<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 March 31, 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 April 28, 2000 was $8,814,509 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 April 28, 2000 was
718,488.
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
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FRANKLIN CAPITAL CORPORATION
================================================================================
<TABLE>
<CAPTION>
Balance Sheets
- --------------------------------------------------------------------------------------------------------------------------------
March 31, December 31,
2000 1999
(unaudited)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Marketable investment securities, at market value (cost: March 31,
2000 - $134,647; December 31, 1999 - $109,784) (Note 2) $793,747 $891,462
Investments, at fair value (cost: March 31, 2000 - $2,881,315;
December 31, 1999 - $2,861,563) (Note 2)
eMattress.com 100,000 100,000
Avery Communications, Inc. 5,863,654 3,471,880
Other investments 2,760,316 3,596,040
----------- ----------
8,723,970 7,167,920
----------- ----------
Cash and cash equivalents (Note 2) 2,434,778 571,341
Receivable from disposal of investments 60,917 231,308
Accrued interest and accounts receivable 61,870 15,976
Other assets 133,944 117,958
----------- ----------
TOTAL ASSETS $12,209,226 $8,995,965
=========== ==========
- --------------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Accounts payable and accrued liabilities $81,395 $204,583
Deferred taxes payable 956,000 351,000
----------- ----------
TOTAL LIABILITIES 1,037,395 555,583
----------- ----------
Commitments and contingencies (Note 5)
STOCKHOLDERS' EQUITY
Common stock, $1 par value: 5,000,000 shares authorized;
1,003,986 shares issued:730,588 shares outstanding at March 31,
2000 and December 31,1999 (Note 7) 1,003,986 1,003,986
Convertible preferred stock, $1 par value, cumulative 7% dividend:
5,000,000 shares authorized; 16,450 issued and outstanding at March 31,
2000, 0 issued and outstanding at December 31, 1999
(Liquidation preference $1,645,000) (Note 4) 16,450 -
Paid-in capital - common stock 8,998,051 8,998,051
preferred stock 1,628,550 -
Unrealized appreciation of investments,
net of deferred income taxes (Notes 2 and 3) 5,545,755 4,737,035
Accumulated deficit (3,752,639) (4,030,368)
----------- ----------
13,440,153 10,708,704
Deduct:273,398 shares of common stock held in treasury, at cost,
at March 31, 2000 and December 31, 1999 (Note 4) (2,268,322) (2,268,322)
----------- ----------
Net assets, equivalent to $15.29 (diluted $13.02) per share at
March 31, 2000 and $11.55 (diluted $11.33) at December 31, 1999 11,171,831 8,440,382
----------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $12,209,226 $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)
- --------------------------------------------------------------------------------------------------------------------------------
For the Three Months Ended March 31, 2000 1999
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Dividend income $10,500 $10,500
Interest income 11,844 8,580
---------- --------
22,344 19,080
---------- --------
EXPENSES
Salaries and employee benefits (Note 7) 191,979 196,060
Professional fees 117,851 54,500
Appraisal fees - 10,000
Rent (Note 5) 20,484 19,869
Insurance 10,440 10,106
Directors' fees 13,875 12,000
Taxes other than income taxes 17,645 15,898
Newswire and promotion 1,500 2,500
Depreciation and amortization 5,221 5,600
General and administrative 66,111 37,907
---------- --------
445,106 364,442
---------- --------
Net investment loss from operations (422,762) (345,362)
Net realized gain on portfolio of investments:
Investment securities:
Affiliated 121,696 -
Unaffiliated 606,448 232,095
---------- --------
Total investment securities 728,144 232,095
Other than investment securities 3,617 (111,392)
---------- --------
Net realized gain on portfolio of investments 731,761 120,703
---------- --------
Provision for current income taxes 19,000 -
---------- --------
Net realized income (loss) 289,999 (224,659)
Increase (decrease) in unrealized appreciation of investments, net of deferred
income taxes:
Investment securities:
Affiliated 2,488,160 -
Unaffiliated (122,578) 546,281
---------- --------
Total investment securities 2,365,582 546,281
Other than investment securities (951,862) 273,709
---------- --------
Deferred income taxes 605,000 -
---------- --------
Increase in unrealized appreciation of investments, net
of deferred income taxes 808,720 819,990
---------- --------
Net increase in net assets from operations $1,098,719 $595,331
---------- --------
Preferred dividends 12,270 -
---------- --------
Net increase in net assets attributable to common stockholders $1,086,449 $595,331
---------- --------
Basic net increase in net assets from operations
per common share (Note 8) $1.49 $0.78
---------- --------
Diluted net increase in net assets from operations
per common share (Note 8) $1.39 $0.78
---------- --------
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
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FRANKLIN CAPITAL CORPORATION
================================================================================
<TABLE>
<CAPTION>
Statements of Cash Flows
(unaudited)
- --------------------------------------------------------------------------------------------------------------------------------
For the Three Months Ended March 31, 2000 1999
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net increase in net assets from operations $1,098,719 $595,331
Adjustments to reconcile net increase in net assets to net
cash used in operating activities:
Depreciation and amortization 5,221 5,600
Increase in unrealized appreciation of investments, net of deferred
income tax expense (808,720) (819,990)
Net realized gain on portfolio of investments, net of current income taxes (712,761) (120,703)
Changes in operating assets and liabilities:
Decrease in receivable from disposal of investments 170,391 -
(Increase) decrease in accrued interest and accounts receivable (45,894) 71,018
Increase in other assets (21,207) (28,781)
Decrease in accounts payable and accrued liabilities (142,191) (59,395)
---------- --------
Total adjustments (1,555,161) (952,250)
---------- --------
Net cash used in operating activities (456,442) (356,920)
---------- --------
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 672,567 629,329
Purchases of investment in majority owned affiliate - (212,500)
Purchases of investments (183,125) -
Purchases of marketable investment securities (23,991) (157,038)
---------- --------
Net cash provided by investing activities 687,149 259,791
---------- --------
Cash flows from financing activities:
Proceeds from issuance of preferred stock 1,645,000 -
Payment of preferred dividends (12,270) -
Purchase of treasury stock - (53,390)
---------- --------
Net cash provided by (used in) financing activities 1,632,730 (53,390)
---------- --------
Net increase (decrease) in cash and cash equivalents 1,863,437 (150,519)
Cash and cash equivalents at beginning of period 571,341 1,100,373
---------- --------
Cash and cash equivalents at end of period $2,434,778 $949,854
========== ========
- --------------------------------------------------------------------------------------------------------------------------------
</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)
- --------------------------------------------------------------------------------------------------------------------------------
For the Three Months Ended March 31, 2000 1999
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets from operations:
Net investment loss ($422,762) ($345,362)
Net realized gain on portfolio of investments,
net of current income taxes 712,761 120,703
Increase in unrealized appreciation of investments,
net of deferred income taxes 808,720 819,990
----------- ----------
Net increase in net assets from operations 1,098,719 595,331
Capital stock transactions:
Issuance of preferred stock 1,645,000 -
Payment of dividends on preferred stock (12,270) -
Issuance of stock from treasury to majority owned affiliate, net - 175,000
Purchase of treasury stock - (53,390)
----------- ----------
Total increase in net assets 2,731,449 716,941
----------- ----------
Net assets at beginning of period 8,440,382 6,315,553
----------- ----------
Net assets at end of period $11,171,831 $7,032,494
=========== ==========
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
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FRANKLIN CAPITAL CORPORATION
================================================================================
<TABLE>
<CAPTION>
Portfolio of Investments
(unaudited)
- --------------------------------------------------------------------------------------------------------------------------------
Marketable Investment Securities
- --------------------------------------------------------------------------------------------------------------------------------
Number of
Shares or Market
Principal Value
March 31, 2000 Amount ($) Cost(1) (Note 2)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Communication Intelligence Corp. - common stock.................. 123,133 $66,988 $734,950
New Medial Spark - common stock.................................. 8,000 22,477 13,615
Certificate of Deposit - 4.5%, due 05/04/2000.................... 45,182 45,182
---------- ----------
Total Marketable Investment Securities
(8.3% of total investments and 7.1% of net assets)........ $134,647 $793,747
========== ==========
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Investments, at Fair Value
- -----------------------------------------------------------------------------------------------------------------------------
Number of
Shares or Directors'
Equity Principal Valuation
March 31, 2000 Investment Interest Amount ($) Cost(1) (Note 2)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Majority Owned Affiliate
eMattress.com (1.1% of total
investments and 0.9% of net
assets)............................. Common stock 87.19% 1,157 $383,748 $100,000
(equity in net loss for 3 month
period ended March 31, 2000 was
approximately $25,000)
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 (61.6% of
total investments and 52.5% of net
assets)............................... 8.83% 1,739,702 5,863,654
(Telecommunications) (fully
diluted
basis)
Other Investments
Go America Inc........................ Common stock 419,088 374,740
Go America Inc........................ Convertible Preferred 1,000 125,000
Stock ----------
Total Go America Inc. (Note 10)
(26.3% of total investments and
22.4% of net assets).................. 1.39% 499,740 2,502,191
(Wireless internet service
provider)
TradingNews, Inc...................... Common stock 72,000 13,125
TradingNews, Inc...................... Convertible Preferred 249,999 75,000
Stock
TradingNews, Inc...................... Convertible Promissory 170,000 170,000
Note 10%(2) ----------
Total Trading News, Inc.
(2.7% of total investments and
2.3% of net assets).......................................... 2.76% 258,125 258,125
---------- ----------
(Investment information provider)
Total Other Investments.................................................................. 757,865 2,760,316
---------- ----------
Total Investments, at Fair Value..................................................... $2,881,315 $8,723,970
========== ==========
- --------------------------------------------------------------------------------------------------------------------------
</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
March 31, 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.
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 three months ended March 31, 2000
and 1999, and paid income taxes of $2,000 during the three months ended March
31, 1999.
On January 25, 1999, the Corporation issued 20,046 shares of treasury stock
valued at $175,000, the Net Asset Value ("NAV") on the date of the transaction,
as part of an investment in a controlled affiliate. On September 30, 1999,
19,044 of these shares valued at $166,252, were canceled and placed back into
treasury. (See Note 6 - Transactions with Affiliates.)
At March 31, 2000 the Corporation held cash and cash equivalents primarily in
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
9
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Franklin Capital Corporation
Notes to Financial Statements (continued)
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 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. 108, "Earnings per Share". See Note 7 for discussion of
Stock Options.
3. INCOME TAXES
For the three months ended March 31, 2000 and 1999, Franklin's tax (provision)
benefit was based on the following:
2000 1999
---- ----
Net investment loss from operations................ $ (422,762) $ (345,362)
Net realized gain on portfolio of investments...... 731,761 120,703
Increase (decrease) in unrealized appreciation..... 1,413,720 (819,990)
---------- -----------
Pre-tax book income loss ........................ $1,722,719 $ 595,331
========== ===========
10
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Franklin Capital Corporation
Notes to Financial Statements (continued)
<TABLE>
<CAPTION>
2000 1999
------------ -----------
<S> <C> <C>
Tax (provision) benefit at 34% on $1,722,719 and
$595,331 respectively..................................................... $ 586,000 $ 202,000
State and local, net of Federal benefit..................................... 34,000 -
Income applied against net operating loss carryforward...................... - (202,000)
Book losses for which no benefit is provided................................ 4,000 -
------------ -----------
Adjustment to deferred taxes provided in prior periods...................... $ 624,000 $ -
============ ===========
</TABLE>
The components of the tax provision are as follows:
<TABLE>
<CAPTION>
2000 1999
------------ -----------
<S> <C> <C>
Current state and local tax provision....................................... $ 19,000 $ -
Deferred tax expense........................................................ 605,000 -
------------ -----------
Provision benefit for income taxes.......................................... $ 624,000 $ -
============ ===========
</TABLE>
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 March 31, 2000 and December 31, 1999, significant deferred tax assets and
liabilities consist of:
<TABLE>
<CAPTION>
Asset (Liability)
------------------------------
March 31, December 31,
2000 1999
----------- ------------
<S> <C> <C>
Deferred Federal and state benefit from net operating
loss carryforward......................................................... $ 1,385,000 $ 1,481,000
Deferred Federal and state provision on unrealized
appreciation of investments............................................... (2,341,000) (1,832,000)
----------- ------------
Deferred taxes.............................................................. $( 956,000) $( 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 March 31, 2000 consists of accumulated net realized
gains of $4,256,000 and accumulated investment losses of $7,996,000.
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 $20 per share.
The Board of Directors has authorized Franklin to repurchase up to an aggregate
of 350,000 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 20,046 shares of stock
from treasury pursuant to an investment made by Franklin on January 25, 1999. On
September 30,
11
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Franklin Capital Corporation
Notes to Financial Statements (continued)
1999, 19,044 of these shares were canceled and placed back into Treasury. (See
Note 6 - Transactions with Affiliates) As of March 31, 2000, Franklin had
repurchased 284,400 shares of its Common Stock of which 273,398 shares remain in
treasury. Franklin had no treasury transactions during the three months ended
March 31, 2000.
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 three months ended March 31, 2000, and 1999 was $20,484 and
$19,869 respectively. For the three months ended March 31, 2000 and 1999, the
Corporation collected rents of $15,000 and $15,615, 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 three months ended March 31, 2000,
was received from a corporation included in Franklin's investment portfolio on
March 31, 2000.
6. TRANSACTIONS WITH AFFILIATES
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 (20,046 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 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 March
31, 2000 Franklin owned 87.2% of eMattress. Unrealized gains as of March 31,
2000 are net of unrealized losses related to eMattress of $283,748.
In August 1995, Franklin made an initial investment of $350,000 in Avery
Communications Inc. ("Avery Communications"), a holding company in the
telecommunications industry. This investment consisted of a one-year 12% note
with warrants and a conversion option. Subsequently, Franklin exercised its
warrants to purchase 158,333 shares of Avery Communications common stock at
$0.10 per share and the note was converted to 350,000 shares of Series B
preferred stock which earn dividends of 12% per annum payable quarterly and are
convertible to 350,000 shares of common stock. An additional 28,506 shares of
common stock at a price of $1.00 per share were issued to Franklin at that time
in lieu of accrued interest on the note.
12
<PAGE>
Franklin Capital Corporation
Notes to Financial Statements (continued)
On May 30, 1997, Franklin made an additional investment of $2,500,000 in Avery
Communications. This investment partially consisted of a $1,000,000 note with a
maturity of three years that earns interest at the rate of 10.0% per annum. The
first year's interest payment of $100,000 was made at the time the loan was
made. As additional consideration for this note, the Corporation received
warrants to purchase 666,667 shares of Avery Communications common stock at
$1.50 per share. These warrants expired five years from the date of issuance.
The remainder of the investment, $1,500,000, purchased 7.5 equity units in Avery
Communications. Each unit consists of 133,333 shares of common stock of Avery
Communications and 200,000 shares of preferred Series D stock, which were
convertible to 100,000 shares of common stock. The shares of preferred Series D
stock earned a dividend of 10.0% per annum payable quarterly. The Series B
preferred shares previously owned by Franklin were converted to Series E
preferred stock with the same terms. This transaction, in conjunction with the
investment in common and preferred stock of Avery Communications that the
Corporation held previously, resulted in Franklin owning in excess of 25% of
Avery Communications' outstanding voting stock on a primary basis. Additionally,
three officers of Franklin were appointed to Avery Communications' six person
Board of Directors and the Corporation's Chairman and Chief Executive Officer
was appointed as the Vice Chairman of Avery Communications' Board of Directors.
On July 6, 1998, Franklin sold the 1,500,000 shares of Avery Communications
preferred Series D stock and the $1,000,000 Avery note along with 280,000
warrants to purchase Avery Communications common stock for a total of $2,500,000
to the Thurston Group, Inc. The president of the Thurston Group is the current
chairman of Avery Communications. Franklin realized a net gain of $935,297 as a
result of this sale. In conjunction with this transaction, Franklin's
representation on Avery Communication' Board of Directors was reduced from three
directors to two. As a result of this transaction, Avery Communications is no
longer a controlled affiliate of Franklin.
On July 13, 1998, Franklin entered into a cashless exercise of its remaining
warrants to purchase 386,667 shares of Avery Communications common stock at
$1.50 per share realizing a net gain of $372,911 and a decrease in unrealized
appreciation of a like amount. In return, Franklin received 196,503 shares of
Avery Communications common stock.
During the three months ended March 31, 2000, Franklin sold 90,000 shares of
Avery realizing a gain of $121,696. At March 31, 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. 75,000 shares of the Corporation's Common
Stock have been reserved for issuance under these plans, of which 45,000 shares
have been reserved for the SIP and 30,000 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.
13
<PAGE>
Franklin Capital Corporation
Notes to Financial Statements (continued)
On February 14, 2000, 20,000 options were granted under the SOP to four eligible
"outside" directors. The strike price of the options was $17.25 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, 1,250 forfeited options were reissued under the SIP to an
eligible officer of the Corporation at a strike price of $21.00 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 March 18, 1999, 10,000 forfeited options were reissued under the SIP to three
eligible officers of the Corporation at a strike price of $5.75 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.
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:
Net realized income (loss): March 31, 2000 March 31, 1999
-------------- --------------
As reported $1,086,449 $595,331
Pro forma $1,007,488 $581,506
Net increase (decrease) in net assets per common share:
As reported $ 1.49 $ 0.78
Pro forma - Basic $ 1.38 $ 0.76
Pro forma - Diluted $ 1.29 $ 0.76
Net Asset Value per share:
As reported $ 15.29 $ 9.26
Pro forma - Basic $ 15.18 $ 9.24
Pro forma - Diluted $ 12.93 $ 9.24
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:
March 31, 2000 March 31, 1999
-------------- --------------
Stock volatility 41.9% 29.0%
Risk-free interest rate 5.5% 5.5%
Option term in years 4 4
Stock dividend yield - -
The following is a summary of the status of the Stock Option Plans during the
three months ended:
14
<PAGE>
Franklin Capital Corporation
Notes to Financial Statements (continued)
March 31, 2000 March 31, 1999
------------------- ------------------
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price
------- -------- ------ --------
Outstanding at beginning of
period 43,750 $6.89 35,000 $7.00
Granted 21,250 $17.47 10,000 $5.75
Exercised - - - -
Forfeited - - - -
Expired - - - -
Outstanding at end of period 65,000 $13.45 45,000 $6.72
====== ======
Exercisable at end of period 46,875 $8.41 30,000 $6.79
====== ======
Weighted average fair value
of options granted $3.88 $2.25
The options issued under the SIP have a remaining contractual life of 8.8 years.
The options issued under the SOP have a remaining contractual life of 9.9 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>
March 31,
-------------------------------
2000 1999
-------------------------------
<S> <C> <C>
Numerator:
Net increase in net assets attributable to
common stockholders per share $1,098,719 $595,331
Preferred stock dividends (12,270) -
---------- --------
Numerator for basic earnings per share -
net income available for common stockholders $1,086,449 $595,331
Effect of dilutive securities:
Preferred stock dividends 12,270 -
---------- --------
Numerator for diluted earnings per share -
net increase in net assets available for common
stockholders after assumed conversions $1,098,719 $595,331
========== ========
Denominator:
Denominator for basic increase in net assets from
operations - weighted - average shares 730,588 760,880
</TABLE>
15
<PAGE>
Franklin Capital Corporation
Notes to Financial Statements (continued)
<TABLE>
<S> <C> <C>
Effect of dilutive securities:
Convertible preferred stock - weighted - average
common equivalent shares 35,250 -
Employee stock options - weighted - average
shares 25,445 -
---------- --------
Dilutive potential commons stock 60,695 -
---------- --------
Denominator for diluted increase in net assets
available for common stockholders - adjusted
weighted - average shares and assumed conversions 791,283 760,880
========== ========
Basic net increase in net assets attributable to common
stockholders $1.49 $0.78
===== =====
Diluted net increase in net assets attributable to common
stockholders $1.39 $0.78
===== =====
</TABLE>
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 March 31, 1999, as discussed in
Note 6 and excluding short term investments, aggregated $207,116 and $894,265
respectively, for the three months ended March 31, 2000; $544,538 and $629,329
respectively, for the three months ended March 31, 1999.
10. SUBSEQUENT EVENTS
On April 7, 2000, Go America completed its initial public offering placing ten
million shares of common stock at an offering price of $16.00 per share.
Franklin converted its preferred shares to common shares pursuant to the public
offering.
On April 20, 2000, Franklin invested in Data Downlink Corporation purchasing
$1,000,000 of Data Downlink Series F Preferred Stock. Data Downlink is a
web-based provider of business and financial information.
On April 26, 2000, the Board of Directors of Franklin declared a three for two
stock split effective June 7, 2000 for holders of record on May 15, 2000.
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,
$12,209,226 and $11,171,831 at March 31, 2000 versus $8,995,965 and $8,440,382
at December 31, 1999. Net asset value per share was $15.29 ($13.02 diluted) at
March 31, 2000 versus $11.55 ($11.33 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:
March 31, 2000 December 31, 1999
-------------- -----------------
Investments, at cost $ 3,015,962 $ 2,971,347
Unrealized appreciation, net of
deferred taxes 5,545,755 4,737,035
------------ -----------
Investments, at fair value $ 8,561,717 $ 7,708,382
============ ===========
Investments
The Corporation has an investment in Avery Communications Corporation
("Avery Communications") valued at $5,863,654 at March 31, 2000, which
represents 48.0% of the Corporation's total assets and 52.5% 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 March
10, 2000, Avery announced that it planned to spin off 100% of its local exchange
carrier (LEC) billing clearinghouse business to its shareholders.
Franklin made an initial investment in Avery Communications of $350,000
in August 1995. It made an additional investment of $2.5 million in May 1997. On
July 6, 1998, Franklin sold certain Avery Communications securities to the
Thurston Group, Inc. for $2.5 million, which resulted in a gain of $935,297.
During the three months ended March 31, 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. Additionally, Stephen L. Brown and Spencer L.
Brown, officers of Franklin, serve on Avery Communications eight member Board of
Directors.
At March 31, 2000, the Corporation held 123,133 shares of
Communications Intelligence Corporation ("CIC") common stock, quoted on NASDAQ
under the symbol "CICI", valued at $734,950, which represents 6.0% of the
Corporation's total assets and 6.6% of its net assets. CIC is a leading supplier
of pen-based software solutions. CIC's core software technologies include
multilingual handwriting recognition, dynamic signature verification, ink
compression, and operating system extensions that enable pen input. CIC's
products are designed to increase the ease of use, functionality, and security
of mobile electronic devices ranging from handheld companions to cellular
phones. Key licensees of CIC's technologies include Ericsson, Fujitsu, Hitachi,
Microsoft, Mitsubishi, National Semiconductor and Nortel. CIC is headquartered
in Redwood Shores, California and has a joint venture, CICC, in Nanjing, China.
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. For the three months ended March 31, 2000, the Corporation sold 99,998
shares of CIC common stock realizing a gain of $603,556. Additionally during
this period, CIC Ventures was terminated and the Corporation received a
distribution of 123,131 shares of CIC common stock.
At March 31, 2000, the Corporation had an investment in eMattress.com
("eMattress") valued at $100,000, which represents 0.8% of 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.
18
<PAGE>
In November 1999, Franklin invested an additional $75,000 into eMattress and as
a result of this transaction on March 31, 2000, Franklin owned 87.2% of
eMattress.
At March 31, 2000 the Corporation owned 419,088 of common stock and
1,000 shares of preferred stock convertible into 95,696 common shares of Go
America, Inc. ("Go America"), a wireless internet service provider valued at
$2,502,191, which represents 20.5% of the Corporation's total assets and 22.4%
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
until October 5, 2000.
At March 31, 2000, the Corporation had an investment in TradingNews,
Inc. ("TradingNews") valued at $258,125, which represents 2.1% of the
Corporation's total assets and 2.3% of its net assets. TradingNews is a provider
of financial market intelligence for retail investors based on price and volume
movement. TradingNews 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 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.
On April 20, 2000, the Corporation purchased $1,000,000 worth of Data
Downlink Corporation ("Data Downlink") preferred stock. In connection with this
investment, Franklin was granted observer rights for all Data Downlink Board of
Directors meetings. 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.
19
<PAGE>
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 $22,344 and $19,080
for the three months ended March 31, 2000 and 1999, respectively. The increase
in interest and dividend income for the three months ended March 31, 2000 when
compared to March 31, 1999, was primarily the result of Franklin having more
cash on hand during the three months ended March 31, 2000.
Operating expenses were $445,106 and $364,442 for the three months
ended March 31, 2000 and 1999, respectively. A majority of the Corporation's
operating expenses consist of employee compensation, 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 $422,762 and $345,362 for
the three months ended March 31, 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 three months ended March 31, 2000 and 1999, the Corporation
realized net gains before taxes of $731,761 and $120,703 respectively, from the
disposition of various investments.
Unrealized Appreciation of Investments:
Unrealized appreciation of investments, net of deferred taxes,
increased by $808,720 during the three months ended March 31, 2000, primarily
from unrealized gains due to the increase in value of Franklin's investment in
Avery. This increase was partially offset by a decrease in the value of
Franklin's investment in CIC.
Unrealized appreciation of investments, net of deferred taxes,
increased by $819,990 during the three months ended March 31, 1999, primarily
from unrealized gains due to the increase in value of Franklin's investment in
CIC.
20
<PAGE>
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 March 31, 2000 was $2,434,778 compared to
$571,341 at December 31, 1999. Management believes that these assets provide the
Corporation with sufficient liquidity for its operations.
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 and has a 7%
quarterly dividend. The stock is convertible into Franklin common stock at a
conversion price of $20 per share. Franklin expects to use the funds raised from
this issuance for additional investments.
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.
Risks Relating to the Year 2000 Issue:
The Corporation's internal computer information is Year 2000 compliant.
The Corporation uses individual PC's that rely on third party software. All such
software has been upgraded to versions that are Year 2000 compliant. As of the
date of this report, Franklin has not experienced any disruption in its business
or any additional costs due to Year 2000 issues. The Corporation does not
believe that any material adverse effects will occur to impair its financial
condition or results of operations.
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
March 31, 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
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 and has a 7%
quarterly dividend. The stock is convertible into Franklin common stock at a
conversion price of $20 per share. Franklin expects to use the funds raised from
this issuance for additional investments.
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 three 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: May 15, 2000 By: /s/
-----------------------
Hiram M. Lazar
Chief Financial Officer
22
<PAGE>
EXHIBIT INDEX
None.
23
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION FROM FORM 10-Q FOR THE
PERIOD ENDED MARCH 31, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1.000
<INVESTMENTS-AT-COST> 2,881
<INVESTMENTS-AT-VALUE> 8,724
<RECEIVABLES> 62
<ASSETS-OTHER> 3,423
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 12,209
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,037
<TOTAL-LIABILITIES> 1,037
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 7,734
<SHARES-COMMON-STOCK> 731
<SHARES-COMMON-PRIOR> 731
<ACCUMULATED-NII-CURRENT> (3,753)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 5,546
<NET-ASSETS> 11,172
<DIVIDEND-INCOME> 11
<INTEREST-INCOME> 12
<OTHER-INCOME> 0
<EXPENSES-NET> 445
<NET-INVESTMENT-INCOME> (423)
<REALIZED-GAINS-CURRENT> 713
<APPREC-INCREASE-CURRENT> 809
<NET-CHANGE-FROM-OPS> 1,099
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 12
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1,086
<ACCUMULATED-NII-PRIOR> (7,574)
<ACCUMULATED-GAINS-PRIOR> 3,543
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 445
<AVERAGE-NET-ASSETS> 9,821
<PER-SHARE-NAV-BEGIN> 11.55
<PER-SHARE-NII> (0.60)
<PER-SHARE-GAIN-APPREC> 2.08
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 15.29
<EXPENSE-RATIO> 4.53
</TABLE>
