SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-Q


(Mark One)

[x]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                  THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended November 30, 1998

                                       OR

[ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                  THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________ to _______________

Commission file number _________________________________ 0-26214

                        Freshstart Venture Capital Corp.
             (Exact name of registrant as specified in its charter)

                 New York                                         13-3134761
(State or other jurisdiction of incorporation                (I.R.S. Employer or
               organization)                                 Identification No.)

                              24-29 Jackson Avenue
                           Long Island City, New York
                    (Address of principal executive offices)

                                      11101
                                   (Zip Code)

                                 (718) 361-9595
              (Registrant's telephone number, including area code)

                              313 West 53rd Street
                            New York, New York 10019
              (Former name, former address and former fiscal year,
                         if changed since last report)

     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 report(s), and (2) has been subject to such
filing requirements for the past 90 days.

Yes ___  No _X_

         The number of shares of Common Stock, par value $.01 per share,
                 outstanding as of January 14, 1999: 2,172,688


<PAGE>


                        FRESHSTART VENTURE CAPITAL CORP.

                           FORM 10-Q Table of Contents


PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

     Statements of Financial Position as of
       November 30, 1998 (unaudited) and May 31, 1998  .................   2-3

     Statements of Operations for the Six Months
       Ended November 30, 1998 and 1997 (unaudited)  ...................    4

     Statements of Stockholders' Equity for the Six Months
       Ended November 30, 1998 and 1997 (unaudited)  ...................    5

     Statements of Cash Flows for the Six Months
       Ended November 30, 1998 and 1997 (unaudited)  ...................    6

     Notes to the Financial Statements .................................   7-10


Item 2.  Managements' Discussion and Analysis of Financial
             Condition and Results of Operations .......................   11-12


PART II.  OTHER INFORMATION

Item 4.  Submission of Matters to a Vote of Security Holders ...........   13

Item 6.  Exhibits and Reports on Form 8-K ..............................   14

SIGNATURES .............................................................   15


<PAGE>


                                     PART I
                              FINANCIAL INFORMATION


ITEM 1. FINANCIAL STATEMENTS

The statement of financial  position of the Company as of November 30, 1998, the
related  statements  of  operations,  and cash  flows for the six  months  ended
November 30, 1998 and 1997 included in Item 1 have been prepared by the Company,
without audit, pursuant to the rules and regulations of the Commission.  Certain
information and footnote  disclosures  normally included in financial statements
prepared in accordance with generally accepted  accounting  principles have been
condensed or omitted pursuant to such rules and  regulations.  In the opinion of
management,  the  accompanying  financial  statements  include  all  adjustments
(consisting of normal,  recurring adjustments) necessary to summarize fairly the
Company's  financial  position  and  results  of  operations.   The  results  of
operations  for the six  months  ended  November  30,  1998 are not  necessarily
indicative of the results of  operations  for the full year or any other interim
period.  These  financial  statements  should  be read in  conjunction  with the
audited financial  statements and notes thereto included in the Company's Annual
Report on Form  N-30D for the fiscal  year ended May 31,  1998 as filed with the
Commission.


<PAGE>


                        FRESHSTART VENTURE CAPITAL CORP.
                        STATEMENTS OF FINANCIAL POSITION

                                     ASSETS


                                                  (Unaudited)
                                                  November 30,      May 31,
                                                  ------------   ------------
                                                      1998           1998
                                                  ------------   ------------
Loans Receivable:
Long Term Portion (Notes 2 and 3)                  $24,905,906    $24,442,206
Less:  Unrealized Depreciation on
  Loans Receivable (Note 3)                           (319,815)      (319,815)
                                                   -----------    -----------
                                                    24,586,091     24,122,391
Less:  Current Maturities - Loans Receivable        (3,734,284)    (3,375,072)
                                                   -----------    -----------
     Total Loans Receivable -
       Net of Current Maturities                    20,851,807     20,747,319
                                                   -----------    -----------
CURRENT ASSETS
Cash (Note 13)                                       1,031,546      1,528,168
Accrued Interest (Notes 2 and 3)                       300,076        256,760
Current Maturities - Loans Receivable                3,734,284      3,375,072
Prepaid Expenses and Other Assets                      298,316        326,375
                                                   -----------    -----------
     Total Current Assets                            5,364,222      5,486,375
                                                   -----------    -----------
Fixed Assets - Net of Accumulated Depreciation
  of $31,364 and $28,364
  respectively (Note 2)                                 18,408         13,908
                                                   -----------    -----------
     Total Assets                                  $26,234,437    $26,247,602
                                                   ===========    ===========


            See Accompanying Notes to Unaudited Financial Statements
                                        2


<PAGE>


                        FRESHSTART VENTURE CAPITAL CORP.
                        STATEMENTS OF FINANCIAL POSITION

                      LIABILITIES AND STOCKHOLDERS' EQUITY

                                                      (Unaudited)
                                                      November 30,     May 31,
                                                          1998          1998
                                                      ------------   -----------
 LONG TERM DEBT:
 Debentures Payable to SBA (Note 5)                    $12,360,000   $12,360,000
 4% Cumulative, 15 Year Redeemable
   Preferred Stock                                       1,410,000     1,410,000
                                                       -----------   -----------
      Total Long Term Debt                              13,770,000    13,770,000
                                                       -----------   -----------
 CURRENT LIABILITIES:
 Notes Payable - Bank                                    5,000,000     5,000,000
 Accrued Interest                                          332,813       317,723
 Other Current Liabilities                                  49,230        57,732
 Dividends Payable (Note 7)                                  9,400         9,400
                                                       -----------   -----------
      Total Current Liabilities                          5,391,443     5,384,855
                                                       -----------   -----------
      Total Liabilities                                 19,161,443    19,154,855
                                                       -----------   -----------
 Commitments and Contingencies
   (Notes 11, 12 and 13)                                      --            --

 STOCKHOLDERS EQUITY:
 4% Cumulative, 15 Year Redeemable Preferred
   Stock- $1 Par Value; 10,000,000 Shares
   Authorized, 1,410,000 Shares Issued and
   Outstanding, (See Long Term Debt)                          --            --

 3% Cumulative Preferred Stock - $1 Par Value:
   No Shares Issued and Outstanding                           --            --

 Common Stock - $.01 Par Value: 3,000,000 Shares
   Authorized, 2,172,688 Shares Issued and
   Outstanding                                              21,726        21,726

 Additional Paid in Capital                              7,048,816     7,048,816
 Retained Earnings                                           2,452        22,205
 Restricted Capital - Realized Gain on
   Redemption (Note 6)                                        --            --
                                                       -----------   -----------
      Total Stockholders' Equity                         7,072,994     7,092,747
                                                       -----------   -----------
      Total Liabilities and Stockholders' Equity       $26,234,437   $26,247,602
                                                       ===========   ===========
Net Assets Per Share                                   $      3.26   $      3.26
                                                       ===========   ===========


            See Accompanying Notes to Unaudited Financial Statements
                                        3


<PAGE>


                        FRESHSTART VENTURE CAPITAL CORP.
                            STATEMENTS OF OPERATIONS
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                       Three Months Ended                     Six Months Ended
                                                            November 30,                        November 30,
                                                  -----------------------------         -----------------------------
                                                     1998               1997               1998               1997
                                                  ----------         ----------         ----------         ----------
<S>                                               <C>                <C>                <C>                <C>       
REVENUE:
Interest Earned on
  Outstanding Receivables                         $  737,201         $  523,398         $1,456,403         $  985,572
Interest Income - Idle Funds                           2,719             26,262              6,031             44,053
                                                  ----------         ----------         ----------         ----------
     Total Revenue (Note 2)                          739,920            549,660          1,462,434          1,029,625
                                                  ----------         ----------         ----------         ----------

EXPENSES:
Interest Expense (Note 6)                            342,798            220,293            680,423            370,025
Professional Fees                                     66,669             22,050             89,779             36,096
Officers' Salaries (Notes 9 and 10)                   30,405             30,405             60,810             60,810
Other Salaries (Note 9)                                9,806              6,618             20,520             15,288
Other Operating Expenses                              21,578             25,309             73,215             73,959
Pension Expense (Note 8)                               3,510              3,805              7,610              7,610
Depreciation and Amortization (Note 2)                10,613             12,391             21,228             19,453
                                                  ----------         ----------         ----------         ----------
     Total Expenses                                  485,379            320,871            953,585            583,241
                                                  ----------         ----------         ----------         ----------
Net Investment Income                                254,541            228,789            508,849            446,384
Unrealized Depreciation in Value of
  Investments (Notes 2 and 3)                           --                 --                 --                 --
                                                  ----------         ----------         ----------         ----------
                                                     254,541            228,789            508,849            446,384
PROVISION FOR TAXES:
Current Income Taxes (Note 2)                           --                 --                  680                544
                                                  ----------         ----------         ----------         ----------
     Net Income                                   $  254,541         $  228,789         $  508,169         $  445,840
                                                  ==========         ==========         ==========         ==========
Earnings Per Share of Common Stock
  (Note 2)                                        $     0.10         $     0.09         $     0.21         $     0.20
                                                  ==========         ==========         ==========         ==========
Dividends Paid Per Share
  of Common Stock                                 $    0.115         $    0.110         $     0.23         $     0.22
                                                  ==========         ==========         ==========         ==========
Weighted Average Shares of Common
  Stock Outstanding                                2,172,688          2,172,688          2,172,688          2,172,688
                                                  ==========         ==========         ==========         ==========
</TABLE>


            See Accompanying Notes to Unaudited Financial Statements
                                        4


<PAGE>


                        FRESHSTART VENTURE CAPITAL CORP.
                       STATEMENTS OF STOCKHOLDERS' EQUITY
                                   (UNAUDITED)


                                                         Six Months Ended
                                                           November 30,
                                                   -----------------------------
                                                      1998              1997
                                                   -----------      -----------
4% Cumulative, 15 Year Redeemable
  Preferred Stock - $1 Par Value:
  10,000,000 Shares Authorized,
  1,410,000 Shares Issued and
  Outstanding (See Long Term Debt)                        --               --
                                                   -----------      -----------
Common Stock - $.01 Par Value:
  3,000,000 Shares Authorized, 2,172,688
  Shares Issued and Outstanding                         21,726           21,726
                                                   -----------      -----------
Additional Paid in Capital -
  Beginning of Period                                7,048,816        6,857,817
Amortization of Restricted
  Capital (Note 6)                                        --             95,499
                                                   -----------      -----------
Balance, End of Period                               7,048,816        6,953,316
                                                   -----------      -----------
Retained Earnings -
Beginning of Period                                     22,205          147,805
Net Income                                             508,169          445,840
Dividends Paid and Accrued                            (527,922)        (506,232)
                                                   -----------      -----------
     Balance, End of Period                              2,452           87,413
                                                   -----------      -----------
Restricted Capital
Gain on Redemption of 3% Preferred
  Stock (See Note 6)                                      --            190,999
Amortization of Gain                                      --            (95,499)
                                                   -----------      -----------
     Balance, End of Period (Note 6)                      --             95,500
                                                   -----------      -----------
     Total Stockholder's Equity                    $ 7,072,994      $ 7,157,955
                                                   ===========      ===========


            See Accompanying Notes to Unaudited Financial Statements
                                        5


<PAGE>


                        FRESHSTART VENTURE CAPITAL CORP.
                            STATEMENTS OF CASH FLOWS



                                                          Six Months Ended
                                                            November 30,
                                                     ---------------------------
                                                        1998           1997
                                                     -----------    -----------
CASH FLOWS PROVIDED (USED) BY
  OPERATING ACTIVITIES:
Net Income                                           $   508,169    $   445,840
Depreciation and Amortization Expense                     21,228         19,453
(Increase) in Accrued Interest                           (43,316)       (85,234)
Decrease (Increase) in Other Assets                        9,831       (161,027)
Increase in Accrued Liabilities                            6,588         17,518
Dividends Paid and Accrued                              (527,922)      (506,232)
                                                     -----------    -----------
Net Cash (Used) By Operating Activities                  (25,422)      (269,682)
                                                     -----------    -----------
CASH FLOWS PROVIDED (USED) BY
  INVESTING ACTIVITIES:
Increase in Loans Receivable                          (9,129,875)    (8,448,700)
Repayment of Loans Receivable                          4,927,584      1,560,182
Increase in Loan Participations                        5,294,611        595,000
Repayment of Loan Participations                      (1,556,020)      (201,298)
                                                     -----------    -----------
Net Cash (Used) By Investing Activities                 (463,700)    (6,494,816)
                                                     -----------    -----------
CASH FLOWS (USED) PROVIDED BY
  FINANCING ACTIVITIES:
Acqisition of Fixed Assets                                (7,500)          --
(Decrease) in Restricted Capital                            --          (95,499)
Increase in Debentures Payable to SBA (Net)                 --        3,910,000
Increase in Additional Paid in Capital                      --           95,499
                                                     -----------    -----------
Net Cash (Used) Provided by Financing Activities          (7,500)     3,910,000
                                                     -----------    -----------
Net (Decrease)  in Cash                                 (496,622)    (2,854,498)

Cash Balance - Beginning of Period                     1,528,168      2,869,861
                                                     -----------    -----------
Cash Balance - End of Period                         $ 1,031,546    $    15,363
                                                     ===========    ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
CASH PAID DURING THE PERIOD FOR:
Interest                                             $   665,333    $   298,608
                                                     -----------    -----------
Taxes                                                $       680    $       544
                                                     -----------    -----------


            See Accompanying Notes to Unaudited Financial Statements
                                        6


<PAGE>


                        FRESHSTART VENTURE CAPITAL CORP.
                        NOTES TO THE FINANCIAL STATEMENTS


NOTE 1  ORGANIZATION

     Freshstart  Venture Capital Corp., a New York  corporation (the "Company"),
     was formed on March 4, 1982 for the purpose of operating  as a  specialized
     small  business  investment  company  ("SSBIC"),  licensed  under the Small
     Business  Investment  Act of 1958 and regulated and financed in part by the
     U.S. Small Business Administration ("SBA"). The Company has also elected to
     be regulated as a business development company under the Investment Company
     Act of 1940. The Company's  business is to provide financing to persons who
     qualify under SBA regulations as socially or economically disadvantaged and
     to  entities  which  are  at  least  fifty  (50%)  percent  owned  by  such
     individuals.

NOTE 2  SIGNIFICANT ACCOUNTING POLICIES

     The following is a summary of significant  accounting  policies  applied by
     the Company in the  preparation  of its financial  statements.  The Company
     maintains its accounts and prepares its financial statements on the accrual
     basis of  accounting  in  conformity  with  generally  accepted  accounting
     principles for investment companies.

     Valuation of Loans and Investments

     The Board of Directors has valued the investment  portfolio  based upon the
     cost of such  investments,  less a  provision  for  loan  losses.  However,
     because of the inherent uncertainty of the valuation,  the estimated values
     might  otherwise  be  significantly  higher or lower than values that would
     exist in a ready  market for such loans,  which  market has not in the past
     and does not now exist.  The  provision  for loan losses  represents a good
     faith  determination by the Board of Directors  maintained at a level that,
     in its judgment,  is adequate to absorb losses.  The balance in the reserve
     account is adjusted  periodically by the Board of Directors on the basis of
     the  fair  value  of  the  collateral   held  and  past  loss   experience.
     Approximately  seventy-nine  (79%) percent of the Company's  loan portfolio
     consists of loans made for the financing of taxicab  medallions and related
     assets.  The  remaining  portion  of the  loans are made to  various  small
     commercial  enterprises.  Substantially  all  loans are  collateralized  by
     either NYC taxi  medallions  or real estate and the personal  guarantees of
     the individual owners.

     Depreciation and Amortization

     Depreciation  and   amortization  of  furniture,   fixtures  and  leasehold
     improvements  is computed on the straight line method at rates  adequate to
     allocate the costs of applicable assets over their expected useful lives.

     Recognition of Interest Income

     It is the Company's  policy to record interest on loans and debt securities
     only to the extent that  management  and the Board of Directors  anticipate
     such amounts may be collected.  Interest on doubtful  accounts and accounts
     which are 180 days past due is not recorded until actually received.


                                        7


<PAGE>


                        FRESHSTART VENTURE CAPITAL CORP.
                        NOTES TO THE FINANCIAL STATEMENTS


NOTE 2  SIGNIFICANT ACCOUNTING POLICIES
(Continued)
     Income Taxes

     The Company has elected to be taxed as a regulated investment company under
     the Internal  Revenue  Code. A regulated  investment  company can generally
     avoid  taxation at the  corporate  level to the extent  that  ninety  (90%)
     percent of its income is distributed  to its  stockholders.  Therefore,  no
     provision for federal income taxes has been made. The financial  statements
     include provisions for New York State and local minimum taxes.

     Earnings Per Share

     Earnings  per  share  are  based on a  weighted  average  number  of shares
     outstanding  during  the  period,  less  accrued  dividends  on  cumulative
     preferred stock.

     Accounting Standard for Impairment of Loans

     Statement  of  Financial   Accounting  Standard  No.  114,  "Accounting  by
     Creditors for Impairment of a Loan" ("SFAS 114") was issued in May 1993 and
     is effective for fiscal years  beginning  after December 15, 1994. SFAS 114
     generally  requires all  creditors to account for  impaired  loans,  except
     those loans that are accounted for at fair value or at the lower of cost or
     fair value, at the present value of expected  future cash flows  discounted
     at the loans' effective  interest rate.  Creditors may account for impaired
     loans at the fair value of the collateral or at the observable market price
     of  the  loan  if one  exists.  Due to the  nature  of the  Company's  loan
     portfolio,  SFAS  114 is not  expected  to have a  material  effect  on the
     Company's financial condition or results of operations.

     Other

     Certain  information from the prior years has been  reclassified to conform
     its presentation to the current financial statements.

NOTE 3  LOANS RECEIVABLE

     The Company's loan portfolio includes  participations with other lenders as
     presented in the  following  schedule.  The following is a breakdown of the
     outstanding loans receivable:

                                                          November 30,
                                                              1998
                                                          ------------
               Outstanding Loans                          $ 36,345,556
               Loan Participations                         (11,439,650)
                                                          ------------
               Net Loans Outstanding                      $ 24,905,906
                                                          ============


NOTE 4  LOANS PAYABLE - LINE OF CREDIT

     Effective  March 6, 1997,  the Company  established  a  $5,000,000  line of
     credit with Israel Discount Bank. All advances bear interest at 1.75% above
     the LIBOR rate. Pursuant to the terms of the line of credit, the Company is
     required to comply with certain terms,  covenants and conditions.  The line
     of credit is  unsecured  and the  Company is required to maintain a minimum
     $100,000 compensating balance with the bank.


                                        8


<PAGE>


                        FRESHSTART VENTURE CAPITAL CORP.
                        NOTES TO THE FINANCIAL STATEMENTS

NOTE 5  LONG TERM DEBT

     The  long-term  debt to the SBA  consisted  of the  following  subordinated
     debentures as of November 30, 1998 with interest payable semi-annually:

                                                                November 30,
                                  Interest Rate Period              1998
     Maturity Date                 First       Second           Face Amount
     -------------                 -----       ------           -----------
     June 9, 1999                  6.000%      9.000%               750,000
     September 22, 1999            5.000%      8.000%               750,000
     December 16, 2002             4.510%      7.510%             1,300,000
     June 1, 2005                  6.690%      6.690%               520,000
     December 1, 2005              6.540%      6.540%               520,000
     June 1, 2006                  7.710%      7.710%               250,000
     March 1, 2007                 7.380%      7.380%             4,210,000
     September 1, 2007             7.760%      7.760%             4,060,000
                                                                  ---------
                                                                $12,360,000
                                                                ===========

     During the period  ended May 31,  1998,  the Company  paid off  $150,000 in
     subsidized  debentures and sold an additional  debenture (listed above) for
     $4,060,000 due September 1, 2007 with interest and fees totaling 7.760% per
     annum.

     Under  the  terms  of the  subordinated  debentures,  the  Company  may not
     repurchase or retire any of its capital stock or make any  distributions to
     its stockholders  other than dividends out of retained earnings without the
     prior written approval of the SBA.

NOTE 6  RESTRICTED CAPITAL - UNREALIZED GAIN ON REDEMPTION

     Repurchase of 3% Preferred Stock

     The Company and the SBA entered into a repurchase  agreement  dated May 10,
     1993.  Pursuant to the  agreement,  the Company  repurchased  all 1,520,000
     shares of its $1 par value, 3 percent  cumulative  preferred stock from the
     SBA for a purchase  price of  $.36225670  per  share,  or an  aggregate  of
     $550,630.  The  repurchase  price  was  at a  substantial  discount  to the
     original sale price of the 3 percent  preferred stock which was sold to the
     SBA at par value or $1.00 per share.

     The  Company  issued  the SBA a  liquidating  interest  in a newly  created
     restricted  capital  surplus  account  which was equal to the amount of the
     repurchase  discount.  This repurchase  discount was amortized over a sixty
     month period and was fully amortized as of May 31, 1998.

NOTE 7  DIVIDENDS

     Dividends  paid to the SBA for the  fiscal  year  ended  May 31,  1998 were
     $56,400.  Total dividends paid to common stockholders during the six months
     ended November 30, 1998, were $527,922.  The Company is contingently liable
     to the SBA for $9,400 in preferred  dividends  due for the two months ended
     November 30, 1998.

NOTE 8  MONEY PURCHASE PLAN

     Effective  for the fiscal year ending May 31, 1989 the Company  initiated a
     defined  contribution  pension  plan.  The  eligibility   requirements  for
     participation  in the plan are a minimum  age of 21 years old and 24 months
     of  continuous  employment  with the Company.  Contributions  are currently
     limited  to  ten   percent  of  each   participants   compensation.   Total
     contributions made for the six months ended November 30, 1998, were $7,610.
     All contributions to the plan have been funded on a current basis.


                                        9


<PAGE>


                        FRESHSTART VENTURE CAPITAL CORP.
                        NOTES TO THE FINANCIAL STATEMENTS


NOTE 9  MANAGEMENT FEES

     The SBA approved the Company's total compensation of $225,000. Compensation
     is inclusive of officers' and staff salaries and pension contributions.

NOTE 10 RELATED PARTY TRANSACTION

     The Company  currently leases office space from a real estate  partnership,
     whose  partners  consist of certain  officers and directors of the Company,
     for $1,500 per month plus certain  extraordinary  operating  expenses.  The
     lease is month to month with a minimum annual rental of $18,000

     Certain officers and directors of the Company are also  shareholders of the
     Company.  Officers' salaries are set by the Board of Directors and are also
     subject to maximum  compensation  set by the SBA.  For the six months ended
     November 30, 1998,  officers'  salaries,  including pension  contributions,
     were $66,891.

NOTE 11 SIGNIFICANT CONCENTRATION OF CREDIT RISK

     Approximately  seventy nine (79%) percent of the Company's  loan  portfolio
     consists  of loans made for the  financing  and  purchase  of New York City
     taxicab medallions and related assets.

NOTE 12 FINANCIAL INSTRUMENTS WITH OFF BALANCE SHEET RISKS

     The  Company  maintained  approximately  $788,556  in one bank in excess of
     amounts  that  would  be  insured  by  the  Federal  Depository   Insurance
     Corporation.  Management  of the  Company  feels  that  the  bank  is  well
     capitalized under FDIC guidelines.

NOTE 13 FAIR VALUE OF FINANCIAL INSTRUMENTS

     The following disclosures represent the Company's best estimate of the fair
     value of  financial  instruments,  determined  on a basis  consistent  with
     requirements  of  Statement  of  Financial  Accounting  Standards  No. 107,
     "Disclosures about Fair Value of Financial Instruments."

     The  estimated  fair  values of the  Company's  financial  instruments  are
     derived using  estimation  techniques based on various  subjective  factors
     including  discount rates. Such estimates may not necessarily be indicative
     of the net  realizable or  liquidation  values of these  instruments.  Fair
     values  typically  fluctuate  in  response  to  changes in market or credit
     conditions.  Additionally,  valuations are presented as of a specific point
     in  time  and  may not be  relevant  in  relation  to the  future  earnings
     potential of the Company.

     Accordingly,  the estimates presented herein are not necessarily indicative
     of the amounts the Company will realize in a current market exchange.

     The use of different market assumptions and/or estimation methodologies may
     have a material effect on the estimated fair value amounts.

     Loans  Receivable - The fair value of loans is estimated at cost net of the
     allowance  for loan losses.  The Company  believes  that the rates of these
     loans approximate current market rates.

     Debentures  Payable to Small  Business  Administration  - The fair value of
     debentures  as of  November  30,  1998 and May 31,  1998 was  approximately
     $12,360,000 and was estimated by discounting the expected future cash flows
     using the current rate at which the SBA has extended similar  debentures to
     the Company.


                                       10


<PAGE>


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

The information contained in this section should be used in conjunction with the
Financial  Statements and Notes therewith appearing in this report Form 10-Q and
the Company's Annual Report for the year ended May 31, 1998.

General

     The  Company is  licensed  by the Small  Business  Administration  (SBA) to
operate as a Specialized  Small Business  Investment  Company  (SSBIC) under the
Small Business Investment Act of 1958, as amended.  The Company has also elected
to be regulated as a business  development  company under the Investment Company
Act of 1940.

     The Company  primarily  makes loans and  investments to persons who qualify
under SBA  regulations as socially or economically  disadvantaged  and loans and
investments  to  entities  which  are at least 50%  owned by such  persons.  The
Company's   primary   lending   activity  is  to  originate  and  service  loans
collateralized by New York City Taxicab Medallions. The Company also makes loans
and investments in other diversified businesses.

Results of Operations For the Six Months ended November 30, 1998 and 1997

     Total investment income. The Company's investment income for the six months
ended  November  30, 1998  increased to  $1,456,403  (an increase of 47.8%) from
$985,572  for the six month period ended  November 30, 1997.  This  increase was
mainly due to an  increase in the loan  portfolio  during the fiscal  year.  The
portfolio  increased from  $20,803,989 as of November 30, 1997 to $24,905,906 as
of November 30, 1998, as part of the Company's strategy to maximize  shareholder
rate of return by use of bank debt.

Operating Expenses

     Interest expense for the six month period ended November 30, 1998 increased
$310,398  ($680,423 from  $370,025) over the similar  quarter ended November 30,
1997.  This increase was mainly due to increased bank  borrowings for the period
offset by lower interest rates for the six months ended November 30, 1998.

     Other operating  expenses  increased $59,886 when compared with the similar
six month  period  ended  November  30,  1997.  This  increase was mainly due to
increases in legal fees and other fees.

Statement of Financial Position

     Total assets and liabilities remained constant as of November 30, 1998 when
compared  with the  statement  of  financial  position as of May 31,  1998.  The
reserves  for bad debts were  deemed to be adequate  as of  November  30.  1998.
Accordingly, the Company did not take any additional bad debt charge-offs.

Results of Operations For the Three Months ended November 30, 1998 and 1997

     Total  investment  income.  The Company's  investment  income for the three
months ended November 30, 1998 increased to $737,201 (an increase of 40.8%) from
$523,398 for the three month period ended  November 30, 1997.  This increase was
mainly due to an increase in the loan portfolio during the fiscal year.

Operating Expenses

     Interest  expense  for the three  month  period  ended  November  30,  1998
increased  $122,505  ($342,798  from  $220,293)  over the similar  quarter ended
November 30, 1997. This increase was mainly due to increased bank borrowings for
the period offset by lower  interest  rates for the three months ended  November
30, 1998.

     There were no significant changes in other operating expenses when compared
with the similar three month period ended November 30, 1997.


                                       11


<PAGE>


LIQUIDITY AND CAPITAL RESOURCES

     To  date,   the  Company  has  funded  its   operations   through   capital
contributions  by its  principal  stockholders,  public and private sales of its
securities,  the issuance to the SBA of its  subordinated  debentures and SBA 4%
cumulative  preferred  stock, in order to make loans,  increase its leverageable
capital and pay its operating expenses.

     The Company's  potential  sources of liquidity are credit  facilities  with
banks, fixed rate long-term  subordinated  debentures that are issued to the SBA
and loan  amortization and  prepayments.  The Company  currently  distributes at
least 90% of its investment  company taxable income;  consequently,  the Company
primarily relies upon external  sources of funds to finance growth.  At November
30, 1998,  the  Company's  $18,770,000  of debts  consisted of  $12,360,000  SBA
subordinated  debentures with fixed rates of interest with a weighted average of
6.93%,  $1,410,000 of 4% cumulative  preferred stock and a $5,000,000 short term
bank line of credit.

     Loan  amortization and prepayments also provide a source of funding for the
Company.  Prepayments on loans are influenced  significantly by general interest
rates, economic conditions and competition.

     The Company believes that anticipated  borrowings from the SBA, bank credit
facilities  which  will be applied  for,  and cash flow from  operations  (after
distributions to stockholders) will be adequate to fund the continuing growth of
the  Company's  loan  portfolio.  In  addition,  in order to  provide  the funds
necessary for the Company's  expansion  strategy,  the Company expects to incur,
from  time to time,  additional  short-and  long-term  bank  and (to the  extent
permitted) SBA loans.  There can be no assurance that such additional  financing
will be available on terms acceptable to the Company.


                                       12


<PAGE>


                                     PART II
                                OTHER INFORMATION

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

The Company held its annual  meeting of  shareholders  on November 10, 1998 (the
"Annual Meeting").

The  Company's  shareholders  were  asked to take the  following  actions at the
meeting:

1.   Elect  eight   Directors  to  serve  until  the  1999  annual   meeting  of
     shareholders  or until their  successors  shall  otherwise  be elected (the
     "Board Proposal");

2.   Approve  the   amendment  of  the   Company's   Restated   Certificate   of
     Incorporation  to increase the number of authorized  shares of Common Stock
     therein from 3,000,000 to 5,000,000 shares,  subject to the approval of the
     U.S. Small Business Administration (the "Charter Proposal");

3.   Approve the Board of Directors'  selection of Michael C.  Finkelstein & Co.
     to serve as the Company's  independent  auditors for the fiscal year ending
     May 31, 1998 (the "Auditors Proposal");

4.   Approve the election to become a Business Development Company under Section
     54 of the Investment Company Act of 1940 (the "BDC Proposal");

5.   Adopt an  incentive  stock  option plan for  employees  of the Company (the
     "Incentive Plan Proposal"); and

6.   Adopt a stock  option  plan  for  non-employee  directors  of the  Company,
     subject to the  approval of the  Securities  and Exchange  Commission  (the
     "Director Plan Proposal"); and

With respect to the Board Proposal, the eight individuals nominated for director
were  elected by the  affirmative  vote of a majority of shares of common  stock
present at the Annual  Meeting.  The  nominees  and votes each  received  are as
follows:

                                           FOR                 WITHHELD
                                         ---------             --------
     Zindel Zelmanovitch                 1,912,787              51,050
     Neil Greenbaum                      1,912,787              51,050
     Pearl Greenbaum                     1,912,787              51,050
     Michael L. Moskowitz                1,912,787              53,050
     Eugene Habar                        1,912,787              51,050
     Alan Work                           1,910,787              53,050
     Ben Lichtenberg                     1,912,787              51,050
     John Hamill                         1,912,787              51,050


                                       13


<PAGE>


The Charter Proposal,  the Auditors  Proposal,  the BDC Proposal,  the Incentive
Plan Proposal and the Director  Plan Proposal were also approved by  affirmative
vote of a majority of shares of Common Stock present at the Annual Meeting. Each
of the proposals received the following votes:

                            Votes Cast For    Against    Abstentions   Not Voted

Charter Proposal               1,863,187       92,950       7,700             0
Auditors Proposal              1,551,287        5,550       7,000             0
BDC  Proposal                  1,290,901       85,992       4,595       582,349
Incentive Plan Proposal        1,228,962      142,729       6,744       585,402
Director Plan Proposal         1,227,133      144,551       6,701       585,402

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits.

     3.1(a)    Certificate of  Incorporation,  as amended.  Filed Exhibit 4.1 to
               the Company's Registration Statement on Form 8-A and incorporated
               by reference thereto.

     3.1(b)    Form of Certificate of Amendment of Certificate of Incorporation,
               as  approved  by the  shareholders  of the  Company at the Annual
               Meeting of  Shareholders  on November 10, 1998 to be filed in New
               York State upon  receipt of approval by the U.S.  Small  Business
               Administration. Filed as Exhibit 1 to the 1998 Proxy Statement of
               the Company and incorporated by reference thereto.

     3.2       By-Laws.  Filed  as  Exhibit  4.2 to the  Company's  Registration
               Statement on Form 8-A and incorporated by reference thereto.

     10.1      1998 Incentive Stock Option Plan.  Filed as Exhibit 2 to the 1998
               Proxy  Statement  of the Company and  incorporated  by  reference
               thereto.

     10.2      Non-Employer  Director Plan. Filed as Exhibit 3 to the 1998 Proxy
               Statement of the Company and incorporated by reference thereto.

     27        Financial Data Schedule.

(b)  Reports on Form 8-K.

     There  were no reports on Form 8-K filed  during the fiscal  quarter  ended
November 30, 1998.


                                       14


<PAGE>


                                   SIGNATURES


Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.


                                   Freshstart Venture Capital Corp.



Dated:  January 14, 1999           By:/s/ Zindel Zelmanovitch
                                   ------------------------------------------
                                   Zindel Zelmanovitch
                                   Chief  Executive, Financial and Accounting
                                   Officer