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 SEPTEMBER 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 October 31, 2000 was $5,157,108 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 October  31,  2000 was
1,099,509.

                                       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

--------------------------------------------------------------------------------
                                                     SEPTEMBER 30,  DECEMBER 31,
                                                         2000          1999
                                                      (UNAUDITED)
--------------------------------------------------------------------------------

ASSETS

Marketable investment securities, at market
  value (cost: September 30, 2000 - $34,675;
  December 31, 1999 - $109,784)  (Note 2)                $34,675      $891,462
Investments, at fair value
 (cost: September 30, 2000 - $4,334,761;
  December 31, 1999 - $2,861,563) (Note 2)
    eMattress.com                                             --       100,000
    Avery Communications, Inc.                         2,727,267     3,471,880
    Excom Ventures, LLC                                  100,000            --
    Other investments                                  6,203,246     3,596,040
                                                      ----------    ----------
                                                       9,030,513     7,167,920
                                                      ----------    ----------
Cash and cash equivalents (Note 2)                       501,904       571,341
Receivable from disposal of investments                       --       231,308
Accrued interest and accounts receivable                  12,234        15,976
Other assets                                             106,955       117,958
                                                      ----------    ----------

TOTAL ASSETS                                          $9,686,281    $8,995,965
                                                      ==========    ==========

--------------------------------------------------------------------------------

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES

Accounts payable and accrued liabilities                $236,876      $204,583
Deferred taxes payable                                   192,000       351,000
                                                      ----------    ----------

TOTAL LIABILITIES                                        428,876       555,583
                                                      ----------    ----------

Commitments and contingencies  (Note 5)

STOCKHOLDERS' EQUITY

Common stock, $1 par value: 5,000,000 shares
  authorized; 1,505,888 shares issued, 1,101,509
  shares outstanding at September 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 September 30, 2000,
  0 issued and outstanding at December 31, 1999
  (Liquidation preference $1,645,000) (Note 4)            16,450            --
Paid-in capital - common stock                         8,636,907     8,998,051
                  preferred stock                      1,628,550            --
Unrealized appreciation of investments,
  net of deferred income taxes (Notes 2 and 3)         4,503,752     4,737,035
Accumulated deficit                                   (4,670,352)   (4,030,368)
                                                      ----------    ----------

                                                      11,621,195    10,708,704
Deduct: 404,379 and 410,097 shares of common stock
  held in treasury, at cost, at September 30, 2000
  and December 31, 1999, respectively (Note 4)        (2,363,790)   (2,268,322)
                                                      ----------    ----------

Net assets, equivalent to $8.40 (diluted $7.54)
  per share at September 30, 2000 and $7.70
  (diluted $7.55) at December 31, 1999                 9,257,405     8,440,382
                                                      ----------    ----------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY            $9,686,281    $8,995,965
                                                      ==========    ==========

--------------------------------------------------------------------------------

   The accompanying notes are an integral part of these financial statements.

                                       4
<PAGE>


                          FRANKLIN CAPITAL CORPORATION
================================================================================

STATEMENTS OF OPERATIONS
(UNAUDITED)
--------------------------------------------------------------------------------
                                     THREE MONTHS ENDED     NINE MONTHS ENDED
                                        SEPTEMBER 30,         SEPTEMBER 30,
                                       2000       1999       2000       1999
--------------------------------------------------------------------------------
INVESTMENT INCOME
  Dividend income                     $10,500   $10,500     $31,500     $31,500
  Interest income                      10,638     4,148      40,134      21,670
  Other Income                           --        --        22,000        --
                                   ----------  --------    --------   ---------

                                       21,138    14,648      93,634      53,170
                                   ----------  --------    --------   ---------

EXPENSES
  Salaries and employee benefits
   (Note 7)                           366,020   194,316   1,068,331     584,696
  Professional fees                    57,400    53,525     270,681     152,714
  Appraisal fees                         --      10,616        --        20,616
  Rent  (Note 5)                       31,484    25,172      72,452      64,920
  Insurance                            10,442    10,473      31,321      30,826
  Directors' fees                      19,875    12,000      53,625      36,000
  Taxes other than income taxes         8,993     3,681      37,802      26,961
  Newswire and promotion                1,500     2,499       4,500       7,497
  Depreciation and amortization         5,416     5,601      16,052      16,802
  General and administrative           62,517    34,663     204,943     116,717
                                   ----------  --------    --------   ---------

                                      563,647   352,546   1,759,707   1,057,749
                                   ----------  --------   ---------   ---------

Net investment loss from operations  (542,509) (337,898) (1,666,073) (1,004,579)

Net realized gain on portfolio
 of investments:
  Investment securities:
    Affiliated                         43,558       --      165,254        --
    Unaffiliated                        3,737   112,301     946,862     529,620
                                   ----------   --------   --------   ---------
  Total investment securities          47,295   112,301   1,112,116     529,620

  Other than investment securities        202      --         3,819    (111,392)
                                   ----------  --------    --------   ---------

Net realized gain on portfolio
 of investments                        47,497   112,301   1,115,935     418,228
                                   ----------   --------  ---------   ---------

Provision for current income taxes      1,001    (8,730)     20,001        (942)
                                   ----------   --------   --------   ---------

Net realized loss                    (496,013) (216,867)   (570,139)   (585,409)

Increase (decrease) in unrealized
 appreciation of investments,
 net of deferred income taxes:
  Investment securities:
    Affiliated                        968,958      --      (709,163)       --
    Unaffiliated                   (3,394,358) (149,322)  1,268,742     203,461
                                   ----------  --------    --------   ---------
  Total investment securities      (2,425,400) (149,322)    559,579     203,461

  Other than investment securities       --     (42,786)   (951,862)    103,100
                                   ----------  --------    --------   ---------

  Deferred income tax benefit        (855,000)     --      (159,000)       --
                                   ----------  --------    --------   ---------

(Decrease) increase in unrealized
 appreciation of investments,
 net of deferred income taxes      (1,570,400) (192,108)   (233,283)    306,561
                                   ----------  --------    --------   ---------

Net decrease in net assets
 from operations                  ($2,066,413)($408,975)  ($803,422)  ($278,848)
                                   ----------  --------    --------   ---------

Preferred dividends                    28,787      --        69,845        --
                                   ----------  --------    --------   ---------

Net decrease in net assets
 attributable to common
 stockholders                     ($2,095,200)($408,975)  ($873,267)  ($278,848)
                                   ==========  ========    ========   =========

Basic and diluted net decrease
 in net assets from operations
 per common share (Note 8)             ($1.89)   ($0.36)     ($0.74)     ($0.25)
                                   ==========  ========    ========    ========

--------------------------------------------------------------------------------

   The accompanying notes are an integral part of these financial statements.

                                       5
<PAGE>


                          FRANKLIN CAPITAL CORPORATION
================================================================================
STATEMENTS OF CASH FLOWS
(UNAUDITED)
--------------------------------------------------------------------------------

FOR THE NINE MONTHS ENDED SEPTEMBER 30,                   2000          1999
--------------------------------------------------------------------------------

Cash flows from operating activities:
  Net decrease in net assets from operations            ($803,422)    ($278,848)
  Adjustments to reconcile net decrease in
   net assets to net cash used in
   operating activities:
     Depreciation and amortization                         16,052        16,802
     Increase (decrease) in unrealized appreciation
      of investments, net of deferred income
      tax expense                                         233,283      (306,561)
     Net realized gain on portfolio of
       investments, net of current income taxes        (1,095,934)     (418,228)
     Non-cash compensation expense from exercise
       of officer options                                 326,505          --

     Changes in operating assets and liabilities:
         Decrease in receivable from disposal
          of investments                                  231,308          --
         Decrease in accrued interest and
          accounts receivable                               3,742        60,902
         Increase in other assets                          (5,056)      (19,105)
         Increase (decrease) in accounts payable
          and accrued liabilities                          12,292       (74,432)
                                                      -----------   -----------

           Total adjustments                             (277,808)     (740,622)
                                                      -----------   -----------

           Net cash used in operating activities       (1,081,230)   (1,019,470)
                                                      -----------   -----------

Cash flows from investing activities:
  Return of capital from investments                         --         103,289
  Proceeds from sale of affiliate                         357,013          --
  Proceeds from sale of other investments                   3,819          --
  Proceeds from sale of marketable
   investment securities                                1,228,374     1,773,624
  Purchase of investment in majority
   owned affiliate                                           --        (303,000)
  Purchase of investment in affiliate                    (100,000)         --
  Purchases of investments                             (1,631,936)     (124,999)
  Purchases of marketable investment securities          (139,417)     (980,723)
                                                      -----------   -----------

           Net cash (used in) provided by
            investing activities                         (282,147)      468,191
                                                      -----------   -----------

Cash flows from financing activities:
  Proceeds from issuance of preferred stock             1,645,000          --
  Payment of preferred dividends                          (69,845)         --
  Cash paid to common shareholders in lieu
   of fractional shares due to stock split
   of common shares                                        (1,449)         --
  Purchase of treasury stock                             (279,766)     (109,737)
                                                      -----------   -----------

           Net cash provided by (used in)
            financing activities                        1,293,940      (109,737)
                                                      -----------   -----------

Net decrease in cash and cash equivalents                 (69,437)     (661,016)

Cash and cash equivalents at beginning of period          571,341     1,100,373
                                                      -----------   -----------

Cash and cash equivalents at end of period               $501,904      $439,357
                                                      ===========   ===========

--------------------------------------------------------------------------------

   The accompanying notes are an integral part of these financial statements.

                                       6
<PAGE>


                          FRANKLIN CAPITAL CORPORATION
================================================================================

STATEMENTS OF CHANGES IN NET ASSETS
(UNAUDITED)
--------------------------------------------------------------------------------
                                   THREE MONTHS ENDED      NINE MONTHS ENDED
                                      SEPTEMBER 30,           SEPTEMBER 30,
                                 2000         1999         2000          1999
--------------------------------------------------------------------------------

Increase (decrease) in
 net assets from operations:
  Net investment loss         ($542,509)  ($337,898)  ($1,666,073)  ($1,004,579)
  Net realized gain on
   portfolio of investments,
   net of current income taxes   46,496     121,031     1,095,934       419,170
  (Decrease) increase in
   unrealized appreciation
   of investments, net of
   deferred income taxes     (1,570,400)   (192,108)     (233,283)      306,561
                             ----------  ----------    ----------   -----------

     Net decrease in net
      assets from operations (2,066,413)   (408,975)     (803,422)     (278,848)

Capital stock transactions:
  Issuance of preferred stock      --          --       1,645,000          --
  Payment of dividends on
   preferred stock              (28,787)       --         (69,845)         --
  Issuance of stock from
   treasury to majority owned
   affiliate, net                  --      (166,254)         --           8,747
  Issuance of stock from
   treasury for exercise of
   officer options              129,317        --         326,505          --
  Cash paid to common
   shareholers in lieu of
   fractional shares               --          --          (1,449)         --
  Purchase of treasury stock    (65,215)       --        (279,766)     (109,737)
                             ----------  ----------    ----------   -----------

     Total (decrease)
      increase in net assets (2,031,098)   (575,229)      817,023      (379,838)
                             ----------  ----------    ----------   -----------


Net assets at beginning
 of period                   11,288,503   6,510,944     8,440,382     6,315,553
                             ----------  ----------    ----------   -----------


Net assets at end of period  $9,257,405  $5,935,715    $9,257,405    $5,935,715
                             ==========  ==========    ==========   ===========

--------------------------------------------------------------------------------

   The accompanying notes are an integral part of these financial statements.

                                       7
<PAGE>


<TABLE>
<CAPTION>
                                                    FRANKLIN CAPITAL CORPORATION
===================================================================================================================================

PORTFOLIO OF INVESTMENTS
(UNAUDITED)
------------------------------------------------------------------------------------------------------------------------------------

MARKETABLE INVESTMENT SECURITIES
------------------------------------------------------------------------------------------------------------------------------------

                                                                                                NUMBER OF
                                                                                                SHARES OR                  MARKET
                                                                                                PRINCIPAL                  VALUE
SEPTEMBER 30, 2000                                                                              AMOUNT ($)    COST(1)     (NOTE 2)
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                        <C>                   <C>                <C>        <C>        <C>

Certificate of Deposit - 5.01%, due 10/04/2000 ................................................               34,675        34,675
                                                                                                             =======       =======
  Total Marketable Investment Securities (0.4% of total investments and 0.4% of net assets) ...              $34,675       $34,675
                                                                                                             =======       =======
------------------------------------------------------------------------------------------------------------------------------------
INVESTMENTS, AT FAIR VALUE
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                NUMBER OF
                                                                                                SHARES OR                 DIRECTORS'
                                                                                   EQUITY       PRINCIPAL                  VALUATION
SEPTEMBER 30, 2000                                             INVESTMENT         INTEREST      AMOUNT ($)      COST(1)     (NOTE 2)
------------------------------------------------------------------------------------------------------------------------------------

MAJORITY OWNED AFFILIATE

  eMattress.com (0.0% of total investments and
   0.0% of net assets) ..................................     Common stock          87.19%            1,157     $440,059         $0
    (equity in net loss for 9 months ended
     September 30, 2000 was approximately $57,000)

AFFILIATE

  Avery Communications Inc ..............................     Common stock                        1,208,438    1,294,327

  Avery Communications Inc ..............................  Convertible Preferred
                                                             Stock - Series E;
                                                           12.0% dividend rate(2)                   350,000      350,000
                                                                                                                 -------

Total Avery Communications (30.1% of total investments
 and 29.5% of net assets)                                                           8.83%                      1,644,327  2,727,267
   (Telecommunications)                                                            (fully
                                                                                diluted basis)

Excom Ventures, LLC (1.1% of total investments and 1.1%            Units           13.33%           100,000      100,000    100,000
 of net assets)
OTHER INVESTMENTS

Data Downlink Corporation (11.0% of total investments      Convertible Preferred    1.68%           321,543    1,000,000  1,000,000
 and 10.8% of net assets)                                          Stock
  (Internet-based information provider)

Go America Inc. (50.2% of total investments and 49.2%          Common Stock         1.10%           514,784      499,750  4,552,621
 of net assets)
    (Wireless internet service provider)

Structured Web, Inc. (3.9% of total investments and        Convertible Preferred    2.02%           188,425      350,000    350,000
 3.8% of net assets)                                               Stock
    (Internet-based application service provider)


  TradingNews, Inc ......................................       Common stock                         72,000       13,125

  TradingNews, Inc ......................................  Convertible Preferred                    249,999       75,000
                                                                   Stock
  TradingNews, Inc ...................................... Convertible Promissory
                                                                Note 10%(2)                         212,500      212,500
                                                                                                                 -------

Total Trading News, Inc. (3.3% of total investments
 and 3.2% of net assets)                                                            2.65%                        300,625    300,625
  (Investment information provider)                                                                             --------    -------

Total Other Investments .......................................................................                2,150,375  6,203,246
                                                                                                               ---------  ---------

  Total Investments, at Fair Value ............................................................               $4,334,761 $9,030,513
                                                                                                              ========== ==========

------------------------------------------------------------------------------------------------------------------------------------
</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
SEPTEMBER 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.

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 nine months ended September 30, 2000
and 1999, and paid income taxes of $2,000 during the nine months ended September
30, 1999.

At September 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
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

                                       9
<PAGE>


FRANKLIN CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

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  nine  months  ended  September  30,  2000  and  1999,  Franklin's  tax
(provision) benefit was based on the following:

                                                         2000           1999
                                                     -----------    -----------
Net investment loss from operations ..............   $(1,666,073)   $(1,004,579)
Net realized gain on portfolio of investments ....     1,115,935        418,228
(Decrease) increase in unrealized appreciation ...      (392,283)       306,561
                                                     -----------    -----------
     Pre-tax book loss ...........................   $  (942,421)   $  (279,790)
                                                     ===========    ===========

                                                         2000           1999
                                                     -----------    -----------
Tax benefit at 34% on $(942,421) and
  $(279,790) respectively ........................   $   320,000    $    95,000
State and local, net of Federal benefit ..........       (20,000)         1,000
Book losses for which no benefit is provided .....      (141,000)       (95,000)
                                                     -----------    -----------
                                                     $   139,000    $     1,000
                                                     ===========    ===========

                                       10
<PAGE>


FRANKLIN CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

The components of the tax provision (benefit) are as follows:

                                                         2000           1999
                                                     -----------    -----------
Current state and local tax provision ............   $   (20,000)   $     1,000
Deferred tax benefit .............................       159,000             --
                                                     -----------    -----------
Provision benefit for income taxes ...............   $   139,000    $     1,000
                                                     ===========    ===========

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 September 30, 2000 and December 31, 1999, significant deferred tax assets and
liabilities consist of:


                                                          Asset (Liability)
                                                    ---------------------------
                                                    September 30,   December 31,
                                                         2000           1999
                                                     -----------    -----------
Deferred Federal and state benefit from
  net operating loss carryforward ................   $ 1,781,000    $ 1,481,000
Deferred Federal and state provision on unrealized
  appreciation of investments ....................    (1,973,000)    (1,832,000)
                                                     -----------    -----------
Deferred taxes ...................................   $  (192,000)   $  (351,000)
                                                     ===========    ===========

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 September  30, 2000,  consists of  accumulated  net
realized gains of $4,569,000 and accumulated investment losses of $9,240,000.

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.

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

                                       11
<PAGE>


FRANKLIN CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

Affiliates). During the nine months ended September 30, 2000, Franklin purchased
26,050  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.
On September 11, 2000,  14,369 shares were issued from treasury  pursuant to the
exercise of options by one of  Franklin's  officers.  As of September  30, 2000,
Franklin had  repurchased  452,650  shares of its Common Stock of which  404,379
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 nine months ended  September 30, 2000, and 1999 was $72,452
and $64,920 respectively. For the nine months ended September 30, 2000 and 1999,
the  Corporation  collected  rents of $34,000  and  $41,532  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.  A
portion of the amount  collected  from  subtenants  during the nine months ended
September  30, 2000,  was received  from a  corporation  included in  Franklin's
investment portfolio at September 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")  a  Business-to-Business  purchase
evaluation engine that simulates the way people make decisions.

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.  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.  In November  1999,  Franklin
invested  an  additional  $75,000  into  eMattress  and  as  a  result  of  this
transaction  Franklin  owned 87.2% of eMattress.  During the third quarter 2000,
eMattress  ceased  operations  and  is in the  process  of  legally  dissolving.
Franklin  has written off its  investment  including a loan of $56,311  that was
determined to be  non-collectible.  Franklin's  unrealized gains as of September
30, 2000 are net of unrealized losses related to eMattress of $440,059.

During the nine months ended September 30, 2000, Franklin sold 177,500 shares of
Avery for total proceeds of $357,013 realizing a gain of $165,254.  At September
30, 2000, Franklin owned 7.05% of Avery Communications on a fully diluted basis,
and 13.8% of Avery Communications on a primary basis.

                                       12
<PAGE>


FRANKLIN CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

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 of Franklin's  officers made a cash-less  exercise of 29,062
options resulting in a non-cash charge to compensation  expense of $197,188.  On
September  11, 2000,  one of Franklin's  officers  made a cash-less  exercise of
29,062  options  resulting  in a  non-cash  charge to  compensation  expense  of
$129,317.

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.

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:

                                       13
<PAGE>


FRANKLIN CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                                                        Nine Months Ended
                                                  ------------------------------
Net decrease in net assets from operations:       September 30,    September 30,
                                                      2000             1999
                                                  -------------    -------------
As reported                                        $(803,422)       $(278,848)
Pro forma                                          $(848,409)       $(304,123)

Net decrease in net assets per common share:
As reported                                        $   (0.74)       $   (0.25)
Pro forma - Basic and Diluted                      $   (0.78)       $   (0.27)

                                                  September 30,    September 30,
                                                      2000             1999
                                                  -------------    -------------
Net Asset Value per share:
As reported                                        $    8.40        $    5.41
Pro forma - Basic                                  $    8.36        $    5.39
Pro forma - Diluted                                $    7.50        $    5.39

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:

                                                  September 30,    September 30,
                                                      2000             1999
                                                  -------------    -------------
          Stock volatility                              41.3%            30.0%
          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
nine months ended:

                                        September 30, 2000    September 30, 1999
                                        ------------------    ------------------
                                                  Weighted              Weighted
                                                   Average               Average
                                                  Exercise              Exercise
                                         Shares     Price      Shares     Price
                                         ------   --------     ------   -------
Outstanding at beginning
  of period                              65,625     $ 4.59     52,500     $4.67
Granted                                  39,375     $11.27     15,000     $3.83
Exercised                                58,124     $ 4.55         --        --
Forfeited                                    --         --         --        --
Expired                                      --         --         --        --
                                         ------                ------
Outstanding at end of period             46,876     $10.25     67,500     $4.48
                                         ======                ======
Exercisable at end of period             18,125     $11.61     45,000     $4.53
                                         ======                ======
Weighted average fair value
  of options granted                     $ 2.58                 $1.65

The  options  issued  under the SIP have a  remaining  contractual  life of 8.25
years. The options issued under the SOP have a remaining contractual life of 9.4
years.

                                       14
<PAGE>


FRANKLIN CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

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>
                                                                              Nine Months Ended               Three Months Ended
                                                                            -------------------------------------------------------
                                                                                 September 30,                  September 30,
                                                                              2000           1999            2000           1999
                                                                            -------------------------------------------------------
<S>                                                                         <C>            <C>            <C>             <C>
Numerator:
  Net decrease in net assets attributable to
     common stockholders per share                                          ($803,422)     ($278,848)     ($2,066,413)    ($408,975)
  Preferred stock dividends                                                   (69,845)            --          (28,787)           --
                                                                            ---------      ---------      -----------     ---------
  Numerator for basic earnings per share -
    net loss available for common stockholders                              ($873,267)     ($278,848)     ($2,095,200)    ($408,975)
  Effect of dilutive securities:
    Preferred stock dividends                                                  69,845             --           28,787            --
                                                                            ---------      ---------      -----------     ---------
  Numerator for diluted earnings per share -
    net decrease in net assets available for common
    stockholders after assumed conversions                                  ($803,422)     ($278,848)     ($2,066,413)    ($408,975)
                                                                            =========      =========      ===========     =========

Denominator:
  Denominator for basic decrease in net assets from
    operations - weighted - average shares                                  1,092,779      1,134,431        1,092,346     1,124,138
                                                                            =========      =========      ===========     =========

Basic and diluted net decrease in net assets attributable
    to common stockholders                                                     ($0.74)        ($0.25)          ($1.89)       ($0.36)
                                                                            =========      =========      ===========     =========
</TABLE>

Diluted net decrease in net assets  attributable  to common  stockholders is not
presented   since  the  effect  of  all  potentially   dilutive   securities  is
anti-dilutive.

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 September 30, 1999, as discussed in
Note  6  and  excluding  short  term  investments,   aggregated  $1,836,678  and
$1,544,024  respectively,   for  the  nine  months  ended  September  30,  2000;
$1,518,549 and $1,876,913 respectively,  for the nine months ended September 30,
1999.

                                       15
<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,
$9,686,281 and $9,198,405 at September 30, 2000 versus $8,995,965 and $8,440,382
at December  31, 1999.  Net asset value per share was $8.40  ($7.54  diluted) at
September 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:

                                          SEPTEMBER 30, 2000   DECEMBER 31, 1999
                                          ------------------   -----------------
Investments, at cost                          $4,369,436          $2,971,347
Unrealized appreciation, net of
  deferred taxes                               4,503,752           4,737,035
                                              ----------          ----------
Investments, at fair value                    $8,814,188          $7,708,382
                                              ==========          ==========

INVESTMENTS

     The  Corporation  has an  investment  in Avery  Communications  Corporation
("Avery  Communications")  valued at  $2,727,267  at September  30, 2000,  which
represents 28.2% of the Corporation's  total assets and 29.5% 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  Web-based   integrated   customer  management  and
intelligence  solutions that allow rapidly evolving  communications and Internet
service providers to stay connected with and grow their customers.  It does this
through an integrated suite of applications  that can track and analyze customer
behavior and preferences, collect usage information, and

                                       16
<PAGE>


support billing and customer care back-office  requirements,  including those of
emerging IP billing  markets.  HBS, based in San Antonio,  Texas is a nationwide
provider of a  comprehensive  range of Local Exchange  Carrier (LEC) Billing and
Collection  services  through an established  billing network of more than 1,300
LECs.  HBS has  built  strong  billing  and  collection  relationships  with all
Regional Bell Operating  Companies  (RBOCs),  GTE, AllTel,  Sprint,  and several
hundred independent  telephone companies  throughout the United States.  Through
these billing  agreements,  HBS provides  clearinghouse  billing services to its
clients  for a  variety  of  telecommunication-related  services  and  products,
including Direct Dialed 1+, Dial-Around 10-10-xxx,  and qualified  non-regulated
telecommunication  services.  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  23,  2000 will  receive  one share of stock in Primal for
every one  Avery  common  share  held on the  record  date.  Primal  has filed 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 November  30,  2000,  assuming all  necessary
approvals are obtained.

     During the nine months  ended  September  30, 2000,  Franklin  sold 177,500
shares of Avery for total  proceeds  of $357,013  realizing a gain of  $165,254.
Franklin's remaining shares represent 13.80% of Avery Communications outstanding
voting  stock on a  primary  share  basis and  7.85% on a fully  diluted  basis.
Stephen L. Brown and Spencer L. Brown,  officers of Franklin,  did not stand for
re-election  on Avery  Communications  Board of Directors at the annual  meeting
held on September 13, 2000 and are no longer members of the Avery Communications
Board of Directors. Spencer L. Brown serves on the Primal Board of Directors.

     At September 30, 2000, the  Corporation  had an investment in Data Downlink
Corporation  ("Data Downlink")  valued at $1,000,000,  which represents 10.3% of
the  Corporation's  total  assets and 10.8% 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   privatesuite(TM),   a  fast,   easy,
cost-effective way to identify and retrieve profiles of privately held companies
around the world;  compbook(TM),  a tool for company peer  analysis;  and Portal
B(TM), 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 September 30, 2000, the Corporation had an investment in Excom Ventures,
LLC ("Excom")  valued at $100,000,  which  represents 1.0% of the  Corporation's
total assets and 1.1% 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.

     On June 26, 2000, the Corporation purchased $100,000 worth of Excom Units.

     At September 30, 2000 the Corporation  owned 514,784 shares of common stock
of Go America, Inc. ("Go America"),  a wireless internet service provider valued
at $4,552,621, which

                                       17
<PAGE>


represents 47.0% of the Corporation's  total assets and 49.2% 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 4, 2000.

     At September 30, 2000, the Corporation had an investment in Structured Web,
Inc.  ("Structured  Web")  valued  at  $350,000,  which  represents  3.6% of the
Corporation's  total assets and 3.8% of its net assets.  Structured Web develops
web building  blocks to enable small  businesses  to create and manage their own
digital  nerve  system  easily  and at an  affordable  price.  Structured  Web's
object-based  proprietary  technology enables customers to choose from a growing
selection  of  "WebBlocks"  including  content,   communication,   commerce  and
services.

     On August 8, 2000, the Corporation  purchased  $350,000 worth of Structured
Web convertible  preferred stock. In connection with this  investment,  Franklin
was granted observer rights for Structured Web Board of Directors meetings.

     At September 30, 2000, the  Corporation  had an investment in  TradingNews,
Inc.  ("TradingNews"),  D/B/A  M4Logic  ("M4Logic")  valued at  $300,625,  which
represents  3.1% of the  Corporation's  total assets and 3.2% 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 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.  In August 2000,  the  Corporation  invested an additional  $42,500 for a
Convertible  Promissory Note from  TradingNews,  Inc. This note pays interest at
10% per annum and is convertible into preferred stock.

     During the third quarter of 2000 eMattress  ceased  operations and Franklin
has  written  off its entire  investment  including  a loan of $56,311  that was
determined  to be  non-collectible.  eMattress  is in the  process of filing for
dissolution.

                                       18
<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 $71,634 and $53,170 for
the nine months ended September 30, 2000 and 1999, respectively. The increase in
interest and dividend  income for the nine months ended  September 30, 2000 when
compared to September 30, 1999, was primarily the result of Franklin having more
cash on hand during the nine months ended September 30, 2000.

     Operating expenses were $1,759,707 and $1,057,749 for the nine months ended
September  30,  2000 and 1999,  respectively.  A majority  of the  Corporation's
operating expenses consist of employee compensation,  (which for the nine months
ended  September  30, 2000  included a non-cash  charge of  $326,505  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 $1,666,073 and $1,004,579 for
the nine months ended September 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 nine months ended  September 30, 2000 and 1999, the  Corporation
realized net gains before taxes of $1,115,935  and $418,228  respectively,  from
the disposition of various investments.

UNREALIZED APPRECIATION OF INVESTMENTS:

     Unrealized appreciation of investments, net of deferred taxes, decreased by
$233,283  during the nine months ended  September 30, 2000,  primarily  from the
realization  of  gains  in CIC and by a  decrease  in the  value  of  Franklin's
investment in Avery.  This decrease was partially offset by unrealized gains due
to the increase in value of Franklin's investment in Go America.

     Unrealized appreciation of investments, net of deferred taxes, increased by
$306,561  during the nine  months  ended  September  30,  1999,  primarily  from
unrealized  gains due to the increase in value of Franklin's  investments in CIC
and Go America.

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<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 September  30, 2000 was $548,813  compared to
$1,710,087  at December 31, 1999.  Management  believes  that these assets along
with Franklin's  investments in Avery  Communication's and Go America's publicly
traded common stock 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
September 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.

                                       20
<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 22.

          (b)  Reports on Form 8-K. The Company did not file any reports on Form
               8-K during the first nine 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: November 13, 2000                     By: /s/ HIRAM M. LAZAR
                                                --------------------------------
                                                    Hiram M. Lazar
                                                    CHIEF FINANCIAL OFFICER

                                       21
<PAGE>


                                  EXHIBIT INDEX

(27) -- Financial Data Schedule

                                       22