,000, or 19%, to $816,000 from $1,008,000 during the
first nine  months of fiscal  2001  compared  to the first nine months of fiscal
2000.  This  decrease was due  primarily to the  decreased  retail  agency trade
volume.

Other revenues increased $928,000 or 69% to $2,270,000 from $1,342,000. The main
reason for this increase is revenues  generated from the  proprietary  execution
system developed in our New York office.

With the decrease in revenues,  expenses also  decreased,  but at a lesser rate.
Total expenses decreased $781,000,  or 2%, to $46,001,000 from $46,782,000.  The
largest component of this decrease was commission  expense.  Commission  expense
decreased 19%, or $5,285,000,  to $23,249,000 from $28,534,000  during the first
nine months of fiscal 2001  compared  with the first nine months of fiscal 2000.
This decrease is consistent  with the dramatic  decrease in commission  revenue.
Although  revenues  decreased,   salaries  increased  $1,467,000,   or  26%,  to
$7,020,000  from  $5,553,000.  This  increase was primarily due to the increased
number of employees in New York City. Overall, combined commissions and salaries
as a percentage of total revenue  increased 2% to 72% from 70% in the first nine
months of fiscal 2001 compared to fiscal 2000, due to the increased salaries.

As  anticipated  with the business  expansion,  including the OTC market making,
expenses regarding  communications,  occupancy, and clearing fees have increased
from the first nine  months of fiscal  2000 to the first  nine  months of fiscal
2001. Clearing fees increased  $1,773,000 or 107% to $3,435,000 from $1,662,000,
mainly  relating to the increased  business  generated from the New York office.
Communication  expenses increased $1,433,000 or 148% to $2,399,000 from $966,000
due to the New York  office  as well as costs  associated  with a branch  office

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opened in Boca Raton, Florida during the first quarter of fiscal 2001. Occupancy
costs  increased  $912,000 or 35% to $3,555,000  from  $2,643,000,  again mainly
relating to the New York office.

Interest  expense  decreased  during  the first  nine  months of fiscal  2001 as
compared with the first nine months of fiscal 2000.  Interest expense  decreased
$1,011,000 or 27% to $2,719,000 from  $3,730,000.  The decrease relates to lower
customer  balances  on which the  Company  pays  interest  during the first nine
months of fiscal 2001 as  compared  with the first nine months of fiscal 2000 as
well as lower interest rates.  Interest revenue  decreased  $1,027,000 or 18% to
$4,689,000  from  $5,716,000  as a result of the  decrease in margin  debits and
lower  interest  rates for the first nine months of fiscal 2001  compared to the
first nine months of fiscal 2001.

Overall,  the diluted loss before the extraordinary  gain was $1.62 per share as
compared  with diluted  earnings of $0.81 per share for the first nine months of
fiscal 2001 and 2000,  respectively.  The diluted  loss after the  extraordinary
gain was $1.43 per share as compared  with  diluted  earnings of $0.81 per share
for the first nine months of fiscal 2001 and 2000, respectively.

Liquidity and Capital Resources

As with most financial firms,  substantial  portions of the Company's assets are
liquid, consisting mainly of cash or assets readily convertible into cash. These
assets are financed  primarily by National's  interest  bearing and non-interest
bearing  customer credit balances,  other payables and equity capital.  National
also  utilizes  short-term  bank  financing  to  supplement  its ability to meet
day-to-day operating cash requirements. Such financing has been used to maximize
cash flow and is regularly repaid.  At June 29, 2001,  National had a $5,000,000
secured line of credit with American National Bank and Trust Company of Chicago,
which is guaranteed  by the Company.  The line is subject to renewal on December
31, 2001. Borrowings bear interest at the "call money rate" plus 1%. Interest is
payable  monthly.  These  borrowings  are short-term and generally do not extend
beyond a few days.  At June 29, 2001,  National  had  $4,750,000  in  borrowings
outstanding.  Additionally, National may borrow up to 70% of the market value of
eligible securities pledged through an unrelated broker-dealer.

National, as a registered broker-dealer is subject to the SEC's 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 or $1,000 per market made,  as a market
maker, up to a maximum of $1,000,000.  At June 29, 2001,  National's net capital
exceeded the requirement by $3,022,000.

WestAmerica,  as a  registered  broker-dealer  is also  subject to the SEC's Net
Capital Rule 15c3-1, which, under the standard method, requires that the company
maintain  minimum  net  capital  equal to the  greater of  $100,000 or 6 2/3% of
aggregate indebtedness. At June 29, 2001, WestAmerica's net capital exceeded the
requirement by $24,660.

Canterbury,  as a  registered  broker-dealer,  is also  subject to the SEC's Net
Capital Rule 15c3-1, which, under the standard method,  requires that Canterbury

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maintain minimum net capital equal to $5,000. At June 29, 2001, Canterbury's net
capital exceeded the requirement by $2,741.

Advances,   dividend  payments  and  other  equity  withdrawals  from  National,
WestAmerica or Canterbury are restricted by the regulations of the SEC and other
regulatory  agencies.  These regulatory  restrictions may limit the amounts that
these subsidiaries may distribute or advance to Olympic.

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

The Company believes its internally generated liquidity, together with access to
external  capital and debt  resources  will be  sufficient  to satisfy  existing
operations.  The $3,000,000 of additional capital raised by the Company,  in the
second  quarter of fiscal 2001,  has been used  primarily to support  National's
expanded  market making  activities.  Furthermore,  as the Company  continues to
expand its  operations,  or acquires other  businesses,  the Company will likely
require  additional  capital.  The Company is  continuously  evaluating  various
alternatives  to increase its capital.  Additionally,  the Company is rigorously
reviewing its overhead  expenses,  and in April, May and June 2001,  implemented
multiple expense reductions  including  reductions in the salaries of management
ranging  from  10%  to  40%.  Management  will  continue  to  implement  expense
reductions as it seeks to achieve profitability.

                                     PART II

ITEM 1 - LEGAL PROCEEDINGS

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

Complete  Management,  Inc.,  United  States  District  Court  for the  Southern
District of New York.  See  disclosure in the Company's Form 10-K for the fiscal
year ended September 29, 2000.

In March 2001, the District Court denied National's motion to dismiss. In May
2001, National submitted its answer to the complaint in which it set forth its
defenses. National believes that its defenses are valid and will vigorously
defend this action.

ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K

a)       Exhibits (None)

b)       Reports on Form 8-K (None)


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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



August 20, 2001                      By: /s/ Steven A. Rothstein
Date                                         Steven A. Rothstein, Chairman
                                             and Chief Executive Officer




August 20, 2001                      By: /s/ Robert H. Daskal
Date                                         Robert H. Daskal, Senior Vice
                                             President, Chief Financial Officer,
                                             Secretary and Treasurer


August 20, 2001                      By: /s/ David M. Williams
Date                                         David M. Williams
                                             Corporate Controller and
                                             Chief Accounting Officer