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, 1999

                                       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:
                                                  None
           Securities registered pursuant to Section 12(g) of the Act:
                                         Common Stock, $1.00 par value

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 29, 1999 was  $4,090,492  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 29,  1999 was
759,632.


                                       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.  811-5103)  AND IN
"MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF FINANCIAL  CONDITION  AND RESULTS OF
OPERATIONS."  READERS  ARE  CAUTIONED  NOT  TO  PLACE  UNDO  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>

<TABLE>


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


Balance Sheets
<CAPTION>

--------------------------------------------------------------------------------------------------------------------------
                                                                                               March 31,       December 31,
                                                                                                 1999             1998
                                                                                            (unaudited)
--------------------------------------------------------------------------------------------------------------------------

ASSETS

<S>                                                                                             <C>            <C>
Marketable investment securities, at market value (cost: March 31,
    1999 - $275,141; December 31, 1998 - $412,048) (Note 2)                                     $ 1,109,079    $   699,704
Investments, at fair value (cost: March 31,1999 - $3,236,000;
    December 31, 1998 - $3,063,181)  (Note 2)
         e.com Captial Corp (Note 6)                                                                387,500              -
         Other investments                                                                        4,484,630      4,425,602
                                                                                                 ----------      ---------

                                                                                                  4,872,130      4,425,602
                                                                                                 ----------      ---------

Cash and cash equivalents                                                                           949,853      1,100,373
Accrued interest and accounts receivable                                                            108,161        179,179
Other assets                                                                                        167,019        143,838
                                                                                                   --------        -------

                                                                                                $ 7,206,242    $ 6,548,696
                                                                                                ===========    =========== 
TOTAL ASSETS


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

LIABILITIES AND NET ASSETS

LIABILITIES

Accounts payable and accrued liabilities                                                        $   173,747    $   233,143

TOTAL LIABILITIES                                                                                   173,747        233,143
                                                                                                   --------        -------

Commitments and contingencies (Note 5)

NET ASSETS

Common stock, $1 par value: 2,000,000 shares authorized;
    1,003,986 shares issued: 759,632 and 750,686 shares outstanding
    at March 31,1999 and December 31, 1998, respectively (Note 7)                                 1,003,986      1,003,986
Paid-in capital                                                                                   9,001,370      8,997,877
Unrealized appreciation of investments,
    net of deferred income taxes (Notes 2 and 3)                                                  2,470,068      1,650,077
Accumulated deficit                                                                              (3,393,888)    (3,169,229)
                                                                                                -----------    -----------

                                                                                                  9,081,535      8,482,711
Deduct: 244,354 and 253,300 shares of common stock held in treasury,
    at cost, at March 31, 1999 and December 31, 1998, respectively (Note 4)                      (2,049,041)    (2,167,158)
                                                                                                -----------    -----------

Net assets, equivalent to $9.26 per share at March 31, 1999
      and $8.41 per share at December 31, 1998                                                    7,032,494      6,315,553
                                                                                                 ----------      ---------

TOTAL LIABILITIES AND NET ASSETS                                                                $ 7,206,242    $ 6,548,696
                                                                                                ===========    =========== 

--------------------------------------------------------------------------------------------------------------------------
</TABLE>

    The accompanying notes are an integral part of these financial statements


                                       4
<PAGE>

<TABLE>


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

 Statements of Operations
(unaudited)
-------------------------------------------------------------------------------------------
<CAPTION>


For the Three Months Ended March 31,                                      1999         1998
-------------------------------------------------------------------------------------------

INVESTMENT INCOME
<S>                                                                  <C>          <C>      
    Income from controlled affiliates  (Note 6)                      $       0    $ 102,758
    Dividend income                                                     10,500       76,915
    Interest income                                                      8,580        1,162
                                                                        ------        -----

                                                                        19,080      180,835
                                                                       -------      -------

EXPENSES
    Salaries and employee benefits                                     196,060      214,729
    Professional fees                                                   54,500       20,824
    Appraisal fees                                                      10,000            -
    Rent  (Note 5)                                                      19,869       28,473
    Insurance                                                           10,106       10,731
    Directors' fees                                                     12,000       11,250
    Taxes other than income taxes                                       15,898       18,333
    Newswire and promotion                                               2,500        2,975
    Depreciation and amortization                                        5,600        9,575
    General and administrative                                          37,907       50,208
                                                                       -------       ------

                                                                       364,442      367,098
                                                                     ---------    ---------

Net investment loss from operations                                   (345,362)    (186,263)

Net realized gain on portfolio of investments                          120,703      290,563

(Provision) for income taxes  (Note 3)                                       -       (2,400)
                                                                     ---------    ---------

Net realized (loss) income                                            (224,659)     101,900

Increase (decrease) in unrealized appreciation of investments, net
    of deferred income taxes                                           819,990     (316,838)
                                                                     ---------    ---------

Net increase (decrease) in net assets from operations                $ 595,331    ($214,938)
                                                                     =========    =========

Net increase (decrease) in net assets per common share               $    0.78    ($   0.27)
                                                                     =========    =========

Weighted average number of common shares outstanding                   760,880      801,198
                                                                     =========    =========

----------------------------------------------------------------------------------------------------------------
</TABLE>

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


                                       5
<PAGE>

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


Statements of Cash Flows
(unaudited)
--------------------------------------------------------------------------------------------------------------------
<CAPTION>

For the Three Months Ended March 31,                                                    1999               1998
--------------------------------------------------------------------------------------------------------------------
<S>                                                                                     <C>               <C>       

Cash flows from operating activities:
  Net increase (decrease) in net assets from operations                                 595,331           ($214,938)
  Adjustments to reconcile net increase (decrease) in net assets to net
    cash used in operating activities:
      Depreciation and amortization                                                       5,600               9,575
      (Increase) decrease in unrealized appreciation of investments                    (819,990)            316,838
      Amortization of discount on note receivable from Avery                                  -             (54,755)
      Net realized gain on portfolio of investments                                    (120,703)           (290,563)

      Changes in operating assets and liabilities:
        Decrease (increase) in accrued interest and accounts receivable                  71,018             (15,503)
        (Increase) in other assets                                                      (28,781)            (26,628)
        (Decrease) increase in accounts payable and accrued liabilities                 (59,395)              7,440
                                                                                        --------           --------

          Total adjustments                                                            (952,250)            (53,596)
                                                                                       ---------           ---------

          Net cash used in operating activities                                        (356,920)           (268,534)
                                                                                       ---------           ---------

Cash flows from investing activities:
  Return of capital from investments                                                          -             293,556
  Investment in controlled affiliate                                                   (212,500)                  -
  Proceeds from sale of marketable investment securities, net of expenses               629,329              28,511
  Purchases of marketable investment securities                                        (157,038)            (45,954)
                                                                                       ---------          ----------

          Net cash used in (provided by) investing activities                           259,791             276,113
                                                                                       ---------          ---------

Cash flows from financing activities:
  Purchase of treasury stock                                                            (53,390)                  -
                                                                                        --------          ---------

          Net cash used in financing activities                                         (53,390)                  -
                                                                                        --------          ---------

Net (decrease) increase in cash and cash equivalents                                   (150,520)              7,579

Cash and cash equivalents at beginning of period                                      1,100,373             348,900
                                                                                      ---------           ---------

Cash and cash equivalents at end of period                                             $949,853            $356,479
                                                                                      =========           ========= 


--------------------------------------------------------------------------------------------------------------------
</TABLE>

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



                                       6
<PAGE>

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


Statements of Changes in Net Assets
(unaudited)
----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
                                                                          
                                                                          
For the Three Months Ended March 31,                                              1999           1998
-----------------------------------------------------------------------------------------------------
<S>                                                                        <C>            <C>         
                                                                          
Increase (decrease) in net assets from operations:                        
   Net investment loss                                                     ($  345,362)   ($  186,263)
   Net realized gain on portfolio of investments,                         
       net of income taxes                                                     120,703        288,163
   Increase (decrease) in unrealized appreciation of investments,         
       net of deferred income taxes                                            819,990       (316,838)
                                                                           -----------      ---------
                                                                          
       Net increase (decrease) in net assets from operations                   595,331       (214,938)
                                                                           -----------    ----------
                                                                          
Capital stock transactions:                                               
   Issuance of stock from treasury                                             171,508              -
   Additional paid in capital due to issuance of stock from treasury             3,493              -
   Purchase of treasury stock                                                  (53,390)             -
                                                                           -----------    -----------
                                                                          
       Total increase (decrease) in net assets                                 716,941       (214,938)
                                                                           -----------    -----------
                                                                          
                                                                          
Net assets at beginning of period                                            6,315,553      7,343,132
                                                                           -----------    -----------
                                                                          
                                                                          
Net assets at end of period                                                $ 7,032,494    $ 7,128,194
                                                                           ===========    ===========
                                                                          
                                                                          
----------------------------------------------------------------------------------------------------------------------------
</TABLE>
                                                                      
   The accompanying notes are an integral part of these financial statements.


                                       7
<PAGE>

<TABLE>
                          FRANKLIN CAPITAL CORPORATION
====================================================================================================================================
<CAPTION>
<S>                                                                                          <C>              <C>         <C>
Portfolio of Investments
(unaudited)

Marketable Investment Securities
------------------------------------------------------------------------------------------------------------------------------------
                                                                                             Number of
                                                                                             Shares or                        Market
                                                                                             Principal                         Value
March 31, 1999                                                                               Amount ($)        Cost         (Note 2)
------------------------------------------------------------------------------------------------------------------------------------
Communication Intelligence Corp. - common stock ................................             550,000          $231,687    $1,065,625
Certificate of Deposit - 4.65%, due 05/04/99 ...................................                                43,454        43,454
                                                                                                              --------    ----------
     Total Marketable Investment Securities (18.5% of total investments 
          and 15.8% of net assets) .............................................                              $275,141    $1,109,079
                                                                                                              =========   ==========
------------------------------------------------------------------------------------------------------------------------------------
Investments, at Fair Value
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                           Directors
                                                                                               Equity                      Valuation
March 31, 1999                                                         Investment             Interest         Cost         (Note 2)
------------------------------------------------------------------------------------------------------------------------------------

Controlled Affiliates

  e.com Capital Corp (6.5% of total investments
  and 5.5% of net assets......................................         Common stock              100%          $387,500     $387,500


Other Investments

  Avery Communications Inc....................................         Common stock                         $ 1,481,482
   (Telecommunications)

  Avery Communications Inc....................................    Convertible preferred
   (Telecommunications)                                             stock - Series E;
                                                                   12.0% dividend rate                          350,000
                                                                                                            -----------

Total Avery Communications                                                                     12.90%         1,831,482    3,380,013
                                                                                       (fully diluted basis)------------  ----------

  Seneca Limited Partnership..................................     Limited partnership         0.80%             500,000     548,040
   (Investment limited partnership)                                     interest

  Codman Research Inc.........................................        Common stock             2.75%             400,031     254,488
   (Healthcare information systems)

  CIC Standby Ventures, L.P. .................................     Limited partnership         1.80%              66,987     252,089
   (Computer handwriting systems)                                       interest

  GoAmerica Corp..............................................        Common stock             0.50%              50,000      50,000
    (Internet Software)                                                                                       ----------  ----------


Total Other Investments (75.0% of total investments and 63.8% of net assets)............................       2,848,500   4,484,630
                                                                                                              ----------  ----------

     Total Investments..................................................................................      $3,236,000  $4,872,130
                                                                                                              ==========  ==========



   The accompanying notes are an integral part of these financial statements.
</TABLE>


                                       8
<PAGE>

Franklin Capital Corporation
Notes to Financial Statements
March 31, 1999

1. ORGANIZATION

Franklin  Capital   Corporation   (formerly  The  Franklin  Holding  Corporation
(Delaware))  ("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

Principles of Consolidation

The Corporation,  as a closed-end  investment  company registered under the Act,
does not consolidate its non-investment company subsidiaries.

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 years ended March 31, 1999, and 1998
and paid no income taxes during the three months ended March 31, 1999, and 1998,
respectively.

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.  (See Note 6 - Transactions
with Controlled Affiliates)

At March 31, 1999 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.  



                                       9
<PAGE>

Franklin Capital Corporation
Notes to Financial Statements (continued)

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 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  has adopted  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

Net  increase  (decrease)  in net  assets  per  common  share is based  upon the
weighted  average number of shares of common stock  outstanding.  See Note 7 for
discussion of Stock Option Plans.

3.  INCOME TAXES

At December 31, 1998,  Franklin had a net operating loss carryforward for income
tax purposes of approximately $3,315,000 that will begin to expire in 2011. At a
43%  effective  tax rate the  after-tax  net  benefit  from this  loss  would be
approximately $1,425,000.

For the three months ended March 31, 1999, and 1998,  Franklin's tax (provision)
benefit was based on the following:



                                       10
<PAGE>

<TABLE>

Franklin Capital Corporation
Notes to Financial Statements (Continued)
                                                                           1999              1998
                                                                     -----------      ------------
<S>                                                                  <C>              <C>         
Net investment loss from operations.............................     $  (346,362)     $  (186,263)
Net realized gain on portfolio of investments...................         120,703          290,563 
Increase (decrease) in unrealized appreciation..................         819,990         (316,838)
                                                                     -----------      ------------
     Pre-tax book income loss ..................................     $   594,331      $  (212,538)
                                                                     ===========      ============

                                                                           1999              1998 
                                                                     -----------      ------------

Tax (provision) benefit at 34% on $594,331 and
  $(212,538) respectively.......................................     $   202,000      $    72,263
State and local, net of Federal benefit.........................               -           (2,400)
Income applied against net operating loss carryforward..........        (202,000)
Book losses for which no benefit is provided....................               -          (72,263)
                                                                    ------------      -------------
Adjustment to deferred taxes provided in prior periods..........     $         -      $    (2,400)
                                                                    ============      =============
The components of the tax benefit (provision) are as follows:

                                                                           1999              1998 
                                                                    ------------      ------------

Current state and local tax
  provision.....................................................    $          -      $    (2,400) 
                                                                    ------------      ------------
(Provision) benefit for income taxes............................    $          -      $    (2,400) 
                                                                    ============      ============
------------------------------------------------------------------------------------------------------------------------------------
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, 1999 and  December 31,  1998,  significant  deferred tax assets and
liabilities consist of:
------------------------------------------------------------------------------------------------------------------------------------


                                                                         Asset (Liability)
                                                                    ----------------------------
                                                                    March 31,      December 31,
                                                                      1999             1998
                                                                    ----------     -------------

Deferred Federal and state benefit from net operating
  loss carryforward............................................    $   1,223,000      $1,425,000
Deferred Federal and state provision on unrealized
  appreciation of investments..................................      (1,062,000)       (710,000)
Valuation allowance............................................        (161,000)       (715,000)
                                                                   -------------   -------------
  Deferred taxes...............................................    $        -                 - 
                                                                   =============     ===========
</TABLE>

At March 31, 1999,  the  realization  of deferred  tax assets is dependent  upon
future appreciation of the Corporation's investments.


                                       11
<PAGE>

Franklin Capital Corporation
Notes to Financial Statements (Continued)

4.  STOCKHOLDERS' EQUITY

The  Accumulated  Deficit at March 31, 1999 consists of accumulated net realized
gains of $2,976,000 and accumulated investment losses of $6,371,000.

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.  As of December 31, 1998 the Corporation had
purchased  263,300  shares of its  common  stock of which  253,300  remained  in
treasury.  During  the three  months  ended  March  31,  1999,  the  Corporation
purchased  11,100  shares of its common  stock at a total cost of  $53,390.  The
Corporation  issued 20,046 of stock from treasury pursuant to an investment made
by Franklin on January 25,  1999.  (See Note 6 -  Transactions  with  Controlled
Affiliates) To date, Franklin has repurchased 274,400 shares of its common stock
of which 244,354 shares remain in treasury at March 31, 1999.

5.  COMMITMENTS AND CONTINGENCIES

Franklin is  obligated  under an  operating  lease,  which  provides  for annual
minimum rental payments as follows:


December 31,
1999..................................................................  $149,600
2000..................................................................   149,600
2001..................................................................   149,600
2002..................................................................   149,600
2003..................................................................  $149,600
                                                                        --------
                                                                        $748,000
                                                                        ========

Rent expense for the three months ended March 31, 1999, and 1998 was $19,869 and
$28,473,  respectively.  For the three months ended March 31, 1999 and 1998, the
Corporation  collected  rents  of  $15,615  and  $10,250,   respectively,   from
subtenants  for a portion of its  existing  office space which is reflected as a
reduction  in rent  expense  for  that  period.  Of the  amount  collected  from
subtenants  during the three months  ended March 31,  1999,  $6,000 was received
from a  partnership  in which two  officers of Franklin  have a  non-controlling
interest.

The Corporation  brought an action against National Union Fire Insurance Company
of  Pittsburgh,  PA ("National  Union") in the Supreme Court of the State of New
York.  The  action  sought  reimbursement  of $1 million  for fees and  expenses
incurred in  connection  with certain  shareholder  litigation  brought  against
Franklin  and its  directors.  National  Union  filed a motion  to  dismiss  the
complaint,  which was granted by the Court on November  24,  1998.  Franklin has
filed an appeal of the dismissal with the New York State Supreme Court Appellate
Division.  Both  sides  have  submitted  briefs  to the  Court,  and the case is
currently pending.


                                       12
<PAGE>

Franklin Capital Corporation
Notes to Financial Statements (Continued)


6. TRANSACTIONS WITH CONTROLLED AFFILIATES

In January 1999, Franklin formed e.com Capital Corporation  ("e.com"),  a wholly
owned subsidiary of Franklin,  for the purposes of investing in internet related
ventures.  On  January  25,  1999,  e.com  invested  a total  of  $387,500  into
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  for  320,000  shares  of
Preferred  Stock which is convertible  into a 50% equity  interest in eMattress.
eMattress  is a retail  internet  mattress  company  that was  founded  in 1998.
eMattress   can  be  found  on  the  World  Wide  Web  at  the  domain   address
www.emattress.com.  eMattress became  operational and its website went online in
March 1999.  Two  officers of Franklin  were elected to serve on the five member
eMattress Board of Directors.

In August  1995,  Franklin  made an  initial  investment  of  $350,000  in Avery
Communications  Inc.  ("Avery"),  a holding  company  in the  telecommunications
industry.  This investment  consisted of a one year 12% note with warrants and a
conversion option. On June 30, 1996, Franklin exercised its warrants to purchase
158,333  shares of Avery common  stock at $0.10 per share and in November  1996,
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.

On May 30, 1997, Franklin made an additional  investment of $2,500,000 in Avery.
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 common stock at $1.50 per share. These warrants
expire in five years from the date of issuance. The remainder of the investment,
$1,500,000,  purchased 7.5 equity units in Avery.  Each unit consists of 133,333
shares of common stock of Avery and 200,000  shares of preferred  Series D stock
which are convertible to 100,000 shares of common stock. The shares of preferred
Series D stock earn 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 that the  Corporation  held
previously,  resulted in Franklin owning in excess of 25% of Avery's outstanding
voting stock on a primary basis.  Additionally,  three officers of Franklin were
appointed  to  Avery's  six  person  Board of  Directors  and the  Corporation's
Chairman  and Chief  Executive  Officer was  appointed  as the Vice  Chairman of
Avery's Board of Directors.

On July 6, 1998,  Franklin sold the 1,500,000 shares of Avery preferred Series D
stock and the  $1,000,000  Avery note along with  280,000  warrants  to purchase
Avery 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.  Franklin
realized a net gain of $935,297 as a result of this sale.  In  conjunction  with
this  transaction,  Franklin's  representation on Avery's Board of Directors was
reduced from three directors to two.

On July 13, 1998,  Franklin  entered into a cashless  exercise of its  remaining
warrants to purchase  386,667  shares of Avery  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 common stock.


                                       13
<PAGE>

Franklin Capital Corporation
Notes to Financial Statements (Continued)


As a result of the July 6 transaction, Avery is no longer a controlled affiliate
of Franklin. At March 31, 1999, Franklin owned 12.9% of Avery on a fully diluted
basis.

7. EMPLOYEE BENEFIT PLANS

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.

The SIP is administered by the Corporation's  Board of Directors.  The Board has
the authority, among other rights, to select the participants to whom awards may
be granted,  determine  the types of awards to be  granted,  and  determine  the
vesting terms and other  conditions of an award to an SIP  participant.  The SIP
permits the  Committee to grant  participants  options to purchase  Common Stock
(including  incentive  stock  options  within the  meaning of Section 422 of the
Internal Revenue Code ("ISOs") or "non-statutory  stock options"  ("non-ISOs")),
stock appreciation rights, restricted stock and tax offset bonuses.

The SOP is also  administered  by the Board of  Directors.  Only non-ISOs can be
granted under the SOP. Because the issuance of options to "outside" directors is
not permitted under the Act without an exemptive  order by the  Commission,  the
issuance  of options  under the SOP is  conditioned  upon the  granting  of such
order. The Corporation has applied for such relief and will not issue options to
"outside"  directors  until obtaining such exemptive  relief.  In the event such
relief is not granted, no "outside" directors will be issued options pursuant to
the SOP.

On January 27, 1998,  45,000 options were granted to three eligible  officers of
the  Corporation  under the SIP.  The strike  price of the options was $7.00 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 December  31,  1998,  one of the  eligible
officers  resigned from the  Corporation  and forfeited  10,000  options.  These
10,000 options were reissued on March 18, 1999 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
that date.  These  options  will expire as  originally  issued.  One-half of the
reissued options vested immediately, and one-half will vest 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 ("FASB 123"), is as follows:

Net realized gain:
As reported                      $594,331
Pro forma                        $581,506

                                       14
<PAGE>

Net increase in net assets per common share:
As reported                         $0.78
Pro forma                           $0.76

Net Asset Value per share:
As reported                         $9.26
Pro forma                           $9.23
Pro forma - fully diluted           $9.23

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 weighted average
assumptions:

            Stock volatility                         29.0%
            Risk-free interest rate                   5.5%
            Option term in years                        4
            Stock dividend yield                        -

A summary of the status of the Stock  Option Plans at March 31, 1999 and changes
during the three months then ended follows:

                                                                      Weighted
                                                                      Average
                                                                      Exercise
                                                       Shares          Price
                                                    ------------     -----------
Outstanding at beginning of
    period                                             35,000           $7.000
Granted                                                10,000           $5.750
Exercised                                              -                -
Forfeited                                              -                -
Expired                                                -                -
Outstanding at end of period                           45,000          $6.722
Exercisable at end of period                           30,000          $6.792
Weighted average fair value 
   of options granted                                   $2.25

The  exercise  price for the options  issued on January 27, 1998 is $7.00 with a
remaining  contractual  life of 8.8 years.  The  exercise  price for the options
issued on March  18,  1999 is $5.75  with a  remaining  contractual  life of 8.8
years.

8.  PURCHASES AND SALES OF INVESTMENT SECURITIES

The  cost of  purchases  and  proceeds  from  sales  of  investment  securities,
including  the issuance of treasury  stock as discussed in Note 6 and  excluding
short term investments,  aggregated $544,538 and $629,329 respectively,  for the
three months ended March 31, 1999;  $45,954 and $322,067  respectively,  for the
three months ended March 31, 1998.


                                       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,
$7,206,242 and $7,032,494 at March 31, 1999 versus  $6,548,696 and $6,315,553 at
December  31,1998.  Net asset value per share was $9.26 at March 31, 1999 versus
$8.41 at December 31, 1998.

           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, 1999      December 31, 1998
                                        --------------      -----------------

Investments, at cost                     $ 3,511,141         $ 3,475,229
Unrealized appreciation, net of
   deferred taxes                          2,470,068           1,650,077
                                         -----------         -----------
Investments, at fair value               $ 5,981,209         $ 5,125,306
                                         ===========         ===========

Investments

           The  Corporation  made an  investment  on January  25,  1999 in e.com
Capital  Corporation  ("e.com")  valued at  $387,500  at March 31,  1999,  which
represents  5.4% of total  assets and 5.5% of its net assets.  e.com is a wholly
owned  subsidiary of Franklin,  which was formed to make investments in internet
related ventures.  The directors and officers of e.com are officers of Franklin.
On January 25, 1999, e.com invested a total of $387,500 into  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 for 320,000 shares of Preferred Stock which is
convertible  into a 50% equity  interest  in  eMattress.  eMattress  is a retail
internet company that was founded in 1998.  eMattress sells mattresses,  futons,
bed frames,  mattress  pads and  pillows.  eMattress  is the only  transactional


                                       16
<PAGE>

internet  retailer to sell name brand  mattresses  nationally.  eMattress can be
found on the World Wide Web at the domain address www.emattress.com.

           The Corporation has an investment in Avery Communication  Corporation
("Avery")  valued at $3,380,013 at March 31, 1999, which represents 46.9% of the
Corporation's  total  assets  and  48.1% of its net  assets.  Avery is a holding
corporation operating in the  telecommunications  industry.  Its common stock is
quoted on the OTC Electronic  Bulletin  Board under the symbol "ATEX".  On March
29, 1999,  Avery  announced  that it had signed an  agreement to acquire  Primal
Systems,  Inc.  ("Primal").  Primal has  developed a suite of  Decision  Support
applications,  known  as  Outfront(TM),  that can  assist  telecom  carriers  in
reducing  customer  churn,  decreasing  marketing  costs,  and guarding  against
subscription  fraud.  Primal  also  has  expertise  in  Internet   applications,
including  Electronic  Bill  Presentment  and Payment.  Avery's other  operating
subsidiary is Hold Billing Services ("HBS"). HBS provides billing and collection
services for inter-exchange carriers and long-distance resellers.

           Franklin's  original  investment  in  Avery of  $350,000  was made in
August 1995, and an additional  investment of $2.5 million was made in May 1997.
On July 6, 1998,  Franklin sold certain Avery  securities to the Thurston Group,
Inc.  for  $2.5  million,  which  resulted  in a gain  of  $935,297.  Franklin's
remaining shares represent more than 17.5% of Avery's  outstanding  voting stock
on a primary  share  basis.  Additionally,  two  officers of  Franklin  serve on
Avery's eight member Board of Directors.

           At  March  31,  1999,   the   Corporation   held  550,000  shares  of
Communications   Intelligence   Corporation   ("CIC")  common  stock  valued  at
$1,065,625 and had an investment in CIC Standby Ventures,  L.P. ("CIC Ventures")
valued at $252,089.  In 1995, the Corporation made an original investment in CIC
Ventures of $66,987. The managing partner of CIC Ventures is 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.  CIC develops,  markets,  and licenses  software products
based  on  proprietary   handwriting   recognition   technologies.   CIC's  core
technologies include multilingual  handwriting recognition and dynamic signature
verification software.  CIC's products are designed to increase the ease of use,
functionality, and security of electronic devices ranging from PC peripherals to
smart  cellular  phones.  Its common  stock is quoted on NASDAQ under the symbol
"CICI".  At  March  31,  1999,  the  total  investment  in CIC and CIC  Ventures
represents 18.3% of the Corporation's total assets and 18.7% of its net assets.

           At March 31, 1999,  the  Corporation  had an investment in the Seneca
Capital,  L.P.  ("Seneca"),  an investment  partnership whose primary investment
objective is to invest in securities  which value will be meaningfully  affected
by an  anticipated  event.  Seneca invests  primarily in publicly  traded equity
securities  of U.S.  companies  and, to control  market  risks,  utilizes  short
positions,  index  options  and other  hedging  techniques.  Franklin is a 0.90%
limited partner. The Corporation's original investment of $500,000 made in April
1996 is valued at $548,040,  which is net of a profit  distribution  of $350,000
received by Franklin during the year ended December 31, 1998. At March 31, 1999,
Seneca  represents  7.6% of the  Corporation's  total assets and 7.8% of its net
assets.



                                       17
<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 $19,080 and
$180,835 for the three months ended March 31, 1999 and 1998,  respectively.  The
decrease in interest  and  dividend  income for the three months ended March 31,
1999 when  compared to March 31, 1998,  was  primarily the result of the sale in
July 1998 of both Series D preferred  stock and a $1,000,000  note that had been
received in connection with the Corporation's investment in Avery.

           Operating  expenses  were  $364,442 and $367,098 for the three months
ended March 31, 1999 and 1998, respectively. Most of the Corporation's operating
expenses  are related to employee  and  director  compensation,  office and rent
expenses and professional fees (primarily general legal and audit fees).

           Net investment  losses from operations were $345,362 and $186,263 for
the three months ended March 31, 1999 and 1998, 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,  1999  and  1998,   the
Corporation  realized  net  gains  before  taxes  of  $120,703,   and  $290,563,
respectively, from the disposition of various investments.

Unrealized Appreciation of Investments:

           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.

           Unrealized  appreciation  of  investments,  net  of  deferred  taxes,
decreased by $316,838  during the three  months ended March 31, 1998,  primarily
due to the realization of the gains from the  distributions  from Seneca and CIC
Ventures and income  realized  from the  amortization  of the note discount from
Avery.  These were partially offset by an increased value for the FMA High Yield
Income L.P.


                                       18
<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,  1999 was  $2,167,093  compared to
$1,979,256 at December 31, 1998. Management believes that these assets, together
with its investment in Seneca, provide the Corporation with sufficient liquidity
for its  operations.  Funds from Seneca may be  withdrawn  upon 30 days  written
notice to the general partner.

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.

           The  Corporation's  Year  2000  issues  and  any  potential  business
interruptions, costs, damages, or losses related thereto are primarily dependent
upon the Year 2000 compliance of third parties. The Corporation's suppliers that
provide mission-critical  services are primarily large companies,  such as local
and long distance telephone service providers, banks, and utility companies. The
Corporation  has no reason to believe that these suppliers will not be Year 2000
compliant.  However,  the  Corporation  is in the process of reviewing its third
party relationships in order to assess and address Year 2000 issues with respect
to these third parties.

           The  Corporation  believes that the Year 2000 problem may be material
to its investments.  The Corporation has received  assurances from the companies
that it  invests  in that they are  addressing  the Year  2000  issue and do not
expect any material events to affect their business operations.

           There can be no assurance that the Year 2000 problem will be properly
or  timely  resolved,  which  could  have  a  material  adverse  effect  on  the
Corporation's  results  of  operations.  The  Corporation  intends  to develop a
contingency  plan to be able to react  to any Year  2000  problems  should  they
arise.


                                       19
<PAGE>


           The costs  associated with Year 2000 compliance have been nominal and
the  Corporation  believes that the remaining costs will be minimal and will not
have a  material  adverse  effect  on 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,  1999.  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.

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
                None

Item 5.    Other Information
                On January 27, 1999, Hiram M. Lazar was named Chief Financial 
                Officer of Franklin.

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 21.

           (b)  Reports on Form 8-K. The Company did not file any reports 
                on Form 8-K during the first quarter of 1999.

                                    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 3, 1999                            By: /s/HIRAM M. LAZAR
                                                 ---------------------------
                                                 Hiram M. Lazar
                                                 Chief Financial Officer


                                       20
<PAGE>

                                  EXHIBIT INDEX


None.

                                       21