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 August 31, 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)


              (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 October 14, 1999: 2,172,688

<PAGE>
                        FRESHSTART VENTURE CAPITAL CORP.

                           FORM 10-Q Table of Contents


                                TABLE OF CONTENTS

PART I   FINANCIAL INFORMATION

Item 1.  Financial Statements

Statements of Financial Position as of
  August 31, 1999 (unaudited) and May 31, 1999. . . . . . . . . . . . .   2-3

Statements of Operations for the Three Months
  Ended August 31, 1999 and 1998 (unaudited). . . . . . . . . . . . . .    4

Statements of Stockholders' Equity for the Three Months
  Ended August 31, 1999 and 1998 (unaudited). . . . . . . . . . . . . .    5

Statements of Cash Flows for the Three Months
  Ended August 31, 1999 and 1998 (unaudited). . . . . . . . . . . . . .    6

Notes to the Financial Statements . . . . . . . . . . . . . . . . . . .   7-13

Supplemental Schedules. . . . . . . . . . . . . . . . . . . . . . . . .   14

Supplementary Information . . . . . . . . . . . . . . . . . . . . . . .   15

Management's Discussion and Analysis of Financial Condition and Results
  of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . .  16-17


PART II. OTHER INFORMATION

Item 6.  Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . .    18

Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    19
<PAGE>

                                     PART I
                              FINANCIAL INFORMATION


ITEM 1.   FINANCIAL STATEMENTS

The  statement of financial  position of the Company as of August 31, 1999,  the
related  statements  of  operations,  and cash flows for the three  months ended
August 31, 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 three  months  ended  August  31,  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 10-K for the  fiscal  year  ended May 31,  1999 as filed with the
Commission.


<PAGE>


                        FRESHSTART VENTURE CAPITAL CORP.
                        STATEMENTS OF FINANCIAL POSITION
                                 AUGUST 31, 1999


                                     ASSETS

                                                   (Unaudited)
                                                    August 31,        May 31,
                                                   ------------    ------------
                                                       1999            1999
                                                   ------------    ------------

Loans Receivable:
Long Term Portion (Notes 2 and 3)                  $ 24,222,900    $ 25,123,632
Less:  Unrealized Depreciation on
  Loans Receivable (Note 3)                            (316,441)       (316,441)
                                                   ------------    ------------
                                                     23,906,459      24,807,191
Less:  Current Maturities - Loans Receivable         (3,633,435)     (3,768,545)
                                                   ------------    ------------

     Total Loans Receivable -
       Net of Current Maturities                     20,273,024      21,038,646
                                                   ------------    ------------

CURRENT ASSETS
Cash (Note 12)                                        1,315,029         814,340
Accrued Interest (Notes 2 and 3)                        347,107         308,897
Current Maturities - Loans Receivable                 3,633,435       3,768,545
Prepaid Expenses and Other Assets                       272,230         305,423
                                                   ------------    ------------

     Total Current Assets                             5,567,801       5,197,205
                                                   ------------    ------------

Fixed Assets - Net of Accumulated Depreciation
  of $32,864 and $28,364
  respectively (Note 2)                                  21,301          22,788
                                                   ------------    ------------

     Total Assets                                  $ 25,862,126    $ 26,258,639
                                                   ============    ============


            See Accompanying Notes to Unaudited Financial Statements

                                       2
<PAGE>

                        FRESHSTART VENTURE CAPITAL CORP.
                        STATEMENTS OF FINANCIAL POSITION
                                 AUGUST 31, 1999


                      LIABILITIES AND STOCKHOLDERS' EQUITY

                                                       (Unaudited)
                                                        August 31,     May 31,
                                                       -----------   -----------
                                                           1999         1999
                                                       -----------   -----------
 LONG TERM DEBT:
 Debentures Payable to SBA (Note 5)                    $11,610,000   $12,360,000
 4% Cumulative, 15 Year Redeemable
   Preferred Stock                                       1,410,000     1,410,000
                                                       -----------   -----------
      Total Long Term Debt                              13,020,000    13,770,000
                                                       -----------   -----------

 CURRENT LIABILITIES:
 Notes Payable - Bank                                    5,000,000     5,000,000
 Accrued Interest                                          427,336       325,202
 Other Current Liabilities                                  14,418        17,354
 Dividends Payable (Notes 7 and 16)                         28,200        14,100
                                                       -----------   -----------
      Total Current Liabilities                          5,469,954     5,356,656
                                                       -----------   -----------

      Total Liabilities                                 18,489,954    19,126,656
                                                       -----------   -----------

 Commitments and Contingencies
   (Notes 11, 12, 13 and 14)                                    --            --

 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                                         301,630        61,441
 Restricted Capital - Realized Gain on
   Redemption (Note 6)                                          --            --
                                                       -----------   -----------
      Total Stockholders' Equity                         7,372,172     7,131,983
                                                       -----------   -----------
      Total Liabilities and Stockholders' Equity       $25,862,126   $26,258,639
                                                       ===========   ===========

Net Assets Per Share                                   $      3.39   $      3.28
                                                       ===========   ===========


            See Accompanying Notes to Unaudited Financial Statements

                                        3
<PAGE>
                        FRESHSTART VENTURE CAPITAL CORP.
                            STATEMENTS OF OPERATIONS
                                 AUGUST 31, 1999
                                   (UNAUDITED)

                                                        Three Months Ended
                                                            August 31,
                                                   ----------------------------
                                                      1999              1998
                                                   -----------      -----------
REVENUE:
Interest Earned on
  Outstanding Receivables                          $   713,989      $   719,202
Interest Income - Idle Funds                             1,385            3,312
                                                   -----------      -----------
     Total Revenue (Note 2)                            715,374          722,514
                                                   -----------      -----------

EXPENSES:
Interest Expense (Notes 4 and 5)                       323,137          337,625
Professional Fees                                       51,938           23,110
Officers' Salaries (Notes 9 and 10)                     30,405           30,405
Other Salaries                                          11,428           10,714
Other Operating Expenses                                38,512           51,637
Pension Expense (Note 8)                                 3,300            4,100
Depreciation and Amortization (Note 2)                   1,487           10,615
                                                   -----------      -----------
     Total Expenses                                    460,207          468,206
                                                   -----------      -----------

Net Investment Income                                  255,167          254,308
Unrealized Depreciation in Value of
  Investments (Notes 2 and 3)                               --               --
                                                   -----------      -----------
                                                       255,167          254,308
PROVISION FOR TAXES:
Current Income Taxes (Note 2)                             (878)            (680)
                                                   -----------      -----------
     Net Income                                    $   254,289      $   253,628
                                                   ===========      ===========

Earnings Per Share of Common Stock
  (Note 2)                                         $      0.11      $      0.11
                                                   ===========      ===========

Dividends Paid Per Share
  of Common Stock                                  $        --      $      0.11
                                                   ===========      ===========

Weighted Average Shares of Common
  Stock Outstanding                                  2,172,688        2,172,688
                                                   ===========      ===========

            See Accompanying Notes to Unaudited Financial Statements

                                        4
<PAGE>

                        FRESHSTART VENTURE CAPITAL CORP.
                       STATEMENTS OF STOCKHOLDERS' EQUITY
                                 AUGUST 31, 1999
                                   (UNAUDITED)

                                                       Three Months Ended
                                                           August 31,
                                                   ----------------------------
                                                       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 -

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

Retained Earnings -
Beginning of Period                                     61,441           22,205
Net Income                                             254,289          253,626
Dividends Paid and Accrued                             (14,100)        (263,961)
                                                   -----------      -----------
     Balance, End of Period                            301,630           11,870
                                                   -----------      -----------

     Total Stockholder's Equity                    $ 7,372,172      $ 7,082,412
                                                   ===========      ===========

            See Accompanying Notes to Unaudited Financial Statements

                                        5
<PAGE>
                        FRESHSTART VENTURE CAPITAL CORP.
                            STATEMENTS OF CASH FLOWS
                                 AUGUST 31, 1999
                                                         Three Months Ended
                                                             August 31,
                                                     --------------------------
                                                        1999            1998
                                                     -----------    -----------
CASH FLOWS PROVIDED (USED) BY
  OPERATING ACTIVITIES:
Net Income                                           $   254,289    $   253,628
Depreciation and Amortization Expense                      1,487         10,615
(Increase) in Accrued Interest                           (38,210)       (28,918)
Decrease (Increase) in Other Assets                       33,193        111,321
Increase in Accrued Liabilities                           99,198       (263,963)
                                                     -----------    -----------
Net Cash (Used) By Operating Activities                  349,957         82,683
                                                     -----------    -----------

CASH FLOWS PROVIDED (USED) BY
  INVESTING ACTIVITIES:
Decrease (Increase) in Loans Receivable, Net             900,732       (510,851)
                                                     -----------    -----------
Net Cash (Used) By Investing Activities                  900,732       (510,851)
                                                     -----------    -----------

CASH FLOWS (USED) PROVIDED BY
  FINANCING ACTIVITIES:
Increase in Debentures Payable to SBA (Net)             (750,000)            --
                                                     -----------    -----------
Net Cash (Used) by Financing Activities                 (750,000)            --
                                                     -----------    -----------

Net Increase (Decrease)  in Cash                         500,689       (428,168)

Cash Balance - Beginning of Period                       814,340      1,528,168
                                                     -----------    -----------
Cash Balance - End of Period                         $ 1,315,029    $ 1,100,000
                                                     ===========    ===========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
CASH PAID DURING THE PERIOD FOR:
Interest                                             $   221,003    $   222,897
                                                     -----------    -----------
Taxes                                                $       878    $       680
                                                     -----------    -----------

            See Accompanying Notes to Unaudited Financial Statements

                                        6
<PAGE>
                        FRESHSTART VENTURE CAPITAL CORP.
                        NOTES TO THE FINANCIAL STATEMENTS
                                 AUGUST 31, 1999

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   is   a
                  non-diversified  investment  Company  that has  elected  to be
                  regulated  as  a  business  development  Company,  a  type  of
                  closed-end Investment Company under the Investment Company Act
                  of 1940.  Beginning  June 1, 1997,  the Company  elected to be
                  taxed as a regulated Investment Company under sub-chapter M of
                  the Internal  Revenue Code of 1986, as amended.  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

                  At  August  31,  1999,  the  investment   portfolio   included
                  investments  totaling  $24,222,900,   whose  values  had  been
                  estimated  by the Board of Directors in the absence of readily
                  ascertainable  market  values.   Accordingly,   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
                  eighty-one  (81%)  percent  of the  Company's  loan  portfolio
                  consists of loans made for the financing of taxicab medallions
                  and related  assets.  The remaining  portions of the loans are
                  made to various small  commercial  enterprises.  The Company's
                  loans to small  business  concerns  range up to  approximately
                  $250,000  in  size,  typically  have a five  to  fifteen  year
                  maturity  and bear  interest  at rates  ranging  from 8.38% to
                  18.0% per annum.

                  Substantially all loans are  collateralized by either NYC taxi
                  medallions  or real estate and the personal  guarantees of the
                  individual owners.

                  DEFERRED DEBENTURE COSTS

                  SBA  Debenture  costs  are  amortized  over  ten  years  which
                  represents the term of the SBA debentures.

                                        7
<PAGE>
                        FRESHSTART VENTURE CAPITAL CORP.
                        NOTES TO THE FINANCIAL STATEMENTS
                                 AUGUST 31, 1999

NOTE 2            SIGNIFICANT ACCOUNTING POLICIES
                  (Continued)

                  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.

                  INCOME TAXES

                  Effective  1998,  the  Company  has  elected  to be taxed as a
                  regulated  investment  company  under  sub-chapter  M  of  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

                  The Company  adopted SFAS No. 128  "Earnings  per Share" which
                  supercedes  Accounting  Principles Board Opinion No. 15. Under
                  SFAS No. 128, net increase (decrease) in shareholders'  equity
                  by the weighted  average  number of common shares  outstanding
                  during the period.  Diluted  earnings  per share  reflects the
                  potential  dilution  that could occur if  securities  or other
                  contracts to issue  common  stock were  exercised or converted
                  into common stock or resulted in the issuance of common stock.

                  RISKS AND UNCERTAINTIES

                  Pursuant to Section 64 (b) (1) of the  Investment  Company Act
                  of 1940,  the  Company  is  required  to  advise  shareholders
                  annually that the Company is engaged in a high risk  business.
                  Loans and other  investments  to small  business  concerns are
                  extremely  speculative.  Most of such  concerns are  privately
                  held.  Even if a  public  market  for the  securities  of such
                  concerns exists,  the loans and other securities  purchased by
                  the  Company  are  often  restricted  against  sale  or  other
                  transfer for specified  periods of time,  Thus, such loans and
                  other  investments  have little,  if any,  liquidity,  and the
                  Company  must  bear  significantly  larger  risks,   including
                  possible  losses on such  investments,  than would be the case
                  with traditional investment companies.


                                        8
<PAGE>
                        FRESHSTART VENTURE CAPITAL CORP.
                        NOTES TO THE FINANCIAL STATEMENTS
                                 AUGUST 31, 1999

NOTE 2            SIGNIFICANT ACCOUNTING POLICIES
                  (Continued)

                  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.

                  USE OF ESTIMATES

                  The  preparation  of financial  statements in conformity  with
                  generally accepted  accounting  principles requires management
                  to make  estimates  and  assumptions  that affect the reported
                  amounts of assets and liabilities and disclosure of contingent
                  assets and liabilities at the date of the financial statements
                  and the  reported  amounts  of income and  expense  during the
                  reporting period. The most significant estimates relate to the
                  valuation of the loans receivable. Actual results could differ
                  from those estimates.

                  OTHER

                  Certain information from the prior years' financial statements
                  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:

                                                          August 31, 1999
                                                          ---------------

                           Outstanding Loans               $  38,182,861
                           Loan Participations               (13,959,961)
                                                           -------------
                           Net Loans Outstanding           $  24,222,900
                                                           =============

                  Loans  on  non-accrual  status  as of  August  31,  1999  were
                  approximately $1,594,015.  Additionally, the cumulative amount
                  of accrued  interest  income not  recorded  was $966,748 as of
                  August 31, 1999.

                                        9
<PAGE>
                        FRESHSTART VENTURE CAPITAL CORP.
                        NOTES TO THE FINANCIAL STATEMENTS
                                 AUGUST 31, 1999

NOTE 3            LOANS RECEIVABLE
(Continued)
                  RECONCILIATION OF LOAN LOSS RESERVE

                  A reconciliation of loan loss reserve is as follows:

                                                            August 31, 1999
                                                            ---------------

                    Balance, Beginning                        $  316,441
                    Provision for Loan Losses                         --
                    Charge-Offs                                       --
                                                              ----------
                    Balance, Ending                           $  316,441
                                                              ==========

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. Effective March
                  31, 1999, the line of credit was increased to $10,000,000.

NOTE 5            LONG TERM DEBT

                  The  long-term  debt to the  SBA  consisted  of the  following
                  subordinated  debentures  as of August 31, 1999 with  interest
                  payable semi-annually:

                                           Interest Rate Period        1999
                    Maturity Date           First       Second      Face Amount
                    -------------           -----       ------      -----------

                    June 1, 2005            6.690%      6.690%      $   520,000
                    December 1, 2005        6.540%      6.540%          520,000
                    September 22, 1999      5.000%      8.000%          750,000
                    December 16, 2002       4.510%      7.510%        1,300,000
                    March 1, 2007           7.380%      7.380%        4,210,000
                    June 1, 2006            7.710%      7.710%          250,000
                    September 1, 2007       7.760%      7.760%        4,060,000
                                                                    -----------
                                                                    $11,610,000
                                                                    ===========

                  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.

                                       10
<PAGE>
                        FRESHSTART VENTURE CAPITAL CORP.
                        NOTES TO THE FINANCIAL STATEMENTS
                                 AUGUST 31, 1999

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 that 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 three  months  ended August
                  31, 1999 were $14,100.

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 three  months ended August 31, 1999 and 1998 were
                  $3,300 and $4,100 respectively.  All contributions to the plan
                  have been funded on a current basis.

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

                  Effective  November 1, 1998, the Company  entered into a lease
                  agreement  with a  corporation  whose  shareholder  is  also a
                  shareholder  of the Company.  Total rental  expense under this
                  lease was $7,363.

                  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 three months ended August
                  31,  1999  and  1998  officers'  salaries,  including  pension
                  contributions, were $30,405.

NOTE 11           SIGNIFICANT CONCENTRATION OF CREDIT RISK

                  Approximately  eighty one (81%) 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.

                                       11
<PAGE>
                        FRESHSTART VENTURE CAPITAL CORP.
                        NOTES TO THE FINANCIAL STATEMENTS
                                 AUGUST 31, 1999

NOTE 12           FINANCIAL INSTRUMENTS WITH OFF BALANCE SHEET RISKS

                  The Company maintained approximately $1,414,397 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           PROPOSED MERGER

                  On August 17, 1999 the Company entered into a Letter of Intent
                  with Medallion Financial Corp. ("Medallion"),  relating to the
                  proposed  merger  of the  Company  with  and  into  Medallion.
                  Pursuant to the Letter of Intent,  the Company's  shareholders
                  will  receive   Medallion  common  stock  for  each  share  of
                  Freshstart Common Stock having a fair market value of $4.15 to
                  $5.00,  based upon the fair market value of  Medallion  common
                  stock. If the fair market value of Medallion stock falls below
                  $12.00 per share, Medallion may elect not to close the merger.
                  Freshstart  granted Medallion the option to purchase 19.99% of
                  its stock (at an average exercise price of $3.875) exercisable
                  by  Medallion  in the event that  Freshstart  accepts an offer
                  from another party or elects not to close the transaction. The
                  Letter  of  Intent  also  restricts  Freshstart's  ability  to
                  declare  dividends  in excess  of $.03 per  share  per  fiscal
                  quarter until December 31, 1999.

NOTE 14           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   Standard   No.  107,
                  "DISCLOSURE 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 (see Note 2).

                  The fair value of financial instruments that are short-term or
                  reprice  frequently  and have a history of  negligible  credit
                  losses is  considered to  approximate  their  carrying  value.
                  Those  instruments  include balances recorded in the following
                  captions:

                           Assets                        Liabilities
                  ---------------------------     -----------------------------
                  Cash                            Notes Payable to Banks
                  Accrued Interest Receivable     Debentures Payable to SBA
                                                  4% Cumulative Preferred Stock

                                       12
<PAGE>
                        FRESHSTART VENTURE CAPITAL CORP.
                        NOTES TO THE FINANCIAL STATEMENTS
                                 AUGUST 31, 1999

NOTE 15           COMMITMENTS AND CONTINGENCIES

                  Effective  November 1, 1998,  the Company  entered into a five
                  year  lease  agreement  expiring  November  30,  2003,  with a
                  minimum rental of $2,331 plus 15% of the total expense for the
                  entire  building.  The minimum  future rental  throughout  the
                  lease term shall be as follows:

                    August 31, 1999 through May 31, 2000        $  20,612
                    June 1, 2000 through November 30, 2003         97,872
                                                                ---------
                             Total future minimum rental        $ 118,484
                                                                =========

NOTE 16           SUBSEQUENT EVENTS

                  On September 7, 1999 the Company  declared and paid  dividends
                  of $.03 per share to  shareholders  of  record  on August  31,
                  1999. The total dividends  aggregated  $65,190.  Additionally,
                  the Company paid $14,100 to the SBA on its 4% preferred  stock
                  outstanding.


                                       13
<PAGE>

                        FRESHSTART VENTURE CAPITAL CORP.
                             SUPPLEMENTAL SCHEDULES
                                 AUGUST 31, 1999

                          SCHEDULE I - LOANS RECEIVABLE
<TABLE>
<CAPTION>

                                                                                              Balance
                                      Number of                                             Outstanding
Type of Loan                            Loans     Interest Rate         Maturity Date     August 31, 1999
------------                            -----     -------------        ---------------    ---------------
<S>                                       <C>      <C>     <C>             <C>               <C>
NYC Taxi Medallion                        312      8.38% - 15.00%          1 - 7 years       $ 19,525,201
Services                                   17     15.00% - 16.00%          1 - 7 years            434,525
Auto Repair Service                         3      9.38% - 14.00%          1 - 4 years            514,736
Renovation and Construction                 1      10.5% - 15.00%              5 years            134,852
Retail Establishment                        4     11.25% - 13.00%          1 - 5 years            366,153
Restaurant                                  7     11.50% - 15.00%          1 - 7 years          1,096,998
Gasoline Service Station                    6     11.50% - 18.00%          1 - 7 years            411,340
Manufacturing                               1     10.00% - 15.00%          1 - 7 years            151,572
Laundromat and Dry Cleaners                 1     11.00% - 15.00%          1 - 7 years          1,481,389
Medical Offices                             1              15.00%          1 - 3 years            106,134
                                        -----                                                ------------
                      TOTAL               353                                                $ 24,222,900
                                                                                             ============
</TABLE>

Substantially all of the above loans are  collateralized by either New York City
taxi medallions or real estate holdings.

SCHEDULE VII - SHORT TERM BORROWINGS

Short term borrowing activities for the periods presented were as follows:

                                Weighted
                     Balance    Average     Maximum Amount      Average Amount
Category of          End of     Interest    Outstanding         Outstanding
Borrowing            Period       Rate      During Period       During Period
-----------          -------    --------    --------------      --------------

May 31, 1999        $5,000,000    7.000%    $5,000,000          $5,000,000
August 31, 1999     $5,000,000    7.125%    $5,000,000          $5,000,000


                                       14
<PAGE>

                        FRESHSTART VENTURE CAPITAL CORP.
                            SUPPLEMENTARY INFORMATION
                       SELECTED PER SHARE DATA AND RATIOS
                            FOR THE FIVE YEARS ENDED
                     MAY 31, 1995, 1996, 1997, 1998 AND 1999
         AND THE THREE MONTHS ENDED AUGUST 31, 1999 (UNAUDITED) AND 1998
<TABLE>
<CAPTION>

                                      FOR THE YEARS ENDED MAY 31,                                              AUGUST 31,
                               ---------------------------------------                                 --------------------------
                                  1995         1996            1997          1998           1999           1999           1998
                               ----------    --------       ----------    ----------     ----------    -----------     ----------
Per Share Data
<S>                           <C>            <C>            <C>           <C>            <C>           <C>             <C>
Investment Income             $      1.83    $   1.88       $     0.79    $     1.13     $     1.34    $      0.32     $     0.33
Investment Expenses                 (1.21)      (1.17)           (0.46)        (0.66)         (0.88)         (0.21)         (0.22)
                               ----------    --------       ----------    ----------     ----------    -----------     ----------
Net Investment Income                0.62        0.71             0.33          0.47           0.46           0.11           0.11
Net Realized and Unrealized
  Gains and Losses on
  Securities                           --       (0.06)              --         (0.06)         (0.08)            --             --

Reduction Due to
  Stock Split                          --          --            (4.94)           --             --             --             --

Dividends - Common Stock            (0.54)      (0.54)           (0.22)        (0.44)         (0.33)            --             --
Dividends - Preferred Stock         (0.08)      (0.11)           (0.03)        (0.03)         (0.03)            --             --

Net Sale of Common Stock               --          --             2.40            --             --             --             --
                               ----------    --------       ----------    ----------     ----------    -----------     ----------
Net Increase/Decrease
  in Net Asset Value                   --          --            (2.46)        (0.06)          0.02           0.11           0.11
Net Asset Value - Beginning
  of Period                          5.78        5.78             5.78          3.32           3.26           3.28           3.26
                               ----------    --------       ----------    ----------     ----------    -----------     ----------
Net Asset Value - End of
  Year                         $     5.78    $   5.78(1)    $     3.32(1) $     3.26     $     3.28    $      3.39     $     3.37
                               ==========    ========       ==========    ==========     ==========    ===========     ==========

Net Asset Value - End of
  Year Excluding Retained
  Earnings                     $     5.75    $   5.75(1)    $     3.23(1) $     3.25     $     3.25    $      3.25     $     3.25
                               ==========    ========       ==========    ==========     ==========    ===========     ==========
Ratios
Ratio of Expenses to
  Average Net Assets                 20.9%       20.3%            14.3%         22.0%           7.9%           6.4%           6.4%
                               ==========    ========       ==========    ==========     ==========    ===========     ==========
Ratio of Net Income to
  Average Net Assets                 10.6%       11.2%            10.1%         12.4%          11.6%           3.5%           3.5%
                               ==========    ========       ==========    ==========     ==========    ===========     ==========

Weighted Average of Common
Shares Outstanding                548,344     548,344        1,627,318     2,172,688      2,172,688      2,172,688      2,172,688
                               ==========    ========       ==========    ==========     ==========    ===========     ==========
</TABLE>

(1)  The net asset value includes the  unamortized  portion of the realized gain
     from  the  repurchase  of  three  3%  percent   preferred   stock  and  the
     undistributed retained earnings at the end of the period.

                                       15
<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, 1999.

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 Three Months ended August 31, 1999 and 1998

         Total investment income. The Company's  investment income for the three
months ended August 31, 1999 was $715,374 as compared to $722,514 for the period
ending August 31, 1999.  The decrease of $7,140  resulted from a decrease in the
loan portfolio of $900,732 (a decrease of 3.7%).

Operating Expenses

Interest  expense for the three month  period  ended  August 31, 1999  decreased
$14,488 ($323,137 from $337,625) over the similar quarter ended August 31, 1998.
The Company paid off $750,000 in SBA subordinated  debentures during the current
period, which resulted in a lower period interest expense.

         Other  operating  expenses  decreased by $7,125 when  compared with the
similar three month period ended August 31, 1999. The decrease was mainly due to
decreases in dues, equipment rental and miscellaneous fees.

Statement of Financial Position

         Total  assets and  liabilities  decreased  by $396,513 as of August 31,
1999 when compared with the statement of financial  position as of May 31, 1999.
The  decrease  resulted  from the  repayment  of  $750,000  of SBA  subordinated
debentures,  and the  repayment of $900,732 of principal in the  Company's  loan
portfolio.  The  reserves  for bad debts were deemed to be adequate as of August
31,  1999.  Accordingly,  the  Company  did not  take  any  additional  bad debt
charge-offs.

                                       16
<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 August 31,
1999,  the  Company's   $18,489,954  of  debts   consisted  of  $11,610,000  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 $10,000,000 short term
bank line of credit, of which $5,000,000 is currently outstanding.

         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 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.

                                       17
<PAGE>

                                    PART II

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

(b) REPORTS ON FORM 8-K. The  Registrant  filed a Current  Report on Form 8-K on
August 19, 1999  disclosing the proposed  merger with Medallion  Financing Corp.
(See Part I - Footnote 13).

                                       18
<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:  October 14, 1999              Freshstart Venture Capital Corp.



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

                                       19