<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
Annual Report Pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934
(Mark One)
X Quarterly Report Pursuant to Section 13 or 15(d) of the
- Securities and Exchange Act of 1934
For the Quarterly period ended June 30, 2000
-------------
or
_ Transition report pursuant to Section 13 or 15(d) of the
Securities and Exchange Act of 1934
For the transition period from ________________ to ___________________.
Commission File No. 1-9727
-------
Franklin Capital Corporation
----------------------------
(Exact name of registrant specified in its charter)
Delaware 13-3419202
--------------------------- -----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
450 Park Avenue, 10th Floor, New York, New York 10022
----------------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 486-2323
--------------------------
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, $1.00 par value
Securities registered pursuant to Section 12(g) of the Act:
None
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 Corporation was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No ___
The aggregate market value of the voting stock held by non-affiliates of the
Registrant as of July 31, 2000 was $5,585,318 based on the last sale price as
quoted by The American Stock Exchange on such date (officers, directors and 5%
stockholders are considered affiliates for the purposes of this calculation).
The number of shares of common stock outstanding as of July 31, 2000 was
1,088,740.
1
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Prospectus of the Registrant dated July 31, 1992 (the
"Prospectus") are incorporated by reference in Part I, and Part II hereof.
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1.Financial Statements
Balance Sheets
Statements of Operations
Statements of Cash Flows
Statements of Changes in Net Assets
Portfolio of Investments
Notes to Financial Statements
Item 2.Management's Discussion and Analysis of Financial Condition and
Results of Operations
Statement of Operations
Financial Condition
Investments
Results of Operations
Liquidity and Capital Resources
Risks
Item 3.Quantitative and Qualitative Disclosures about Market Risk
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signature
Exhibit Index
CAUTIONARY STATEMENT FOR PURPOSES OF
THE "SAFE HARBOR" PROVISIONS OF
THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
WHEN USED IN THIS QUARTERLY REPORT ON FORM 10-Q, THE WORDS "BELIEVES,"
"ANTICIPATES,""EXPECTS" AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY
FORWARD-LOOKING STATEMENTS. STATEMENTS LOOKING FORWARD IN TIME ARE INCLUDED IN
THIS QUARTERLY REPORT ON FORM 10-Q PURSUANT TO THE "SAFE HARBOR" PROVISION OF
THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. SUCH STATEMENTS ARE
SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES WHICH COULD CAUSE ACTUAL RESULTS TO
DIFFER MATERIALLY, INCLUDING, BUT NOT LIMITED TO, THOSE SET FORTH IN THE
CORPORATION'S REGISTRATION STATEMENT ON FORM N-2 (FILE NO. 814-159) AND IN
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS." READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE
FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE HEREOF. THE
CORPORATION UNDERTAKES NO OBLIGATION TO PUBLICLY REVISE THESE FORWARD-LOOKING
STATEMENTS TO REFLECT EVENTS OR CIRCUMSTANCES OCCURRING AFTER THE DATE HEREOF OR
TO REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS.
2
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
The information furnished in the accompanying financial statements
reflects all adjustments that are, in the opinion of management, necessary for a
fair presentation of the results for the interim period presented.
3
<PAGE>
FRANKLIN CAPITAL CORPORATION
Balance Sheets
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
June 30, December 31,
2000 1999
(unaudited)
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Marketable investment securities, at market value (cost: June 30,
2000 - $34,675; December 31, 1999 - $109,784) (Note 2) $ 34,675 $ 891,462
Investments, at fair value (cost: June 30, 2000 -$3,981,325;
December 31, 1999 - $2,861,563) (Note 2)
eMattress.com 100,000 100,000
Avery Communications, Inc. 1,697,374 3,471,880
Excom Ventures, LLC 100,000 --
Other investments 9,205,103 3,596,040
------------ ------------
11,102,477 7,167,920
------------ ------------
Cash and cash equivalents (Note 2) 1,259,268 571,341
Receivable from disposal of investments -- 231,308
Accrued interest and accounts receivable 72,424 15,976
Other assets 119,420 117,958
------------ ------------
TOTAL ASSETS $ 12,588,264 $ 8,995,965
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Accounts payable and accrued liabilities $ 252,761 $ 204,583
Deferred taxes payable 1,047,000 351,000
------------ ------------
TOTAL LIABILITIES 1,299,761 555,583
------------ ------------
Commitments and contingencies (Note 5)
STOCKHOLDERS' EQUITY
Common stock, $1 par value: 5,000,000 shares authorized; 1,505,888 shares
issued, 1,094,940 shares outstanding at June 30, 2000, 1,505,979 shares
issued, 1,095,882 outstanding at December 31,
1999 (Notes 4 and 7) 1,505,888 1,003,986
Convertible preferred stock, $1 par value, cumulative 7% dividend:
5,000,000 shares authorized; 16,450 issued and outstanding at June 30, 2000,
0 issued and outstanding at December 31, 1999
(Liquidation preference $1,645,000) (Note 4) 16,450 --
Paid-in capital - common stock 8,591,054 8,998,051
preferred stock 1,628,550 --
Unrealized appreciation of investments,
net of deferred income taxes (Notes 2 and 3) 6,074,152 4,737,035
Accumulated deficit (4,145,552) (4,030,368)
------------ ------------
13,670,542 10,708,704
Deduct: 410,948 and 410,097 shares of common stock held in treasury,
at cost, at June 30, 2000 and December 31, 1999, respectively (Note 4) (2,382,039) (2,268,322)
------------ ------------
Net assets, equivalent to $10.31 (diluted $9.12) per share at
June 30, 2000 and $7.70 (diluted $7.55) at December 31, 1999 11,288,503 8,440,382
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 12,588,264 $ 8,995,965
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements
4
<PAGE>
FRANKLIN CAPITAL CORPORATION
<TABLE>
<CAPTION>
Statements of Operations
(unaudited)
-----------------------------------------------------------------------------------------------------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend income $ 10,500 $ 10,500 $ 21,000 $ 21,000
Interest income 17,652 8,942 29,496 17,522
Other Income 22,000 -- 22,000 --
----------- ----------- ----------- -----------
50,152 19,442 72,496 38,522
----------- ----------- ----------- -----------
EXPENSES
Salaries and employee benefits (Note 7) 510,332 194,320 702,311 390,380
Professional fees 95,430 44,689 213,281 99,189
Appraisal fees -- -- -- 10,000
Rent (Note 5) 20,484 19,879 40,968 39,748
Insurance 10,439 10,247 20,879 20,353
Directors' fees 19,875 12,000 33,750 24,000
Taxes other than income taxes 11,164 7,382 28,809 23,280
Newswire and promotion 1,500 2,498 3,000 4,998
Depreciation and amortization 5,415 5,601 10,636 11,201
General and administrative 76,315 44,147 142,426 82,054
----------- ----------- ----------- -----------
750,954 340,761 1,196,060 705,203
----------- ----------- ----------- -----------
Net investment loss from operations (700,802) (321,319) (1,123,564) (666,681)
Net realized gain on portfolio of investments:
Investment securities:
Affiliated -- -- 121,696 --
Unaffiliated 336,677 185,224 943,125 417,319
----------- ----------- ----------- -----------
Total investment securities 336,677 185,224 1,064,821 417,319
Other than investment securities -- -- 3,617 (111,392)
----------- ----------- ----------- -----------
Net realized gain on portfolio of investments 336,677 185,224 1,068,438 305,927
----------- ----------- ----------- -----------
Provision for current income taxes -- 7,788 19,000 7,788
----------- ----------- ----------- -----------
Net realized loss (364,125) (143,883) (74,126) (368,542)
Increase (decrease) in unrealized appreciation of investments, net
of deferred income taxes:
Investment securities:
Affiliated (4,166,281) -- (1,678,121) --
Unaffiliated 4,785,678 (193,498) 4,663,100 352,783
----------- ----------- ----------- -----------
Total investment securities 619,397 (193,498) 2,984,979 352,783
Other than investment securities -- (127,823) (951,862) 145,886
----------- ----------- ----------- -----------
Deferred income taxes 91,000 -- 696,000 --
----------- ----------- ----------- -----------
Increase (decrease) in unrealized appreciation of investments, net
of deferred income taxes 528,397 (321,321) 1,337,117 498,669
----------- ----------- ----------- -----------
Net increase (decrease) in net assets from operations $ 164,272 ($ 465,204) $ 1,262,991 $ 130,127
----------- ----------- ----------- -----------
Preferred dividends 28,788 -- 41,058 --
----------- ----------- ----------- -----------
Net increase (decrease) in net assets attributable to common
stockholders $ 135,484 ($ 465,204) $ 1,221,933 $ 130,127
=========== =========== =========== ===========
Basic net increase (decrease) in net assets from operations
per common share (Note 8) $ 0.15 ($ 0.41) $ 1.16 $ 0.11
=========== =========== =========== ===========
Diluted net increase (decrease) in net assets from operations
per common share (Note 8) $ 0.11 ($ 0.41) $ 1.00 $ 0.11
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
FRANKLIN CAPITAL CORPORATION
<TABLE>
<CAPTION>
Statements of Cash Flows
(unaudited)
-----------------------------------------------------------------------------------------------------------------------
For the Six Months Ended June 30, 2000 1999
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net increase in net assets from operations $ 1,262,991 $ 130,127
Adjustments to reconcile net increase in net assets to net
cash used in operating activities:
Depreciation and amortization 10,636 11,201
Increase in unrealized appreciation of investments, net of deferred
income tax expense (1,337,117) (498,669)
Net realized gain on portfolio of investments, net of current income taxes (1,049,438) (305,927)
Non-cash compensation expense from exercise of officer options 197,188 --
Changes in operating assets and liabilities:
Decrease in receivable from disposal of investments 231,308 --
(Increase) decrease in accrued interest and accounts receivable (56,448) 101,957
Increase in other assets (12,107) (26,075)
Increase (decrease) in accounts payable and accrued liabilities 29,178 (73,414)
----------- -----------
Total adjustments (1,986,800) (790,927)
----------- -----------
Net cash used in operating activities (723,809) (660,800)
----------- -----------
Cash flows from investing activities:
Proceeds from sale of affiliate 218,081 --
Proceeds from sale of other investments 3,617 --
Proceeds from sale of marketable investment securities 1,212,638 1,523,997
Purchases of investment in majority owned affiliate -- (222,500)
Purchase of affiliate (100,000) --
Purchases of investments (1,183,125) (20,900)
Purchases of marketable investment securities (127,417) (813,824)
----------- -----------
Net cash provided by investing activities 23,794 466,773
----------- -----------
Cash flows from financing activities:
Proceeds from issuance of preferred stock 1,645,000 --
Payment of preferred dividends (41,058) --
Cash paid to common shareholders in lieu of fractional shares
due to stock split of common shares (1,449) --
Purchase of treasury stock (214,551) (109,737)
----------- -----------
Net cash provided by (used in) financing activities 1,387,942 (109,737)
----------- -----------
Net increase (decrease) in cash and cash equivalents 687,927 (303,764)
Cash and cash equivalents at beginning of period 571,341 1,100,373
----------- -----------
Cash and cash equivalents at end of period $ 1,259,268 $ 796,609
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
FRANKLIN CAPITAL CORPORATION
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
(unaudited)
-----------------------------------------------------------------------------------------------------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets from operations:
Net investment loss ($ 700,802) ($ 321,319) ($ 1,123,564) ($ 666,681)
Net realized gain on portfolio of investments,
net of current income taxes 336,677 177,436 1,049,438 298,139
Increase (decrease) in unrealized appreciation of investments,
net of deferred income taxes 528,397 (321,321) 1,337,117 498,669
------------ ------------ ------------ ------------
Net increase (decrease) in net assets from operations 164,272 (465,204) 1,262,991 130,127
Capital stock transactions:
Issuance of preferred stock -- -- 1,645,000 --
Payment of dividends on preferred stock (28,788) -- (41,058) --
Issuance of stock from treasury to majority owned affiliate, net -- -- -- 175,001
Issuance of stock from treasury for exercise of options 197,188 -- 197,188 --
Cash paid to common shareholers in lieu of fractional shares (1,449) -- (1,449) --
Purchase of treasury stock (214,551) (56,346) (214,551) (109,737)
------------ ------------ ------------ ------------
Total increase (decrease) in net assets 116,672 (521,550) 2,848,121 195,391
------------ ------------ ------------ ------------
Net assets at beginning of period 11,171,831 7,032,494 8,440,382 6,315,553
------------ ------------ ------------ ------------
Net assets at end of period $ 11,288,503 $ 6,510,944 $ 11,288,503 $ 6,510,944
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
FRANKLIN CAPITAL CORPORATION
<TABLE>
<CAPTION>
Portfolio of Investments
(unaudited)
-----------------------------------------------------------------------------------------------------------------------------------
Marketable Investment Securities
-----------------------------------------------------------------------------------------------------------------------------------
Number of
Shares or Market
Principal Value
June 30, 2000 Amount ($) Cost(1) (Note 2)
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Certificate of Deposit - 4.66%, due 07/05/2000 34,675 34,675
----------- -----------
Total Marketable Investment Securities (0.3% of total investments and
0.3% of net assets) $ 34,675 $ 34,675
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
Investments, at Fair Value
-----------------------------------------------------------------------------------------------------------------------------------
Number of
Shares or Directors'
Equity Principal Valuation
June 30, 2000 Investment Interest Amount ($) Cost(1) (Note 2)
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Majority Owned Affiliate
eMattress.com (0.9% of total investments and 0.9% of
net assets)......................................... Common stock 87.19% 1,157 $383,748 $100,000
(equity in net loss for 6 months ended June 30, 2000
was approximately $50,000)
Affiliate
Avery Communications Inc.................................. Common stock 1,295,938 1,389,702
Avery Communications Inc.................................. Convertible Preferred
Stock - Series E;
12.0% dividend rate(2) 350,000 350,000
----------
Total Avery Communications (15.2% of total investments
and 15.0% of net assets) 8.83% 1,739,702 1,697,374
(Telecommunications) (fully diluted
basis)
Excom Ventures, LLC (0.9% of total investments and 0.9% of
net assets) Units 13.33% 100,000 100,000 100,000
Other Investments
Data Downlink Corporation (9.0% of total investments and
8.9% of net assets) Convertible
(Internet-based information provider) Preferred Stock 1.68% 321,543 1,000,000 1,000,000
Go America Inc. (71.4% of total investments and
70.4% of net assets) Common Stock 1.10% 514,784 499,750 7,946,978
(Wireless internet service provider)
TradingNews, Inc. Common stock 72,000 13,125
TradingNews, Inc. Convertible
Preferred Stock 249,999 75,000
TradingNews, Inc. Convertible
Promissory
Note 10%(2) 170,000 170,000
-----------
Total Trading News, Inc. (2.3% of total investments
and 2.3% of net assets) 2.76% 258,125 258,125
----------- -----------
(Investment information provider)
Total Other Investments 1,857,875 9,205,103
----------- -----------
Total Investments, at Fair Value $ 3,981,325 $11,102,477
=========== ===========
</TABLE>
(1) Book cost equals tax cost for all investments
(2) Income producing security
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
Franklin Capital Corporation
Notes to Financial Statements
June 30, 2000
1. ORGANIZATION
Franklin Capital Corporation ("Franklin", or the "Corporation") is a Delaware
corporation registered as a Business Development Company ("BDC") under the
Investment Company Act of 1940 (the "Act"). A BDC is a specialized type of
Investment Company under the Act. A BDC must be primarily engaged in the
business of furnishing capital and managerial expertise to companies that do not
have ready access to capital through conventional financial channels. Such
companies are termed "eligible portfolio companies". The Corporation, as a BDC,
may invest in the securities of public companies and other investments that are
not qualifying assets of eligible portfolio companies; however such investments
may not exceed 30% of the Corporation's total asset value at the time of any
such investment.
On April 26, 2000, the Corporation declared a three for two stock split of the
Corporation's Common Stock in the form of a stock dividend to shareholders of
record on May 15, 2000, payable June 7, 2000.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Statements of Cash Flows
For purposes of the Statements of Cash Flows, Franklin considers only highly
liquid investments with maturities of 90 days or less at the date of their
acquisition to be cash equivalents.
The Corporation paid no interest during the six months ended June 30, 2000 and
1999, and paid income taxes of $2,000 during the six months ended June 30, 1999.
At June 30, 2000, the Corporation held cash and cash equivalents primarily in
overnight commercial paper and money market funds at two commercial banking
institutions.
Valuation of Investments
Security investments which are publicly traded on a national exchange or NASDAQ
are stated at the last reported sales price on the day of valuation, or if no
sale was reported on that date, then the securities are stated at the last
quoted bid price. The Board of Directors of Franklin (the "Board of Directors")
may determine, if appropriate, to discount the value where there is an
impediment to the marketability of the securities held.
Investments for which there is no ready market are initially valued at cost and,
thereafter, at fair value based upon the financial condition and operating
results of the issuer and other pertinent factors as determined by the Board of
Directors. The financial condition and operating results have been derived
utilizing both audited and unaudited data. In the absence of a ready market for
an investment, numerous assumptions are inherent in the valuation process. Some
or all of these assumptions may not materialize. Unanticipated events and
9
<PAGE>
Franklin Capital Corporation
Notes to Financial Statements (continued)
circumstances may occur subsequent to the date of the valuation and values may
change due to future events. Therefore, the actual amounts eventually realized
from each investment may vary from the valuations shown and the differences may
be material. Franklin reports the unrealized gain or loss resulting from such
valuation in the Statements of Operations.
Gains on Portfolio of Investments
Amounts reported as realized gains are measured by the difference between the
proceeds of sale or exchange and the cost basis of the investment without regard
to unrealized gains reported in the prior periods. Gains are considered realized
when sales or dissolution of investments are consummated.
Income Taxes
Franklin does not qualify as a Regulated Investment Company for income tax
purposes. Therefore, the Corporation is taxed as a regular corporation.
Franklin accounts for income taxes in accordance with the provision of Statement
of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS
109"). The significant components of deferred tax assets and liabilities are
principally related to the Corporation's net operating loss carryforward and its
unrealized appreciation of investments.
Depreciation and Amortization
Depreciation is recorded using the straight-line method at rates based upon
estimated useful lives for the respective assets. Leasehold Improvements are
included in other assets and are amortized over their useful lives or the
remaining life of the lease, whichever is shorter.
Net Increase (Decrease) in Net Assets Per Common Share
Basic and diluted net increase (decrease) in net assets per common share is
calculated in accordance with the provisions of Statement of Financial
Accounting Standards No. 128, "Earnings per Share". See Note 7 for discussion of
Stock Options.
3. INCOME TAXES
For the six months ended June 30, 2000 and 1999, Franklin's tax (provision)
benefit was based on the following:
2000 1999
-------- ---------
Net investment loss from operations........... $(1,123,563) $(666,681)
Net realized gain on portfolio of
investments................................ 1,068,438 305,927
Increase in unrealized appreciation.......... 2,033,116 498,669
----------- ---------
Pre-tax book income..................... $ 1,977,991 $ 137,915
=========== =========
10
<PAGE>
Franklin Capital Corporation
Notes to Financial Statements (continued)
2000 1999
-------- ---------
Tax (provision) benefit at 34% on $1,977,991
and $137,915 respectively.................. $ (673,000) $ (47,000)
State and local, net of Federal benefit....... ( 40,000) ( 7,788)
Income applied against net operating loss
carryforward................................ -- 47,000
Book losses for which no benefit is provided.. ( 2,000) --
----------- ---------
$ (715,000) $ ( 7,788)
=========== =========
The components of the tax provision are as follows:
2000 1999
-------- ---------
Current state and local tax provision......... $ (19,000) $ ( 7,788)
Deferred tax expense.......................... (696,000) -
---------- -----------
Provision benefit for income taxes............ $ (715,000) $ ( 7,788)
========== ===========
Deferred income tax benefit (provision) reflects the impact of "temporary
differences" between amounts of assets and liabilities for financial reporting
purposes and such amounts as measured by tax laws.
At June 30, 2000 and December 31, 1999, significant deferred tax assets and
liabilities consist of:
<TABLE>
<CAPTION>
Asset (Liability)
-----------------------------
June 30, December 31,
2000 1999
------------ ------------
<S> <C> <C>
Deferred Federal and state benefit from net operating
loss carryforward............................................ $ 1,517,000 $ 1,481,000
Deferred Federal and state provision on unrealized
appreciation of investments.................................. (2,564,000) (1,832,000)
------------ ------------
Deferred taxes................................................. $ (1,047,000) $ ( 351,000)
============ ============
</TABLE>
At December 31, 1999, Franklin had net operating loss carryforwards for income
tax purposes of approximately $4,115,000 that will begin to expire in 2011. At a
36% effective tax rate the after-tax net benefit from this loss would be
approximately $1,481,000.
4. STOCKHOLDERS' EQUITY
The Accumulated Deficit at June 30, 2000 consists of accumulated net realized
gains of $4,593,000 and accumulated investment losses of $8,738,000.
On February 22, 2000, the Corporation issued $1,645,000 of convertible preferred
stock. The stock was issued at a price of $100 per share, has a cumulative 7%
quarterly dividend and is convertible into Franklin Common Stock at a conversion
price of $13.33 per share.
On April 26, 2000, the Corporation declared a three for two stock split of the
Corporation's Common Stock in the form of a stock dividend to shareholders of
record on May 15, 2000, and payable June 7, 2000. The stock split has been
reflected in the accompanying financial statements and all applicable references
as to the number of common shares and per share information have been restated.
11
<PAGE>
Franklin Capital Corporation
Notes to Financial Statements (continued)
The Board of Directors has authorized Franklin to repurchase up to an aggregate
of 525,000 shares of its common stock in open market purchases on the American
Stock Exchange when such purchases are deemed to be in the best interest of the
Corporation and its stockholders. The Corporation issued 30,069 shares of stock
from treasury pursuant to an investment made by Franklin on January 25, 1999. On
September 30, 1999, 28,566 of these shares were canceled and placed back into
treasury (see Note 6 - Transactions with Affiliates). During the six months
ended June 30, 2000, Franklin purchased 18,250 shares of its common stock. On
May 9, 2000, 17,399 shares were issued from treasury pursuant to the exercise of
options by one of Franklin's officers. As of June 30, 2000, Franklin had
repurchased 444,850 shares of its Common Stock of which 410,948 shares remain in
treasury.
5. COMMITMENTS AND CONTINGENCIES
Franklin is obligated under an operating lease, which provides for annual
minimum rental payments as follows:
December 31,
2000................................................. $ 149,600
2001................................................. 149,600
2002................................................. 149,600
2003................................................. 149,600
$ 598,400
==========
Rent expense for the six months ended June 30, 2000, and 1999 was $40,968 and
$39,748 respectively. For the six months ended June 30, 2000 and 1999, the
Corporation collected rents of $30,000 and $31,220 respectively, from subtenants
under month-to-month leases, for a portion of its existing office space, which
is reflected as a reduction in rent expense for that period. The amount
collected from subtenants during the six months ended June 30, 2000, was
received from a corporation included in Franklin's investment portfolio at June
30, 2000.
6. TRANSACTIONS WITH AFFILIATES
On June 26, 2000, the Corporation invested $100,000 in Excom Ventures, LLC.
("Excom"). Excom was formed as a holding company for the purpose of investing in
Expert Commerce, Inc. ("Expert Commerce") Excom is holding all funds in escrow
and will invest all funds into Expert Commerce upon the closing of Expert
Commerce's financing round which is expected to close prior to the end of the
third quarter of 2000.
In January 1999, Franklin formed eCom Capital Corporation ("eCom"), a wholly
owned subsidiary of Franklin, for the purposes of investing in Internet related
ventures. On January 25, 1999, eCom invested a total of $387,500 in
eMattress.com Inc. ("eMattress"), consisting of $175,000 worth of Franklin
common stock (30,069 shares from treasury stock valued at the Net Asset Value on
the date of the transaction) and $212,500 in cash. Franklin received preferred
stock convertible into a 50% equity interest in eMattress. Two officers of
Franklin were elected to serve on the five member eMattress Board of Directors.
In August 1999, Franklin invested an additional $87,500 in eCom. Pursuant to
this transaction, eMattress was merged into eCom and 28,566 shares of Franklin
common stock valued at $166,252 were returned to Franklin's treasury. The
surviving entity, eMattress.com is a Delaware corporation. In November 1999,
12
<PAGE>
Franklin Capital Corporation
Notes to Financial Statements (continued)
Franklin invested an additional $75,000 into eMattress and as a result of this
transaction on June 30, 2000 Franklin owned 87.2% of eMattress. Franklin's
unrealized gains as of June 30, 2000 are net of unrealized losses related to
eMattress of $283,748.
During the six months ended June 30, 2000, Franklin sold 90,000 shares of Avery
realizing a gain of $121,696. At June 30, 2000, Franklin owned 8.83% of Avery
Communications on a fully diluted basis, and 15.02% of Avery Communications on a
primary basis.
7. STOCK OPTIONS
On September 9, 1997, Franklin's stockholders approved two Stock Option Plans: a
Stock Incentive Plan ("SIP") to be offered to the Corporation's consultants,
officers and employees (including any officer or employee who is also a director
of the Corporation) and a Non-Statutory Stock Option Plan ("SOP") to be offered
to the Corporation's "outside" directors, i.e., those directors who are not also
officers or employees of Franklin. 112,500 shares of the Corporation's Common
Stock have been reserved for issuance under these plans, of which 67,500 shares
have been reserved for the SIP and 45,000 shares have been reserved for the SOP.
Shares subject to options that terminate or expire prior to exercise will be
available for future grants under the Plans.
On March 18, 1999, 15,000 forfeited options were reissued under the SIP to three
eligible officers of the Corporation at a strike price of $3.83 per share, which
represented the closing price of Franklin's Common Stock as reported by the
American Stock Exchange on the date of issuance. These options will expire as
originally issued. One-half of the reissued options vested immediately, and
one-half vested on January 27, 2000.
On February 14, 2000, 30,000 options were granted under the SOP to four eligible
"outside" directors. The strike price of the options was $11.50 per share, which
represented the closing price of Franklin's Common Stock as reported by the
American Stock Exchange on that date. One-third of the options granted vested
immediately; another one-third vest one year from the date of issuance; and the
final one-third vest two years after the date of issuance. The options expire
after ten years.
On March 1, 2000, 1,875 forfeited options were reissued under the SIP to an
eligible officer of the Corporation at a strike price of $14.00 per share, which
represented the closing price of Franklin's Common Stock as reported by the
American Stock Exchange on that date. These options will expire as originally
issued. One-half of the reissued options vested immediately, and one-half will
vest on March 1, 2001.
On May 9, 2000, one officer made a cash-less exercise of 29,062 options
resulting in a non-cash charge to compensation expense of $197,188.
On June 7, 2000, 7,500 options were granted under the SOP to four eligible
"outside" directors. The strike price of the options was $9.67 per share, which
represented the closing price of Franklin's Common Stock as reported by the
American Stock Exchange on that date. One-third of the options granted vested
immediately; another one-third vest one year from the date of issuance; and the
final one-third vest two years after the date of issuance. The options expire
after ten years.
13
<PAGE>
Franklin Capital Corporation
Notes to Financial Statements (continued)
Franklin accounts for the options issued to employees under APB Opinion No. 25,
under which no compensation cost has been recognized. Proforma information
determined consistent with the fair value method required by FASB Statement No.
123, is as follows:
<TABLE>
<CAPTION>
Six Months Ended
------------------------------------------
Net realized income: June 30, 2000 June 30, 1999
------------- -------------
<S> <C> <C>
As reported $1,262,991 $130,127
Pro forma $1,218,004 $104,852
</TABLE>
<TABLE>
<CAPTION>
Net increase in net assets per common share:
<S> <C> <C>
As reported $ 1.16 $ 0.11
Pro forma - Basic $ 1.11 $ 0.09
Pro forma - Diluted $ 0.96 $ 0.09
</TABLE>
<TABLE>
<CAPTION>
June 30, 2000 June 30, 1999
------------- -------------
<S> <C> <C>
Net Asset Value per share:
As reported $ 10.31 $ 5.79
Pro forma - Basic $ 10.27 $ 5.77
Pro forma - Diluted $ 9.09 $ 5.77
</TABLE>
The fair value of the options granted was estimated on the date of the grant
using the Black-Scholes option-pricing model with the following assumptions:
<TABLE>
<CAPTION>
June 30, 2000 June 30, 1999
------------- -------------
<S> <C> <C>
Stock volatility 41.3% 30.0%
Risk-free interest rate 5.5% 5.5%
Option term in years 4 4
Stock dividend yield - -
</TABLE>
The following is a summary of the status of the Stock Option Plans during the
six months ended:
<TABLE>
<CAPTION>
June 30, 2000 June 30, 1999
------------- -------------
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price
------ ----- ------ -----
<S> <C> <C> <C> <C>
Outstanding at beginning of
period 65,625 $4.59 52,500 $4.67
Granted 39,375 $11.65 15,000 $3.83
Exercised 29,062 $6.82 - -
Forfeited - - - -
Expired - - - -
Outstanding at end of period 75,938 $9.81 67,500 $4.48
====== ======
Exercisable at end of period 47,188 $10.04 45,000 $4.53
====== ======
Weighted average fair value
of options granted $2.58 $1.65
</TABLE>
14
<PAGE>
Franklin Capital Corporation
Notes to Financial Statements (continued)
The options issued under the SIP have a remaining contractual life of 8.5 years.
The options issued under the SOP have a remaining contractual life of 9.6 years.
8. NET INCREASE IN NET ASSETS ATTRIBUTABLE TO COMMON STOCKHOLDERS PER SHARE
The following table sets forth the computation of basic and diluted change in
net assets per common share:
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
------------------------------------------------
June 30, June 30,
2000 1999 2000 1999
------------------------------------------------
<S> <C> <C> <C> <C>
Numerator:
Net increase in net assets attributable to
common stockholders per share $1,262,991 $130,127 $164,272 ($465,204)
Preferred stock dividends (41,058) - (28,788) -
Numerator for basic earnings per share -
net income available for common stockholders $1,221,933 $130,127 $135,484 ($465,204)
Effect of dilutive securities:
Preferred stock dividends 41,058 - 28,788 -
---------- ---------- ---------- ----------
Numerator for diluted earnings per share -
net increase in net assets available for common
stockholders after assumed conversions $1,262,991 $130,127 $164,272 ($465,204)
========== ========== ========== ==========
Denominator:
Denominator for basic increase in net assets from
operations - weighted - average shares 1,092,997 1,139,542 1,090,113 1,137,765
Effect of dilutive securities:
Convertible preferred stock - weighted - average
common equivalent shares 88,125 - 123,375 -
Employee stock options - weighted - average
shares 42,204 - 46,240 -
Dilutive potential common stock 130,329 - 169,615 -
Denominator for diluted increase in net assets
available for common stockholders - adjusted
weighted - average shares after assumed conversions 1,223,326 1,139,542 1,259,728 1,137,765
========== ========== ========== ==========
Basic net increase in net assets attributable to common
stockholders $1.16 $0.11 $0.15 ($0.41)
===== ===== ===== ======
Diluted net increase in net assets attributable to common
stockholders $1.00 $0.11 $0.11 ($0.41)
===== ===== ===== ======
</TABLE>
15
<PAGE>
Franklin Capital Corporation
Notes to Financial Statements (continued)
9. PURCHASES AND SALES OF INVESTMENT SECURITIES
The cost of purchases and proceeds from sales of investment securities,
including the issuance of treasury stock for June 30, 1999, as discussed in Note
6 and excluding short term investments, aggregated $1,375,867 and $1,389,154
respectively, for the six months ended June 30, 2000; $1,166,961 and $1,523,997
respectively, for the six months ended June 30, 1999.
16
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Statement of Operations
The Corporation accounts for its operations under Generally Accepted
Accounting Principles for investment companies. On this basis, the principal
measure of its financial performance is captioned "Net increase (decrease) in
net assets from operations", which is composed of the following: "Net investment
loss from operations," which is the difference between the Corporation's income
from interest, dividends and fees and its operating expenses; "Net realized gain
on portfolio of investments," which is the difference between the proceeds
received from dispositions of portfolio securities and their stated cost; any
applicable income tax provisions (benefits); and "Net increase (decrease) in
unrealized appreciation of investments," which is the net change in the fair
value of the Corporation's investment portfolio, net of any increase (decrease)
in deferred income taxes that would become payable if the unrealized
appreciation were realized through the sale or other disposition of the
investment portfolio.
"Net realized gain (loss) on portfolio of investments" and "Net increase
(decrease) in unrealized appreciation of investments" are directly related. When
a security is sold to realize a gain, the net unrealized appreciation decreases
and the net realized gain increases. When a security is sold to realize a loss,
the net unrealized appreciation increases and the net realized gain decreases.
Financial Condition
The Corporation's total assets and net assets were, respectively,
$12,588,264 and $11,288,503 at June 30, 2000 versus $8,995,965 and $8,440,382 at
December 31, 1999. Net asset value per share was $10.31 ($9.12 diluted) at June
30, 2000 versus $7.70 ($7.55 diluted) at December 31, 1999.
The Corporation's financial condition is dependent on the success of its
investments. A summary of the Corporation's investment portfolio is as follows:
June 30, 2000 December 31, 1999
Investments, at cost $ 4,016,000 $ 2,971,347
Unrealized appreciation, net of
deferred taxes 6,074,152 4,737,035
--------- -----------
Investments, at fair value $10,090,152 $ 7,708,382
=========== ===========
Investments
The Corporation has an investment in Avery Communications Corporation
("Avery Communications") valued at $1,697,374 at June 30, 2000, which represents
13.5% of the Corporation's total assets and 15.0% of its net assets. Its common
stock is quoted on the OTC Electronic Bulletin Board under the symbol "ATEX".
Avery Communications is the public parent of two companies, Primal Solutions,
Inc. ("Primal") and HBS Billing Service, Ltd ("HBS"), both of which operate in
the telecommunications industry. Primal, based in Irvine, California, is a
leading provider of customer relationship management and intelligence solutions
to the communications industries worldwide, including web-enabled customer
acquisition and retention, billing, switch mediation and decision support. Its
Outfront(TM), Customer Relationship Management software utilizes some of the
newest Java-based technology to provide
17
<PAGE>
telecommunications and Internet providers with powerful business intelligence
for customer retention, valuation and executive decision making. HBS, based in
San Antonio, Texas provides local exchange carrier (LEC) clearinghouse billing
services to domestic long-distance telephone companies and other third party
billers who desire their charges to appear on the local telephone bill. On
August 10, 2000, Avery announced that it had revised its previously stated plan
to spin-off its HBS Subsidiary to its shareholders. Pending regulatory approval,
under the new plan Avery shareholders of record on October 2, 2000 will receive
one share of stock in Primal for every one Avery common share held on the record
date. Primal will file a registration statement with the Securities and Exchange
Commission to register the Primal shares to be issued in the spin-off. Avery
anticipates that the distribution will be completed by October 31, 2000,
assuming all necessary approvals are obtained.
During the six months ended June 30, 2000, Franklin sold 90,000 shares
of Avery realizing a gain of $121,696. Franklin's remaining shares represent
15.02% of Avery Communications outstanding voting stock on a primary share basis
and 8.83% on a fully diluted basis. Stephen L. Brown and Spencer L. Brown,
officers of Franklin, presently serve on Avery Communications eight member Board
of Directors.
At June 30, 2000, the Corporation no longer held shares of
Communications Intelligence Corporation ("CIC") common stock. In 1995, the
Corporation made an original investment in CIC Standby Ventures, L.P. ("CIC
Ventures") of $66,987. The managing partner of CIC Ventures was the Chairman of
the Board of CIC. In November 1998, the Corporation added to its existing
holdings by purchasing in an open market transaction 875,000 shares of CIC
common stock at a cost of $375,000. During the year ended December 31, 1999 the
Corporation sold 775,000 shares of CIC common stock realizing a gain of
$922,118. In March 2000, CIC Ventures was terminated and the Corporation
received a distribution of 123,131 shares of CIC common stock. For the six
months ended June 30, 2000, the Corporation sold 223,131 shares of CIC common
stock realizing a gain of $956,572.
At June 30, 2000, the Corporation had an investment in Data Downlink
Corporation ("Data Downlink") valued at $1,000,000, which represents 7.9% of the
Corporation's total assets and 8.9% of its net assets. Data Downlink,
headquartered in New York and London, is a leading provider of Internet-based
online information services. Data Downlink provides a service called .xls, which
aggregates and cross-indexes over 70 premier business databases, delivering
information directly to Microsoft Excel, HTML, Microsoft Word or PDF formats at
the desktop. Other products include privatesuiteTM, a fast, easy, cost-effective
way to identify and retrieve profiles of privately held companies around the
world; compbookTM, a tool for company peer analysis; and Portal BTM, a fully
integrated business information portal.
On April 20, 2000, the Corporation purchased $1,000,000 worth of Data
Downlink Series F Preferred Stock. In connection with this investment, Franklin
was granted observer rights for Data Downlink Board of Directors meetings.
At June 30, 2000, the Corporation had an investment in Excom Ventures,
LLC ("Excom") valued at $100,000, which represents 0.8% of the Corporation's
total assets and 0.9% of its net assets. Excom was formed as a holding company
for the purpose of investing in Expert Commerce, Inc. ("Expert Commerce").
Expert Commerce is a Business-to-Business purchase evaluation engine that
simulates the way people make decisions. Based on intelligent and proven
technology, the engine helps structure complex decisions and provides an audit
trail to justify transactions, empowering buyers to make purchase decisions with
confidence.
18
<PAGE>
On June 26, 2000, the Corporation purchased $100,000 worth of Excom
Units. Excom is holding all funds in escrow and will invest all funds into
Expert Commerce upon the closing of Expert Commerce's financing round. This is
expected to occur prior to the end of the third quarter of 2000. Should Excom
not invest in Expert Commerce, all funds will be returned to the Corporation.
At June 30, 2000, the Corporation had an investment in eMattress.com
("eMattress") valued at $100,000, which represents 0.8% of the Corporation's
total assets and 0.9% of its net assets. eMattress is a development stage
company that sells mattresses and related bedding products over the Internet.
During 1999 the Corporation formed a wholly owned subsidiary, eCom
Capital Corporation ("eCom") which in turn invested a total of $387,500 into
eMattress consisting of $175,000 worth of Franklin common stock (20,046 shares
from treasury stock valued at the Net Asset Value on the date of the
transaction) and $212,500 in cash. eCom received preferred stock convertible
into a 50% equity interest in eMattress. In conjunction with this transaction,
Stephen L. Brown and Spencer L. Brown were appointed to the eMattress five
member Board of Directors. In August 1999, Franklin invested an additional
$87,500 into eCom. Pursuant to this transaction eMattress was merged into eCom
and 19,044 shares of Franklin common stock were returned to Franklin's treasury.
The surviving entity, eMattress.com is a Delaware corporation. In November 1999,
Franklin invested an additional $75,000 into eMattress and as a result of this
transaction on June 30, 2000 Franklin owned 87.2% of eMattress.
At June 30, 2000 the Corporation owned 514,784 shares of common stock of
Go America, Inc. ("Go America"), a wireless internet service provider valued at
$7,946,978, which represents 63.1% of the Corporation's total assets and 70.4%
of its net assets. Go America is a leading provider of nationwide wireless
Internet services. Go America enables business and individual subscribers to
access remotely the Internet, email and corporate intranets in real time through
a wide variety of mobile computing and communications devices. Go America's
Wireless Internet Connectivity Center offers subscribers comprehensive and
flexible mobile data solutions for wireless Internet access by providing
wireless network services, mobile devices, software and subscriber service and
support.
The Corporation made an initial purchase of $25,000 worth of Go America
common stock in 1996. The Corporation made additional purchases of common stock
of $25,000 and $324,740 in 1998 and in November 1999, respectively.
Additionally, in November 1999, the Corporation purchased $125,000 of
convertible preferred stock. On April 7, 2000, Go America's common stock began
trading on the NASDAQ National Market. All of the convertible preferred stock
owned by Franklin was converted to common on this date as well. Franklin signed
a lockup agreement and is restricted from selling any of its Go America shares
prior to October 10, 2000.
At June 30, 2000, the Corporation had an investment in TradingNews, Inc.
("TradingNews"), D/B/A M4Logic ("M4Logic") valued at $258,125, which represents
2.1% of the Corporation's total assets and 2.3% of its net assets. M4Logic is a
provider of financial market intelligence for retail investors based on price
and volume movement. M4Logic scans every trade on major stock exchanges for
important technical signals. These signals, published instantly on the World
Wide Web as easy to understand news headlines, help investors identify key
market entry and exit points, spot market trends, and grasp the feel of the
market.
During 1999, the Corporation purchased $75,000 worth of TradingNews
convertible preferred stock. In connection with this investment, Stephen L.
Brown was appointed to the
19
<PAGE>
TradingNews six member Board of Directors. In January 2000 the Corporation
invested an additional $13,125 for 72,000 shares of TradingNews common stock. In
February 2000 the Corporation invested an additional $170,000 for a Convertible
Promissory Note from TradingNews, Inc. This note pays interest at 10% per annum
and is convertible into preferred stock.
Results of Operations
Investment Income and Expenses:
The Corporation's principal objective is to achieve capital appreciation
through long-term investments in businesses believed to have favorable growth
potential. Therefore, a significant portion of the investment portfolio is
structured to maximize the potential for capital appreciation and provides
little or no current yield in the form of dividends or interest. The Corporation
earns interest income from loans, preferred stocks, corporate bonds and other
fixed income securities. The amount of interest income varies based upon the
average balance of the Corporation's fixed income portfolio and the average
yield on this portfolio.
The Corporation had interest and dividend income of $50,496 and $38,522
for the six months ended June 30, 2000 and 1999, respectively. The increase in
interest and dividend income for the six months ended June 30, 2000 when
compared to June 30, 1999, was primarily the result of Franklin having more cash
on hand during the six months ended June 30, 2000.
Operating expenses were $1,196,059 and $705,203 for the six months ended
June 30, 2000 and 1999, respectively. A majority of the Corporation's operating
expenses consist of employee compensation, (which for the six months ended June
30, 2000 included an non-cash charge of $197,188 due to the exercise of
incentive options) office and rent expense, other expenses related to
identifying and reviewing investment opportunities and professional fees.
Professional fees consist of general legal fees, audit and tax fees and
investment related legal fees.
Net investment losses from operations were $1,123,563 and $666,681 for
the six months ended June 30, 2000 and 1999, respectively.
The Corporation has relied and continues to rely to a large extent upon
proceeds from sales of investments rather than investment income to defray a
significant portion of its operating expenses. Because such sales cannot be
predicted with certainty, the Corporation attempts to maintain adequate working
capital to provide for fiscal periods when there are no such sales.
Net Realized Gains and Losses on Portfolio of Investments:
During the six months ended June 30, 2000 and 1999, the Corporation
realized net gains before taxes of $1,068,438 and $305,927 respectively, from
the disposition of various investments.
Unrealized Appreciation of Investments:
Unrealized appreciation of investments, net of deferred taxes, increased
by $1,337,116 during the six months ended June 30, 2000, primarily from
unrealized gains due to the increase in value of Franklin's investment in Go
America. This increase was partially offset by a decrease in the value of
Franklin's investment in Avery and the realization of gains in CIC.
20
<PAGE>
Unrealized appreciation of investments, net of deferred taxes, increased
by $498,669 during the six months ended June 30, 1999, primarily from unrealized
gains due to the increase in value of Franklin's investment in CIC.
Liquidity and Capital Resources
The Corporation's reported total cash and cash equivalents, accrued
interest and accounts receivable and marketable investment securities (the
primary measure of liquidity) at June 30, 2000 was $1,366,367 compared to
$571,341 at December 31, 1999. Management believes that these assets provide the
Corporation with sufficient liquidity for its operations.
Risks
Pursuant to Section 64(b) (1) of the Investment Corporation Act of 1940,
a BDC is required to describe the risk factors involved in an investment in its
securities inherent in the nature of the Corporation's investment portfolio.
There are significant risks inherent in the Corporation's venture capital
business. The Corporation has invested a substantial portion of its assets in
small private companies and a non-reporting public corporation. Because of the
speculative nature of these investments, there is significantly greater risk of
loss than is the case with traditional investment securities. The Corporation
expects that from time to time its venture capital investments may result in a
complete loss of the Corporation's invested capital or may be unprofitable.
Other investments may appear likely to become successful, but may never realize
their potential. Neither the Corporation's investments nor an investment in the
Corporation is intended to constitute a balanced investment program. The
Corporation has in the past relied and continues to rely to a large extent upon
proceeds from sales of investments rather than investment income to defray a
significant portion of its operating expenses.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
A portion of the Corporation's portfolio of investments is in marketable
securities traded on the over-the-counter market. In order to realize the full
market value of a security the market must trade in an orderly fashion. Should
an economic event occur that would not allow the markets to trade in an orderly
fashion, the Corporation may not be able to receive fair value for those
investments.
All investments owned by the Corporation are marked at fair value at
June 30, 2000. For those investments that do not have a ready market, the
Corporation has received valuation information from either an independent third
party or the investee corporation itself. The Corporation has no off-balance
sheet investments or hedging instruments.
21
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities and Use of Proceeds
None
Item 3. Defaults Upon Senior Securities Holders
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits. The exhibits which are filed with the Form 10-Q or
incorporated herein by reference are set for in the Exhibit Index
on page 23.
(b) Reports on Form 8-K. The Company did not file any reports on Form
8-K during the first six months of 2000.
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Corporation has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
FRANKLIN CAPITAL CORPORATION
Date: August 11, 2000 By: /s/ Hiram M. Lazar
-----------------------------
Hiram M. Lazar
Chief Financial Officer
22
<PAGE>
EXHIBIT INDEX
None.
23
