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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended March 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 1934during
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 |_| No |X|
The number of shares outstanding of registrant's common stock, par value $0.02
per share, at May 15, 2003 was 3,367,558.
1
OLYMPIC CASCADE FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
ASSETS
March 31, September 30,
2003 2002
(unaudited) (see note below)
------------ ------------
CASH $ 3,000 $ 325,000
CASH, restricted 4,000 309,000
DEPOSITS 1,091,000 1,489,000
RECEIVABLES
Broker-dealers and clearing organizations 1,635,000 1,269,000
Other, net of reserve for uncollectible accounts of $209,000 1,111,000 1,155,000
ADVANCES TO REGISTERED REPRESENTATIVES 758,000 799,000
SECURITIES HELD FOR RESALE, at market 1,644,000 606,000
FIXED ASSETS, net 301,000 369,000
OTHER ASSETS 1,775,000 1,627,000
------------ ------------
$ 8,322,000 $ 7,948,000
============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
BANK OVERDRAFT $ 97,000 $ 408,000
PAYABLES - Broker-dealers and clearing organizations 1,320,000 490,000
SECURITIES SOLD, BUT NOT YET PURCHASED, at market 314,000 105,000
ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER LIABILITIES 2,392,000 2,821,000
NOTES PAYABLE 3,438,000 3,215,000
NOTE PAYABLE - RELATED PARTY 1,000,000 1,000,000
------------ ------------
8,561,000 8,039,000
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' 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 and
2,274,449 shares issued and outstanding at March 31, 2003 and
September 30, 2002, respectively 67,000 45,000
Additional paid-in capital 12,628,000 12,045,000
Deficit (12,934,000) (12,181,000)
------------ ------------
(239,000) (91,000)
------------ ------------
$ 8,322,000 $ 7,948,000
============ ============
Note: The balance sheet at September 30, 2002 has been derived from the audited
financial statements at that date.
See notes to consolidated financial statements
2
OLYMPIC CASCADE FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
-------- Three Months Ended ----------------Six Months Ended-------
March 31, March 31, March 31, March 31,
2003 2002 2003 2002
----------------- -------------- -------------- --------------
REVENUES:
Commissions $ 5,887,000 $ 7,077,000 $ 11,895,000 $ 14,911,000
Net dealer inventory gains 2,668,000 2,747,000 6,225,000 5,463,000
Interest 304,000 338,000 616,000 1,077,000
Transfer fees 346,000 390,000 721,000 775,000
Investment banking 25,000 82,000 131,000 183,000
Other 163,000 336,000 397,000 846,000
------------ ------------ ------------ ------------
TOTAL REVENUES 9,393,000 10,970,000 19,985,000 23,255,000
------------ ------------ ------------ ------------
EXPENSES:
Commissions 6,045,000 6,709,000 12,946,000 14,247,000
Salaries 1,060,000 1,481,000 2,081,000 2,759,000
Clearing fees 542,000 1,505,000 1,224,000 2,613,000
Communications 709,000 654,000 1,267,000 1,470,000
Occupancy costs 676,000 943,000 1,429,000 1,919,000
Interest 33,000 52,000 78,000 444,000
Professional fees 299,000 138,000 531,000 420,000
Taxes, licenses, registration 48,000 118,000 133,000 208,000
Other 572,000 486,000 1,047,000 1,016,000
------------ ------------ ------------ ------------
TOTAL EXPENSES 9,984,000 12,086,000 20,736,000 25,096,000
------------ ------------ ------------ ------------
Loss from continuing operations before (591,000) (1,116,000) (751,000) (1,841,000)
income taxes and discontinued operations
Income tax benefit -- 52,000 -- 40,000
------------ ------------ ------------ ------------
Loss from continuing operations (591,000) (1,064,000) (751,000) (1,801,000)
Income from discontinued operations, net of tax -- -- -- 300,000
------------ ------------ ------------ ------------
Net loss (591,000) (1,064,000) (751,000) (1,501,000)
Preferred stock dividends (62,000) (48,000) (125,000) (50,000)
------------ ------------ ------------ ------------
Net loss attributable to common stockholders $ (653,000) $ (1,112,000) $ (876,000) $ (1,551,000)
============ ============ ============ ============
NET INCOME (LOSS) PER COMMON SHARE
Basic and diluted:
Loss from continuing operations $ (0.20) $ (0.50) $ (0.29) $ (0.83)
Income from discontinued operations -- -- -- 0.14
------------ ------------ ------------ ------------
Net loss attributable to
common stockholders $ (0.20) $ (0.50) $ (0.29) $ (0.69)
============ ============ ============ ============
Weighted average number of shares outstanding
Basic and diluted 3,347,900 2,236,449 2,982,015 2,236,449
============ ============ ============ ============
See notes to consolidated financial statements
3
OLYMPIC CASCADE FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
-------Six Months Ended------
March 31, March 31,
2003 2002
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (751,000) $ (1,501,000)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities
Depreciation and amortization 123,000 428,000
Change in net assets (liabilities) of discontinued operations -- (300,000)
Changes in assets and liabilities
Cash, cash equivalents and securities -- 37,293,000
Restricted Cash 305,000 --
Deposits 398,000 2,804,000
Receivables (281,000) 28,617,000
Securities held for resale (1,038,000) (54,000)
Other assets (148,000) (494,000)
Payables 826,000 (64,042,000)
Securities sold, but not yet purchased 209,000 (512,000)
------------ ------------
Net cash provided by (used in) operating activities (357,000) 2,239,000
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets (55,000) (52,000)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on line of credit -- (3,500,000)
Payments on capital lease -- (127,000)
Proceeds from notes payable -- 1,598,000
Payments on notes payable (153,000) (179,000)
Decrease in cash overdraft (311,000) (1,252,000)
Net proceeds from issuance of preferred stock -- 1,222,000
Net proceeds from issuance of common stock and warrants 554,000 --
------------ ------------
Net cash provided by (used in) financing activities 90,000 (2,238,000)
------------ ------------
NET DECREASE IN CASH (322,000) (51,000)
CASH BALANCE
Beginning of the period 325,000 150,000
------------ ------------
End of the period $ 3,000 $ 99,000
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for
Interest $ 79,000 $ 466,000
============ ============
Income taxes $ -- $ 12,000
============ ============
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND
FINANCING ACTIVITIES
Exchange of notes payable for preferred stock $ -- $ 1,000,000
============ ============
Exchange of notes payable for common stock $ -- $ 49,000
============ ============
Exchange of accounts payable for common stock $ 50,000 $ --
============ ============
Conversion of accounts payable for note payable $ 375,000 $ --
============ ============
See notes to consolidated financial statements
4
OLYMPIC CASCADE FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 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 March 31, 2003 and March 30, 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 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, 2002.
Certain revenues classified as net dealer inventory gains and other revenues in
prior quarters have been reclassified as commission revenues to conform with the
presentation used in the March 31, 2003 financial statements without affecting
the previously reported net income (loss).
NOTE 2 - 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 March 31, 2003:
Securities held Securities sold, but
for resale not yet purchased
---------- ----------
Corporate Stocks $ 257,000 $ 103,000
Corporate Bonds 90,000 --
Government Obligations 1,297,000 211,000
---------- ----------
$1,644,000 $ 314,000
========== ==========
5
NOTE 3 - ISSUANCE OF SECURITIES
In the first quarter of fiscal year 2003, the Company consummated a private
placement (the "Private Offering") of its securities to a limited number of
"accredited investors" pursuant to Rule 506 of Regulation D under the Securities
Act of 1933, as amended (the "Securities Act"). Each unit in the Private
Offering sold for $0.65 and consisted of one share of the Company's common
stock, $.02 par value per share (the "Common Stock") and one three-year warrant
to purchase one share of the Company's Common Stock at a per share price of
$1.25 (the "Warrants"). Net proceeds of $554,500 closed in the first quarter of
fiscal year 2003, and the Company correspondingly issued 1,016,186 shares of
Common Stock and 1,016,186 Warrants.
In January 2003, the Company issued 76,923 shares of Common Stock and a
three-year warrant to purchase 76,923 shares of Common Stock at $1.25 per share
to D'Ancona & Pflaum LLC, as payment of $50,000 of legal fees that were accrued
as of September 30, 2002.
NOTE 4 - LOAN FROM 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 is due to be repaid in January 2004. Additionally, First
Clearing has waived its stockholders' equity covenant as of March 31, 2003, and
set the excess net capital covenant at $850,000 as of March 31, 2003. Excess net
capital as of March 31, 2003 was $873,000. The minimum level of stockholders'
equity required to be maintained will be $1,000,000 as of June 30, 2003, and the
minimum excess net capital required to be maintained will be $1,000,000 as of
May 31, 2003.
NOTE 5 - CLOSING OF WESTAMERICA INVESTMENT GROUP
In December 2001, the Company's former wholly-owned subsidiary, WestAmerica
Investment Group ("WestAmerica") voluntarily withdrew its membership with the
National Association of Securities Dealers ("NASD"), ceased to conduct business
as a broker-dealer, and filed for Chapter 7 Bankruptcy protection in accordance
with the U.S. Bankruptcy Code. This filing eliminated the risk of loss for the
liabilities in excess of assets, and accordingly that amount was reversed and
reflected as income during the first quarter of fiscal year 2002 in the amount
of $300,000. WestAmerica had been operated as a separate legal entity, and the
Company believes it will not have any ongoing liability for any unpaid
obligations of WestAmerica.
NOTE 6 - CONTINGENCIES
National Securities Corporation, the Company's wholly-owned subsidiary
("National"), has been named, together with others, as a defendant in a
consolidated class action lawsuit filed against Complete Management, Inc.
Plaintiffs in the class action are seeking approximately $80.0 million from all
named parties. In June 2000, National filed a motion 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. In November 2001,
the plaintiffs filed a motion to certify the class. Plaintiffs thereafter
withdrew their motion and the case was referred to mediation. The mediation
process is
6
moving toward a global settlement of the matter. National has agreed to settle
its portion of this litigation, subject to court approval, for $100,000. Should
the matter not be settled, National will pursue its defenses, which it believes
are meritorious. However, the Company is unable to predict the outcome of this
matter and accordingly, no adjustments have been made in the consolidated
financial statements in response to this matter.
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 $575,000 in damages. The Company 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. However,
the Company is unable to predict the outcome of this matter and accordingly, no
adjustments have been made in the consolidated financial statements in response
to this matter.
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 contest class certification and defend this action,
although the ultimate outcome of the matter cannot be determined at this time.
However, the Company is unable to predict the outcome of this matter and
accordingly, no adjustments have been made in the consolidated financial
statements in response to this matter.
The Company is a defendant in various other arbitrations and administrative
proceedings, lawsuits and claims, which in the aggregate seek general and
punitive damages approximating $2.6 million. These matters arise out of the
normal course of business. The Company believes it has meritorious defenses and
intends to vigorously defend these actions. However, the Company is unable to
predict the outcome of these matters and accordingly, no adjustments have been
made in the consolidated financial statements in response to these matters.
NOTE 7 - ADOPTION OF NEW ACCOUNTING STANDARD
During the current quarter, 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 loss attributable to common stockholders for basic
and diluted net loss per share as if the fair value-based method had been
applied to all awards of options granted by the Company.
7
Three Months Ended Six Months Ended
March 31, 2003 March 31, 2002 March 31, 2003 March 31, 2002
--------------------------------- ---------------------------------
Net loss attributable to common stockholders - as reported $ (653,000) $ (1,112,000) $ (876,000) $ (1,551,000)
Stock-based employee compensation cost determined
under fair value method, net of tax effects (7,700) (50,000) (15,000) (50,000)
--------------------------------- ---------------------------------
Net loss attributable to common stockholders - pro forma $ (660,700) $ (1,162,000) $ (891,000) $ (1,601,000)
================================= =================================
Net income (loss) per common share
Basic and diluted:
Net loss attributable to common stockholders - as reported $ (0.20) $ (0.50) $ (0.29) $ (0.69)
Per share stock-based employee compensation cost
determined under fair value method, net of tax effects - (0.02) (0.01) (0.02)
--------------------------------- ---------------------------------
Net loss attributable to common stockholders - pro forma $ (0.20) $ (0.52) $ (0.30) $ (0.71)
================================= =================================
The Black-Scholes option valuation model was used to estimate the fair value of
the options granted in the quarter and the six months ending March 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 other options that are traded. 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:
2003 2002
-------------------------
Periods ended March 31,
Assumptions:
Risk-free interest rate 4.06% 5.7%
Expected life, in years 4.6 5.0
Expected volatility 311% 286%
Results:
Fair value of options granted $ 0.36 $ 1.15
8
NOTE 8 - CUMULATIVE DIVIDENDS ON CONVERTIBLE PREFERRED STOCK
The holders of the Series A Cumulative Convertible Preferred Stock are to
receive dividends on a quarterly basis at a rate of 9% per annum when, as and if
declared by the Company's Board of Directors. At March 31, 2003, the amount of
accumulated dividends on the Company's 27,825 issued and outstanding shares of
preferred stock was $293,000.
NOTE 9 - INCOME (LOSS) PER COMMON SHARE
Basic income (loss) per share is computed based on the weighted average number
of shares of Common Stock outstanding during the period. Net income (loss)
attributable to common stockholders reflects cumulative but unpaid preferred
stock dividends on the Company's Preferred Stock issued during fiscal year 2002.
Common Stock equivalents have been omitted as their inclusion would be
antidilutive. For the three month periods ended March 31, 2003 and 2002,
2,384,065 and 1,406,751 shares, respectively, attributable to outstanding stock
options and warrants were excluded from the calculation of diluted earnings per
share because the effect was antidilutive. For the six month periods ended March
31, 2003 and 2002, 2,384,065 and 1,406,751 shares, respectively, attributable to
outstanding stock options and warrants were excluded from the calculation of
diluted earnings per share because the effect was antidilutive.
NOTE 10 - THE AMERICAN STOCK EXCHANGE
The Company has received a letter from The American Stock Exchange (the
"Exchange") indicating that it is 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 has
submitted to the Exchange a plan that indicates compliance with item (1) above
within a maximum of 18 months and the Company is actively seeking another
independent director to satisfy item (2) above. 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.
NOTE 11 - BUSINESS OPERATIONS
Although the Company has continued to incur operating losses, the Company
believes that based on the continuation of the improved market conditions and
the Company's increased volume of business experienced in the month of April and
the beginning of May 2003, funds will be sufficient to maintain its current
level of business activities through the end of March 2004. Additionally,
effective in April 2003, the Company implemented a temporary salary decrease for
its employees. If current market conditions do not continue, the Company would
need to consider curtailing certain of its business activities, further reducing
its fixed overhead costs and/or seek additional sources of financing.
9
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 26, 2002. 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
Reclassification of Revenues
Certain revenues classified as net dealer inventory gains and other revenues in
prior quarters have been reclassified as commission revenues to conform with the
presentation used in the March 31, 2003 consolidated financial statements. The
revenues formerly classified as net dealer inventory gains were generated from
principal trades to institutions that National charges a commission.
Quarter Ended March 31, 2003 Compared to Quarter Ended March 31, 2002
The Company's second quarter of fiscal year 2003 resulted in a decrease in total
revenues and a corresponding greater decrease in expenses compared with the same
period of fiscal year 2002. The decrease in revenues is due to the continued
weakness in the securities markets compared to a year ago. However, as a result
of management's efforts to reduce the fixed costs associated with its business,
the Company's loss from continuing operations before income taxes decreased
$525,000 from $1,116,000 in the second quarter of fiscal year 2002 to $591,000
in the second quarter of fiscal year 2003.
Total revenues decreased $1,577,000, or 14%, to $9,393,000 in the second quarter
of fiscal year 2003 from $10,970,000 in the second quarter of fiscal year 2002.
The decrease in total revenues is primarily due to a continued weaker overall
securities market caused by the geopolitical crisis surrounding the conflicts in
the Mid-East. Accordingly, commission revenues decreased $1,190,000 or 17% to
$5,887,000 in the second quarter of fiscal year 2003 as compared to $7,077,000
in the second quarter of fiscal year 2002. Net dealer inventory gains decreased
$79,000, or 3%, to $2,668,000 in the second quarter of fiscal year 2003 from
$2,747,000 in the second quarter of fiscal year 2002. The decrease in commission
revenue and net dealer inventory gains is due to an approximate 13% decrease in
the Company's trading volume from the prior period.
10
Investment banking revenues decreased $57,000, or 70%, to $25,000 in the second
quarter of fiscal year 2003 from $82,000 in the second quarter of fiscal year
2002. The decrease in revenues is primarily due to a general slow-down in the
broader capital markets. Interest income decreased $34,000, or 10%, to $304,000
in the second quarter of fiscal year 2003 from $338,000 in the second quarter of
fiscal year 2002. The decrease in interest income is attributable to a decrease
in the amount of customer credits and customer debits in National's customers'
accounts. Other revenues decreased $173,000, or 51%, to $163,000 in the second
quarter of fiscal year 2003 from $336,000 in the second quarter of fiscal year
2002. The decrease is due to a decline in order flow rebates from other
broker-dealers.
In comparison with the 14% decrease in total revenues, total expenses decreased
$2,102,000, or 17%, to $9,984,000 in the second quarter of fiscal year 2003 from
$12,086,000 in the second quarter of fiscal year 2002. The decrease in total
expenses is a result of management's efforts to streamline its operations and
reduce costs.
Commission expense, which includes expenses related to commission revenue, net
dealer inventory gains and investment banking, decreased by $664,000, or 10%, to
$6,045,000 in the second quarter of fiscal 2003 from $6,709,000 in the second
quarter of fiscal 2002. Salaries decreased $421,000, or 28%, to $1,060,000 in
the second quarter of fiscal year 2003 from $1,481,000 in the second quarter of
fiscal year 2002. This decrease is due to management's ongoing efforts to reduce
its fixed costs associated with salaried employees. Overall, combined commission
and salary expenses as a percentage of revenue increased by 1% to 76% during the
second quarter of fiscal year 2003 compared to 75% during the second quarter of
fiscal year 2002. The increase is due to the decrease in interest and other
income in the second quarter of fiscal year 2003 compared to the second quarter
of fiscal year 2002.
Clearing fees decreased by $963,000, or 64%, to $542,000 from $1,505,000 in the
second quarter of fiscal year 2003 compared to the second quarter of fiscal year
2002. The decrease in clearing fees is due to lower trading volume during the
current period and a one time clearing charge of $548,000 incurred in the second
quarter of fiscal year 2002. Communication expenses increased by $55,000, or 8%,
to $709,000 from $654,000. The increase is due to higher usage of telequote
services. Occupancy costs decreased $267,000, or 28%, to $676,000 from $943,000
in second quarter of fiscal year 2003 compared to the second quarter of fiscal
year 2002. 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 by $161,000, or 117%, to $299,000 in the second
quarter of fiscal year 2003 from $138,000 in the second quarter of fiscal year
and 2002. The increase in professional fees is due to an increase in the legal
fees relating to various lawsuits and arbitrations. Taxes, licenses and
registrations decreased by $70,000, or 59% in the second quarter of fiscal year
2003 to $48,000 from $118,000 in the second quarter of fiscal year 2002. The
decrease is due to fewer license and registration fees associated with the
Company's employees. Other expenses increased by $86,000, or 18%, to $572,000
from $486,000 in the second quarter of fiscal years 2003 and 2002, respectively.
The decrease is due to reduced travel and entertainment expenses as well as
fewer write-offs of bad debts.
11
Due to the continued slumping markets, the Company reported a net loss from
continuing operations of $591,000 in the second quarter of fiscal year 2003
compared to a net loss from continuing operations of $1,064,000 in the second
quarter of fiscal year 2002. Overall, the diluted loss from continuing
operations was $.20 per share for the second quarter of fiscal year 2003 as
compared to a diluted loss from continuing operations of $.50 per share for the
second quarter of fiscal year 2002.
Six Months Ended March 31, 2003 Compared to Six Months Ended March 31, 2002
The Company's first six months of fiscal year 2003 resulted in a decrease in
total revenues and a corresponding greater decrease in expenses compared with
the same period of fiscal year 2002. The decrease in revenues is due to the
continued weakness in the securities markets compared to a year ago. However, as
a result of management's efforts to reduce the fixed costs associated with its
salaried employees, communication expenses, occupancy costs and other expenses,
the Company's loss from continuing operations before income taxes decreased by
$1,090,000 from $1,841,000 in the first six months of fiscal year 2002 to
$751,000 in the first six months of fiscal year 2003.
Total revenues decreased by $3,270,000, or 14%, to $19,985,000 in the first six
months of fiscal year 2003 from $23,255,000 in the first six months of fiscal
year 2002. The decrease in total revenues is primarily due to a continued weaker
overall securities market caused by the geopolitical crisis surrounding the
conflicts in the Mid-East. Accordingly, commission revenues decreased by
$3,016,000 or 20% to $11,895,000 in the first six months of fiscal year 2003 as
compared to $14,911,000 in the first six months of fiscal year 2002. The
decrease in commission revenue is due an approximate 8% decrease in the
Company's trading volume from the prior period. Net dealer inventory gains
increased by $762,000, or 14%, to $6,225,000 in the first six months of fiscal
year 2003 from $5,463,000 in the first six months of fiscal year 2002.
Investment banking revenues decreased by $52,000, or 28%, to $131,000 in the
first six months of fiscal year 2003 from $183,000 in the first six months of
fiscal year 2002. The decrease in revenues is attributed to a general slow-down
in the broader capital markets. Interest income decreased by $461,000, or 43%,
to $616,000 in the first six months of fiscal year 2003 from $1,077,000 in the
first six months of fiscal year 2002. The decrease in interest income is
attributable to a decrease in the amount of customer credits and customer debits
in National's customers' accounts Other revenues decreased by $449,000, or 53%,
to $397,000 in the first six months of fiscal year 2003 from $846,000 in the
first six months of fiscal year 2002. The decrease is due to a decline in order
flow rebates from other broker-dealers.
In comparison with the 14% decrease in total revenues, total expenses decreased
by $4,360,000, or 17%, to $20,736,000 in the first six months of fiscal year
2003 from $25,096,000 in the first six months of fiscal year 2002. The decrease
in total expenses is a result of management's efforts to streamline its
operations and reduce costs.
Commission expense, which includes expenses related to commission revenue, net
dealer inventory gains and investment banking, decreased by $1,301,000, or 9%,
to $12,946,000 in the first six
12
months of fiscal 2003 from $14,247,000 in the first six months of fiscal 2002.
Salaries decreased by $678,000, or 25%, to $2,081,000 in the first six months of
fiscal year 2003 from $2,759,000 in the first six months of fiscal year 2002.
This decrease is due to management's ongoing efforts to reduce its fixed costs
associated with salaried employees. Overall, combined commission and salary
expenses as a percentage of revenue increased by 2% to 75% during the first six
months of fiscal year 2003 compared to 73% during the first six months of fiscal
year 2002. The increase is due to the decrease in interest income from the first
six months of fiscal year 2003 compared to the first six months of fiscal year
2002.
Clearing fees decreased by $1,389,000, or 53%, to $1,224,000 from $2,613,000 in
the first six months of fiscal year 2003 compared to the first six months of
fiscal year 2002. The decrease in clearing fees is due to lower trading volume
during the current period and a one time clearing charge of $548,000 incurred in
the first six months of fiscal year 2002. Communication expenses decreased
$203,000, or 14%, to $1,267,000 from $1,470,000 in the first six months of
fiscal year 2003 compared to the first six months of fiscal year 2002. The
decrease is due to a reduction in voice and data charges. Occupancy costs
decreased by $490,000, or 26%, to $1,429,000 from $1,919,000 in first six months
of fiscal year 2003 compared to the first six months of fiscal year 2002. 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 by $111,000, or 26%, to $531,000 in the first six
months of fiscal year 2003 from $420,000 in the first six months of fiscal year
and 2002. The increase in professional fees is due to an increase in the legal
fees relating to various lawsuits and arbitrations. Taxes, licenses and
registrations decreased by $75,000, or 36% in the first six months of fiscal
year 2003 to $133,000 from $208,000 in the first six months of fiscal year 2002.
The decrease is due to fewer license and registration fees associated with the
Company's employees. Other expenses increased by $31,000, or 3%, to $1,047,000
from $1,016,000 in the first six months of fiscal year 2003 compared to the
first six months of fiscal year 2002..
Due to the continued slumping markets, the Company reported a net loss from
continuing operations of $751,000 in the first six months of fiscal year 2003
compared to a net loss from continuing operations of $1,801,000 in the first six
months of fiscal year 2002. Overall, the diluted loss from continuing operations
was $.29 per share for the first six months of fiscal year 2003 as compared to a
diluted loss from continuing operations of $.83 per share for the first six
months of fiscal year 2002.
In the first quarter of fiscal 2002, the Company recorded a gain of $300,000
from discontinued operations related to the write-off of WestAmerica's net
liabilities. Overall, the net loss was $.29 per share in the first six months of
fiscal year 2003 as compared to a net loss of $.69 per share for the first six
months of fiscal year 2002.
Liquidity and Capital Resources
13
As with most financial services firms, substantial portions of the Company's
assets are liquid, consisting mainly of cash or assets readily convertible into
cash. Through December 2001, while acting as a self-clearing firm, these assets
were financed primarily by National's interest bearing and non-interest bearing
customer credit balances, other payables and equity capital. National utilized
short-term bank financing to supplement its ability to meet day-to-day operating
cash requirements. Such financing was used to maximize cash flow and was
regularly repaid. The Company's line of credit was fully repaid and expired on
December 31, 2001.
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 the Company is a market maker. At March 31, 2003,
National's net capital exceeded the requirement by $873,000.
In December 2001, WestAmerica voluntarily withdrew its membership with the NASD,
ceased conducting business as a broker-dealer, and filed for Chapter 7
Bankruptcy protection in accordance with the U.S. Bankruptcy Code. WestAmerica
had been operated as a separate legal entity, and although the Company believes
it will not have any ongoing liability for any unpaid obligations of
WestAmerica, there can be no assurances that creditors of WestAmerica will not
seek recovery of their claims from the Company.
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.
As a result of the losses throughout fiscal year 2001, notably those of the
fourth quarter, attributable in part to the unprecedented events in September
2001, the Company concluded that existing capital would not be sufficient to
satisfy existing operations. The Company explored various transactions to
finance the Company's operations. In December 2001, the Company completed a
series of transactions under which certain new investors obtained a significant
ownership in the Company. (For a more complete description of these
transactions, see Item 1(b) of the Company's Annual Report on Form 10-K for the
fiscal year ended September 30, 2002.) The Company continued to incur operating
losses throughout fiscal year 2002, and as a result, the Company believed that
its then existing capital was not sufficient to satisfy its current level of
operations. Accordingly, the Company pursued additional sources of capital from
various potential investors. In the fourth quarter of fiscal year 2002, the
Company completed $210,000 of financing in the form of Series A Preferred Stock
and continued to seek additional investors.
In the first quarter of fiscal year 2003, the Company consummated a private
placement (the "Private Offering") of its securities to a limited number of
accredited investors pursuant to Rule 506 of Regulation D under the Securities
Act of 1933, as amended (the "Securities Act"). Each
14
unit in the Private Offering sold for $0.65 and consisted of one share of the
Company's Common Stock and one three-year warrant to purchase one share of the
Company's Common Stock at a per share price of $1.25 (the "Warrants"). Net
proceeds of $554,500 were received in the first quarter of fiscal year 2003, and
the Company correspondingly issued 1,016,186 shares of Common Stock and
1,016,186 Warrants. The Company has 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 during the second
quarter of fiscal year 2003. The Registration Statement is currently being
reviewed by the SEC.
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. 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 then outstanding divided by the remaining life of the note.
Borrowings under the promissory note are forgivable based on achieving certain
business performance and trading volumes of the Company over the life of the
loan that the Company has satisfied through the quarter ended March 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 required to be maintained by the Company 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. Additionally,
National received its clearing deposit, net of miscellaneous expenses, of
$975,000 from US Clearing. National terminated its clearing agreement with US
Clearing.
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 is due to be
repaid in January 2004. Additionally, First Clearing has waived its
stockholders' equity covenant as of March 31, 2003, and set the excess net
capital covenant at $850,000 as of March 31, 2003. The minimum level of
stockholders' equity required to be maintained will be $1,000,000 as of June 30,
2003, and the minimum excess net capital required to be maintained will be
$1,000,000 as of May 31, 2003. The Company believes that future waivers will be
available if needed.
15
Although the Company has continued to incur operating losses, the Company
believes that based on the continuation of the improved market conditions and
the Company's increased volume of business experienced in the month of April and
the beginning of May 2003, funds will be sufficient to maintain its current
level of business activities through the end of March 2004. Additionally,
effective in April 2003, the Company implemented a temporary salary decrease for
its employees. If current market conditions do not continue, the Company would
need to consider curtailing certain of its business activities, further reducing
its fixed overhead costs and/or seek additional sources of financing. The
Company's ability to obtain such financing could be adversely affected by recent
developments relating to the listing of the Company's common stock on The
American Stock Exchange (See Note 10 herein).
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
owned ("long"), securities sold but not yet purchased ("short") and net
positions as of March 31, 2003:
Long Short Net
---- ----- ---
16
Corporate Stocks $ 257,000 $ 103,000 $ 154,000 (long)
Corporate Bonds $ 90,000 $ -- $ 90,000 (long)
Government Obligations $ 1,297,000 $ 211,000 $ 1,086,000 (long)
ITEM 4 - CONTROLS AND PROCEDURES
Within 90 days prior to the date of this report, we carried out an evaluation,
under the supervision and with the participation of our Chief Executive Officer
and Acting Chief Financial Officer, of the effectiveness of the design and
operation of our "disclosure controls and procedures" (as defined in the
Securities Exchange Act of 1934, as amended, Rules 13a-14(c) and 15(d)-14(c)).
This evaluation has provided our Chief Executive Officer and Acting Chief
Financial Officer with reasonable assurance that our disclosure controls and
procedures are effective and can be relied upon to gather, analyze and disclose
all information required to be included in our periodic SEC reports.
In addition, we reviewed our internal controls, and there have been no
significant changes in our 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
During the quarter ended March 31, 2003, the Company agreed to settle its
portion of the litigation relating to Complete Management, Inc., subject to
court approval, for $100,000. There were no other significant developments in
the Company's legal proceedings during the quarter. For a detailed discussion of
the Company's legal proceedings, please refer to Note 6 herein, and the
Company's Annual Report on Form 10-K for the fiscal year ended September 30,
2002.
17
ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS
In the first quarter of fiscal year 2003, the Company consummated a private
placement (the "Private Offering") of its securities to a limited number of
"accredited investors" pursuant to Rule 506 of Regulation D under the Securities
Act of 1933, as amended (the "Securities Act"). Each unit in the Private
Offering sold for $0.65 and consisted of one share of the Company's Common Stock
and one three-year warrant to purchase one share of the Company's Common Stock
at a per share price of $1.25 (the "Warrants"). Net proceeds of $554,500 were
received in the first quarter of fiscal year 2003, and the Company
correspondingly issued 1,016,186 shares of Common Stock and 1,016,186 Warrants.
National acted as the placement agent on a best efforts basis for the Private
Offering. In consideration of the services rendered by National, National was
(i) paid a cash fee equal to ten percent (10%) of the gross proceeds received by
the Company, and (ii) issued warrants to purchase such number of Units equal to
ten percent (10%) of the Units sold in the Private Offering, at the same
valuation received by investors in the Private Offering. The offering period for
the Private Offering expired on February 17, 2003.
In January 2003, the Company issued 76,923 shares of Common Stock and a
three-year warrant to purchase 76,923 shares of Common Stock at $1.25 per share
to D'Ancona & Pflaum LLC, as payment of $50,000 of legal fees that were accrued
as of September 30, 2002.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its annual meeting of shareholders on March 13, 2003. Proxies
were solicited by the Company pursuant to Regulation 14A under the Exchange Act
of 1934, as amended. At the annual meeting, the Company's shareholders approved
the following proposals:
1. The number of shares voted "for" and "withhold authority" in connection with
the election of Robert J. Rosan as a Class II Director to the Board of Directors
of the Company was as follows:
Withhold
For Authority
--------- ---------
In Person 285,000 0
By Proxy 3,190,060 78,980
--------- ------
Total 3,475,060 78,980
--------- ------
The terms of Steven B. Sands and Martin S. Sands, Class I Directors, and Mark
Goldwasser, Gary A. Rosenberg and Peter Rettman, Class III Directors, continued
after the annual meeting.
2. The number of shares voted "for", "against" and "abstain" in connection with
the ratification of Grassi & Co., CPAs P.C. as the Company's independent public
accountants for the fiscal year ending September 30, 2003, was approved as
follows:
18
For Against Abstain
--------- ------- -------
In Person 285,000 0 0
By Proxy 3,233,354 35,449 237
--------- ------ ---
Total 3,518,354 35,449 237
--------- ------ ---
ITEM 5 - OTHER INFORMATION
None.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
99.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
99.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section
1350, as adopted 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 May 5, 2003 reporting a change in
its independent public accountants.
19
CERTIFICATION
I, Mark Goldwasser, certify that:
1) I have reviewed this quarterly report on Form 10-Q of Olympic Cascade
Financial Corporation;
2) Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3) Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4) The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) Designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) Presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5) The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function);
a) All significant deficiencies in the design or operations of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6) The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
/s/ Mark Goldwasser
------------------------
Mark Goldwasser
Chief Executive Officer
May 15, 2003
20
CERTIFICATION
I, Robert H. Daskal, certify that:
1) I have reviewed this quarterly report on Form 10-Q of Olympic Cascade
Financial Corporation;
2) Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3) Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4) The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5) The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function);
a) all significant deficiencies in the design or operations of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6) The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
/s/ Robert H. Daskal
------------------------------
Robert H. Daskal
Acting Chief Financial Officer
May 15, 2003
21
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
May 15, 2003 By: /s/ Mark Goldwasser
-------------------------
Mark Goldwasser
President and Chief Executive Officer
May 15, 2003 By:/s/ Robert H. Daskal
---------------------------
Robert H. Daskal
Acting Chief Financial Officer
22