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 February 28, 1999

                                       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                               (I.R.S. Employer  
incorporation 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 _X_  No ___

         The number of shares of Common Stock, par value $.01 per share,
                   outstanding as of April 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
       February 28, 1999 (unaudited) and May 31, 1998 .................     2-3

     Statements of Operations for the Nine Months
       Ended February 28, 1999 and 1998 (unaudited) ...................      4

     Statements of Stockholders' Equity for the Nine Months
       Ended February 28, 1999 and 1998 (unaudited) ...................      5

     Statements of Cash Flows for the Nine Months
       Ended February 28, 1999 and 1998 (unaudited) ...................      6

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

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

SIGNATURES                                                                  13


<PAGE>



                                     PART I
                              FINANCIAL INFORMATION


ITEM 1. FINANCIAL STATEMENTS

The statement of financial  position of the Company as of February 28, 1999, the
related  statements  of  operations,  and cash flows for the nine  months  ended
February 28, 1999 and 1998 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 nine months  ended  February  28,  1999 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)
                                                   February 28,       May 31,
                                                   ------------    ------------
                                                       1999            1998
                                                   ------------    ------------



Loans Receivable:
Long Term Portion (Notes 2 and 3)                  $ 25,013,075    $ 24,442,206
Less:  Unrealized Depreciation on
  Loans Receivable (Note 3)                            (319,815)       (319,815)
                                                   ------------    ------------
                                                     24,693,260      24,122,391
Less:  Current Maturities - Loans Receivable         (3,751,961)     (3,375,072)
                                                   ------------    ------------

     Total Loans Receivable -
       Net of Current Maturities                     20,941,299      20,747,319
                                                   ------------    ------------

CURRENT ASSETS
Cash (Note 13)                                          937,359       1,528,168
Accrued Interest (Notes 2 and 3)                        337,487         256,760
Current Maturities - Loans Receivable                 3,751,961       3,375,072
Prepaid Expenses and Other Assets                       279,556         326,375
                                                   ------------    ------------

     Total Current Assets                             5,306,363       5,486,375
                                                   ------------    ------------

Fixed Assets - Net of Accumulated Depreciation
  of $32,864 and $28,364
  respectively (Note 2)                                  24,408          13,908
                                                   ------------    ------------

     Total Assets                                  $ 26,272,070    $ 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)
                                                    February 28,       May 31,
                                                    ------------    ------------
                                                        1999            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                                        417,762         317,723
 Other Current Liabilities                                83,086          57,732
 Dividends Payable (Note 7)                                9,400           9,400
                                                    ------------    ------------
      Total Current Liabilities                        5,510,248       5,384,855
                                                    ------------    ------------

      Total Liabilities                               19,280,248      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                                       (78,720)         22,205
 Restricted Capital - Realized Gain on
   Redemption (Note 6)                                      --              --
                                                    ------------    ------------
      Total Stockholders' Equity                       6,991,822       7,092,747
                                                    ------------    ------------
      Total Liabilities and Stockholders' Equity    $ 26,272,070    $ 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            Nine Months Ended
                                                February 28,                February 28,
                                         --------------------------   --------------------------
                                            1999           1998          1999           1998
                                         -----------    -----------   -----------    -----------
<S>                                      <C>            <C>           <C>            <C>        
REVENUE:
Interest Earned on
  Outstanding Receivables                $   692,220    $   661,726   $ 2,148,623    $ 1,647,298
Interest Income - Idle Funds                   3,544          2,279         9,575         46,332
                                         -----------    -----------   -----------    -----------
     Total Revenue (Note 2)                  695,764        664,005     2,158,198      1,693,630
                                         ===========    ===========   ===========    ===========

EXPENSES:
Interest Expense (Note 6)                    335,378        255,952     1,015,801        625,977
Professional Fees                             68,097         21,694       157,876         57,790
Officers' Salaries (Notes 9 and 10)           30,405         30,405        91,215         91,215
Other Salaries (Note 9)                       12,835         11,789        33,355         27,077
Other Operating Expenses                      52,198         43,325       125,413        117,284
Pension Expense (Note 8)                       3,371          3,958        10,981         11,568
Depreciation and Amortization (Note 2)        10,614          5,478        31,842         24,931
                                         -----------    -----------   -----------    -----------
     Total Expenses                          512,898        372,601     1,466,483        955,842
                                         ===========    ===========   ===========    ===========

Net Investment Income                        182,866        291,404       691,715        737,788
Unrealized Depreciation in Value of
  Investments (Notes 2 and 3)                   --             --            --             --
                                         -----------    -----------   -----------    -----------
                                             182,866        291,404       691,715        737,788
PROVISION FOR TAXES:
Current Income Taxes (Note 2)                    (77)          --            (757)        (1,224)
                                         -----------    -----------   -----------    -----------
     Net Income                          $   182,789    $   291,404   $   690,958    $   736,564
                                         ===========    ===========   ===========    ===========
Earnings Per Share of Common Stock
  (Note 2)                               $      0.06    $      0.09   $      0.29    $      0.31
                                         ===========    ===========   ===========    ===========

Dividends Paid Per Share
  of Common Stock                        $     0.115    $     0.110   $      0.35    $      0.33
                                         ===========    ===========   ===========    ===========

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)


                                                        Nine Months Ended
                                                           February 28,
                                                   ----------------------------
                                                       1999             1998
                                                   -----------      -----------


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)                                        --            143,250
                                                   -----------      -----------

Balance, End of Period                               7,048,816        7,001,067
                                                   -----------      -----------


Retained Earnings -
Beginning of Period                                     22,205          147,805
Net Income                                             690,958          736,564
Dividends Paid and Accrued                            (791,883)        (759,327)
                                                   -----------      -----------
     Balance, End of Period                            (78,720)         125,042
                                                   -----------      -----------

Restricted Capital
Gain on Redemption of 3% Preferred
  Stock (See Note 6)                                      --            190,999
Amortization of Gain                                      --           (143,250)
                                                   -----------      -----------
     Balance, End of Period (Note 6)                      --             47,749
                                                   -----------      -----------
     Total Stockholder's Equity                    $ 6,991,822      $ 7,195,584
                                                   ===========      ===========


            See Accompanying Notes to Unaudited Financial Statements

                                        5
<PAGE>


                        FRESHSTART VENTURE CAPITAL CORP.
                            STATEMENTS OF CASH FLOWS



                                                          Nine Months Ended
                                                            February 28,
                                                     --------------------------
                                                         1999           1998
                                                     -----------    -----------

CASH FLOWS PROVIDED (USED) BY
  OPERATING ACTIVITIES:
Net Income                                           $   690,958    $   736,564
Depreciation and Amortization Expense                     31,842         24,931
(Increase) in Accrued Interest                           (80,727)      (126,945)
Decrease (Increase) in Other Assets                       19,477       (145,958)
Increase in Accrued Liabilities                          125,393        168,918
Dividends Paid and Accrued                              (791,883)      (764,027)
                                                     -----------    -----------
Net Cash (Used) By Operating Activities                   (4,940)      (106,517)
                                                     -----------    -----------

CASH FLOWS PROVIDED (USED) BY
  INVESTING ACTIVITIES:
Increase in Loans Receivable, Net                       (570,869)    (7,917,182)
                                                     -----------    -----------
Net Cash (Used) By Investing Activities                 (570,869)    (7,917,182)
                                                     -----------    -----------

CASH FLOWS (USED) PROVIDED BY
  FINANCING ACTIVITIES:
Acqisition of Fixed Assets                               (15,000)          --
(Decrease) in Restricted Capital                            --         (143,250)
Increase in Debentures Payable to SBA (Net)                 --        3,910,000
Increase In banl Line of Credit                        1,750,000
Increase in Additional Paid in Capital                      --          143,250
                                                     -----------    -----------
Net Cash (Used) Provided by Financing Activities         (15,000)     5,660,000
                                                     -----------    -----------

Net (Decrease)  in Cash                                 (590,809)    (2,363,699)

Cash Balance - Beginning of Period                     1,528,168      2,869,861
                                                     -----------    -----------
Cash Balance - End of Period                         $   937,359    $   506,162
                                                     ===========    ===========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
CASH PAID DURING THE PERIOD FOR:
Interest                                             $   665,333    $   319,146
                                                     -----------    -----------
Taxes                                                $       680    $     1,224
                                                     -----------    -----------



            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: 

                                                         February 28,
                                                             1999
                                                        ------------
                Outstanding Loans                       $ 36,628,744
                Loan Participations                      (11,615,669)
                                                        ------------
                Net Loans Outstanding                   $ 25,013,075
                                                        ============


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   February   28,   1999  with   interest   payable
          semi-annually:

                                                                February 28,
                                      Interest Rate Period          1999
               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 nine
          months  ended  February  28,  1999  were  $749,583.   The  Company  is
          contingently  liable to the SBA for $9,400 in preferred  dividends due
          for the two months ended February 28, 1999.

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  nine
          months ended February 28, 1999, were $10,981. 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 nine
          months ended February 28, 1999, officers' salaries,  including pension
          contributions, were $91,215.

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 $644,182 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  February  28,  1999  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 Nine Months ended February 28, 1999 and 1998

     Total  investment  income.  The  Company's  investment  income for the nine
months ended February 28, 1999 increased to $2,158,198 (an increase of 27%) from
$1,693,630 for the nine month period ended February 28, 1998.  This increase was
mainly due to an increase in the loan portfolio  during the fiscal year, and the
utilization of an additional  $3,250,000 in bank debt.  The portfolio  increased
from $22,226,141 as of February 28, 1998 to $25,013,075 as of February 28, 1999,
as part of the Company's strategy to maximize  shareholder rate of return by use
of bank debt and a reduction in loan participations.

Operating Expenses

Interest  expense for the nine month  period ended  February 28, 1999  increased
$389,824  ($1,015,801 from $625,977) over the similar quarter ended February 28,
1998.  This increase was mainly due to increased bank borrowings for the period,
and higher debenture costs for the nine months ended February 28, 1999.

     Other operating  expenses increased $120,817 when compared with the similar
nine month period  ended  February  28,  1999.  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 February 28, 1999 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  February  28,  1999.
Accordingly, the Company did not take any additional bad debt charge-offs.

Results of Operations For the Three Months ended February 28, 1999 and 1998

     Total  investment  income.  The Company's  investment  income for the three
months  ended  February  28, 1999  increased to $31,759 (an increase of 5%) from
$695,764 for the three month period ended  February 28, 1998.  This increase was
mainly due to a small increase in the loan portfolio.

Operating Expenses

     Interest  expense  for the three  month  period  ended  February  28,  1999
increased  $79,426  ($335,378  from  $255,952)  over the similar  quarter  ended
February 28, 1998. This increase was mainly due to increased bank borrowings for
the period.

     Professional  fees  increased by $46,403,  when  compared  with the similar
three month period ended  February  28,  1998.  This  increase was mainly due to
increases in legal fees.

     There were no significant changes in other operating expenses when compared
with the similar three month period ended February 28, 1999.


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<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 February
28, 1999,  the  Company's  $19,280,248  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.

     As a result of several factors,  the number and dollar volume of taxi loans
originated by the Company have not increased.  The factors which  contributed to
this included an increased competition for taxi loans, and more alternative loan
products. These other products often provide prospective borrowers with interest
only rates, which the Company does not provide.

     The  reduction  in the  interest  rate  spread  (investment  income  versus
interest  expense)  where  investment  income  went up by only 31% and  interest
expense went up by 63%, reduced profits by 7% versus the comparable nine months.

     The  current  lower  interest  rate   environment  and  increased   lending
competition  have reduced the spread between the rate at which the Company lends
funds and the cost of such  funds.  There can be no  assurance  that the Company
will experience  increased spreads in the foreseeable future. In some cases, the
increased   level  of  lending   competition  has  resulted  in  interest  rates
considerable  more  aggressive  than those  offered by the Company.  In order to
maintain a quality portfolio, the Company has and will continue to adhere to its
historical   underwriting  criteria.   Accordingly,   certain  loan  origination
opportunities which do not meet the Company's  underwriting criteria will not be
funded by the Company.



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<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.

Dated:  April 14, 1999                  Freshstart Venture Capital Corp.



                                        By: /s/ Zindel Zelmanovitch    
                                        ----------------------------------------
                                        Zindel Zelmanovitch, Chief Executive,
                                             Financial and Accounting Officer


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