Firm recasts to offer surgical sponge tracking technology.

FROM hedge fund to health care.

That's where Santa Monica hedge fund operator Milton "Todd Ault finds himself now that he has taken over as chairman and chief executive of Franklin Capital Corp., which is making itself over as a surgical safety business.

Ault's investment company, Ault Glazer & Co. Investment Management LLC, purchased a 48 percent stake in Amex-traded Franklin Capital last year and this month Franklin spent $4 million to purchase a startup that promises to eliminate the problem of surgical sponges left behind in patients' bodies.

SurgiCount Medical Inc. has developed a system that uses a scanning device to help track sponges during and after surgery. A leading Harvard University researcher on surgical safety is helping refine the technology.

"This is a serious issue. We make it impossible for the nurse, scrub tech and circulating nurse not to mess up the sponge count," said Ault, who is still running the fund.

The company envisions providing the scanning device free to hospitals in exchange for having them buy sponges from the company--a classic razor and blade business model in a lucrative $650 million annual market.

Ault, who is selling off Franklin's existing businesses, including a stake in a radio network, claims the system will add only $4 to the cost of a surgery.

Franklin's stock has gained since Ault took a position in the company in May and took over in late October. Shares closed at $17.95 on Feb. 15, up from just over $1 a share in April 2004.

The company will ask shareholders at its March 25 meeting to change its name to Patient Safety Technologies Inc.