SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    Form 10-Q

(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, 2002_

                                       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  number  of  shares  of  common  stock  outstanding  as of May 13,  2002 was
1,071,900.

                                       1
<PAGE>


                                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
                  Critical Accounting Policies
                  Statement of Operations
                  Financial Condition
                  Proposed Merger with Change Technology Partners, Inc.
                  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

                           FORWARD LOOKING STATEMENTS

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. 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 "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

--------------------------------------------------------------------------------
                                                        March 31,   December 31,
                                                          2002          2001
                                                       (unaudited)
--------------------------------------------------------------------------------

ASSETS

Marketable investment securities, at market value
  (cost: March 31, 2002 - $57,660;
  December 31, 2001 - $34,675)  (Note 2)               $   62,175    $   34,675
Investments, at fair value
  (cost: March 31, 2002 - $3,757,830;
  December 31, 2001 - $3,876,430)  (Note 2)
    Excelsior Radio Networks, Inc.                      2,250,000     2,325,000
    Other investments                                   1,358,915     1,369,197
                                                       ----------    ----------
                                                        3,608,915     3,694,197
                                                       ----------    ----------

Cash and cash equivalents (Note 2)                        116,737       279,728
Other assets                                               99,937        90,266
                                                       ----------    ----------

TOTAL ASSETS                                           $3,887,764    $4,098,866
                                                       ==========    ==========

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

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES

Notes payable                                          $1,000,000    $1,000,000
Accounts payable and accrued liabilities                  234,922       177,121
                                                       ----------    ----------

TOTAL LIABILITIES                                       1,234,922     1,177,121
                                                       ----------    ----------

Commitments and contingencies  (Note 5)

STOCKHOLDERS' EQUITY

Convertible preferred stock, $1 par value,
  cumulative 7% dividend: 5,000,000 shares
  authorized; 16,450 shares issued and outstanding
  at March 31, 2002 and December 31, 2001
  (Liquidation preference $1,645,000) (Note 4)             16,450        16,450

Common stock, $1 par value: 5,000,000 shares
  authorized; 1,505,888 shares issued:
  1,074,700 shares outstanding at March 31, 2002
  and at December 31, 2001 (Note 7)                     1,505,888     1,505,888
Paid-in capital - common stock                         10,271,610    10,271,610
Unrealized depreciation of investments
  (Notes 2 and 3)                                        (144,400)     (182,233)
Accumulated deficit                                    (6,477,350)   (6,170,614)
                                                       ----------    ----------

                                                        5,172,198     5,441,101
Deduct common stock held in treasury, at cost,
  431,188 shares at March 31, 2002, and at
  December 31, 2001 (Note 4)                           (2,519,356)   (2,519,356)
                                                       ----------    ----------

  Net assets (Note 9 for per share information)         2,652,842     2,921,745
                                                       ----------    ----------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY             $3,887,764    $4,098,866
                                                       ==========    ==========

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

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

                                       4
<PAGE>


                          FRANKLIN CAPITAL CORPORATION
================================================================================
 Statements of Operations
(unaudited)
--------------------------------------------------------------------------------

For the Three Months Ended March 31,                        2002           2001
--------------------------------------------------------------------------------

INVESTMENT INCOME
  Dividend income                                     $       --    $    26,744
  Interest income                                          1,549         15,813
  Management fees                                         90,000             --
                                                      ----------    -----------

                                                          91,549         42,557
                                                      ----------    -----------

EXPENSES
  Salaries and employee benefits (Note 7)                181,776        252,190
  Professional fees                                       35,925         41,325
  Rent  (Note 5)                                          35,154         29,784
  Insurance                                               11,148         10,600
  Directors' fees                                            500         18,500
  Taxes other than income taxes                           18,896         20,754
  Newswire and promotion                                   1,000          1,000
  Depreciation and amortization                            4,243          4,998
  Interest expense                                         8,850           --
  General and administrative                              48,498         53,503
                                                      ----------    -----------

                                                         345,990        432,654
                                                      ----------    -----------

Net investment loss from operations                     (254,441)      (390,097)

Net realized (loss) gain on portfolio
  of investments:
  Investment securities:
    Affiliated                                                --        137,757
    Unaffiliated                                         (23,507)        87,287
                                                      ----------    -----------
  Total investment securities                            (23,507)       225,044

Net realized (loss) gain on portfolio
  of investments                                         (23,507)       225,044
                                                      ----------    -----------

Provision for current income taxes                            --         10,532
                                                      ----------    -----------

Net realized loss                                       (277,948)      (175,585)

Increase (decrease) in unrealized appreciation
  of investments:
  Investment securities:
    Affiliated                                              --          419,699
    Unaffiliated                                          37,833     (1,397,280)
                                                      ----------    -----------
  Total investment securities                             37,833       (977,581)
                                                      ----------    -----------

Increase (decrease) in unrealized appreciation
  of investments                                          37,833       (977,581)
                                                      ----------    -----------

Net decrease in net assets from operations              (240,115)    (1,153,166)
                                                      ----------    -----------

Preferred dividends                                       28,788         28,787
                                                      ----------    -----------

Net decrease in net assets attributable to
  common stockholders                                 ($ 268,903)   ($1,181,953)
                                                      ==========    ===========

Basic and diluted net decrease attributable to
  common stockholders per share (Note 8)                  ($0.25)        ($1.08)
                                                           =====          =====

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

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

                                       5
<PAGE>


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

Statements of Cash Flows
(unaudited)
--------------------------------------------------------------------------------

For the Three Months Ended March 31,                      2002           2001
--------------------------------------------------------------------------------

Cash flows from operating activities:
  Net decrease in net assets from operations          ($ 240,115)   ($1,153,166)
  Adjustments to reconcile net decrease in net
    assets to net cash used in operating activities:
    Depreciation and amortization                          4,243          4,998
    (Increase) decrease in unrealized appreciation
      of investments                                     (37,833)       977,581
    Net realized loss (gain) on portfolio of
      investments, net of current income taxes            23,507       (214,520)

    Changes in operating assets and liabilities:
      Increase in other assets                           (13,914)        (1,347)
      Increase (decrease) in accounts payable
        and accrued liabilities                           57,801       (119,070)
                                                      ----------    -----------
        Total adjustments                                 33,804        647,642
                                                      ----------    -----------

          Net cash used in operating activities         (206,311)      (505,524)

Cash flows from investing activities:
  Proceeds from sale of affiliates                          --        1,519,421
  Proceeds from sale of other investments                 20,093        114,635
  Proceeds from sale of marketable
    investment securities                                   --          221,399
  Loan payments from majority-owned affiliate             75,000           --
  Purchases of other investments                            --          (49,094)
  Purchases of marketable investment securities          (22,985)      (190,634)
                                                      ----------    -----------

          Net cash provided by investing activities       72,108      1,615,727
                                                      ----------    -----------

Cash flows from financing activities:
  Payment of preferred dividends                         (28,788)       (28,787)
  Purchases of treasury stock                               --           (9,659)
                                                      ----------    -----------

          Net cash used in by financing activities       (28,788)       (38,446)
                                                      ----------    -----------

Net (decrease) increase in cash and cash equivalents    (162,991)     1,071,757

Cash and cash equivalents at beginning of period         279,728        647,565
                                                      ----------    -----------

Cash and cash equivalents at end of period            $  116,737    $ 1,719,322
                                                      ==========    ===========

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

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

                                       6
<PAGE>


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

Statements of Changes in Net Assets
(unaudited)
--------------------------------------------------------------------------------

For the Three Months Ended March 31,                        2002           2001
--------------------------------------------------------------------------------

Decrease in net assets from operations:
  Net investment loss                                 ($ 254,441)   ($  390,097)
  Net realized (loss) gain on portfolio of
    investments, net of current income taxes             (23,507)       214,512
  Increase (decrease) in unrealized appreciation
    of investments,                                       37,833       (977,581)
                                                      ----------    -----------

    Net decrease in net assets from operations          (240,115)    (1,153,166)

Capital stock transactions:
  Payment of dividends on preferred stock                (28,788)       (28,787)
  Purchase of treasury stock                                  --         (9,659)
                                                      ----------    -----------

    Total decrease in net assets                        (268,903)    (1,191,612)

Net assets at beginning of period                      2,921,745      5,579,080
                                                      ----------    -----------

Net assets at end of period                           $2,652,842    $ 4,387,468
                                                      ==========    ===========

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

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

                                       7
<PAGE>


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

PORTFOLIO OF INVESTMENTS
------------------------------------------------------------------------------------------------------------------------------------

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

                                                                                             NUMBER OF
                                                                                             SHARES OR                     MARKET
                                                                                             PRINCIPAL                     VALUE
MARCH 31, 2002(2)                                                                            AMOUNT ($)     COST(1)       (NOTE 2)
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                           <C>          <C>            <C>
Communications Intelligence Corporation (Common Stock)                                                        $22,985        $27,500
Certificate of Deposit - 1.21%, due 04/04/2002                                                                 34,675         34,675
                                                                                                           ----------     ----------

  Total Marketable Investment Securities
    (1.7% of total investments and 2.3% of net assets)                                                        $57,660        $62,175
                                                                                                           ==========     ==========
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
INVESTMENTS, AT FAIR VALUE
------------------------------------------------------------------------------------------------------------------------------------
                                                                                             NUMBER OF
                                                                                             SHARES OR                   DIRECTORS'
                                                                               EQUITY        PRINCIPAL                   VALUATION
MARCH 31, 2002 (2)                                          INVESTMENT        INTEREST       AMOUNT ($)    COST(1)        (NOTE 2)
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                        <C>             <C>                <C>          <C>            <C>
MAJORITY OWNED AFFILIATE

Excelsior Radio Networks, Inc.                             Common stock         90.00%        2,250,000    $2,250,000     $2,250,000
Excelsior Radio Networks, Inc.                               Warrants              --            12,879            --             --
Total Excelsior Radio Networks, Inc.                                                                       ----------     ----------
  (61.3% of total investments and 84.8% of net assets)                          50.81%                      2,250,000      2,250,000
    (Radio production and advertising sales)                               (fully diluted)

AFFILIATES

Excom Ventures, LLC
  (0.0% of total investments and 0.0% of net assets)          Units              18.64%         140,000       140,000             --
    (Purchase evaluation software)

OTHER INVESTMENTS

Alacra Corporation
  (27.2% of total investments and 37.7% of net assets)     Convertible            1.68%         321,543     1,000,000      1,000,000
    (Internet-based information provider)                Preferred Stock

Primal Solutions, Inc.
  (0.2% of total investments and 0.3% of net assets)       Common Stock           0.55%         111,438        17,830          8,915
    (Internet-based Voice over IP billing software)

Structured Web, Inc.
  (9.5% of total investments and 13.2% of net assets)      Convertible            3.60%         188,425       350,000        350,000
    (Internet-based application service provider)        Preferred Stock                                    ---------      ---------

Total Other Investments                                                                                     1,367,830      1,358,915
                                                                                                            ---------      ---------

  Investments, at Fair Value                                                                                3,757,830      3,608,915
                                                                                                            =========     =========
</TABLE>

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

(1)  Book cost equals tax cost for all investments

(2)  Total investments refers to investments and marketable investment
     securities.

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

                                       8
<PAGE>


FRANKLIN CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2002

1.   DESCRIPTION OF BUSINESS

Franklin Capital  Corporation  ("Franklin",  or the "Corporation") is a Delaware
corporation  operating  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 making  available  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,  generally may invest in other securities;  however,
such  investments may not exceed 30% of the  Corporation's  total asset value at
the time of any such investment.

The  accompanying  financial  statements  have been  prepared  assuming that the
Corporation  will continue as a going concern.  For the three months ended March
31, 2002 and for the years ended December 31, 2001,  and 2000,  the  Corporation
has  incurred  a net  investment  loss from  operations  of  approximately  $0.3
million,  $1.4 million,  and $2.3 million,  respectively,  a net decrease in net
assets from operations of  approximately  $0.3 million,  $2.4 million,  and $4.4
million,  respectively, and has a working capital deficiency of approximately $1
million at March 31, 2002. (Working capital is defined as total liabilities less
liquid assets.) These conditions raise substantial doubt about the Corporation's
ability to continue  as a going  concern.  The  Corporation  has entered  into a
proposed  merger with Change  Technology  Partners,  Inc.  (see Note 11),  which
management  believes will alleviate the doubt as to whether the Corporation,  as
the  surviving  company  in the  merger,  will be able  to  continue  as a going
concern,  although  there can be no  assurance  in this  regard.  The  merger is
subject  to a number  of  conditions,  however,  and  therefore  there can be no
assurance  that the merger  will be  completed  on or before June 30, 2002 or at
all. If the merger is not completed by June 30, 2002, either party may terminate
the  merger  agreement.  In the event the merger is not  completed,  in order to
alleviate the substantial doubt about the Corporation's ability to continue as a
going concern,  the Corporation would likely seek another merger partner or seek
alternative  financing.  There can be no assurance that the Corporation would be
able  to find a  suitable  merger  partner  or be  able  to  obtain  alternative
financing.  The financial  statements do not include any  adjustments to reflect
the possible  future effects on the  recoverability  of assets or the amounts of
liabilities that may result from the outcome of this uncertainty.

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

USE OF ESTIMATES

The preparation of financial statements in conformity with accounting principles
generally  accepted in the United States  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  such as  money  market  funds  and  commercial  paper  with
maturities  of 90  days or less at the  date  of  their  acquisition  to be cash
equivalents.

The  Corporation  paid no interest or income taxes during the three months ended
March 31, 2002 and 2001.

                                       9
<PAGE>


FRANKLIN CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)


At March  31,  2002 and 2001,  the  Corporation  held cash and cash  equivalents
primarily in money market funds at two commercial banking institutions,  and one
broker/dealer.

VALUATION OF INVESTMENTS

Security  investments which are publicly traded on a national exchange or Nasdaq
Stock  Market  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 in good faith 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 (LOSSES) ON PORTFOLIO OF INVESTMENTS

Amounts  reported as realized  gains  (losses)  are  measured by the  difference
between the  proceeds of sale or exchange  and the cost basis of the  investment
without regard to unrealized gains (losses) reported in the prior periods. Gains
(losses) are considered  realized when sales or  dissolution of investments  are
consummated.

INCOME TAXES

Franklin  does not  qualify  for  pass  through  tax  treatment  as a  Regulated
Investment  Company under  Subchapter M of the Internal  Revenue Code for income
tax purposes. Therefore, the Corporation is taxed under Regulation C.

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.

                                       10
<PAGE>


FRANKLIN CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)


NET INCREASE (DECREASE) IN NET ASSETS ATTRIBUTABLE TO COMMON STOCKHOLDERS
PER SHARE

Net increase  (decrease) in net assets  attributable to common  stockholders per
share is calculated in accordance  with the provisions of Statement of Financial
Accounting Standards No. 128, "Earnings per Share".

RECLASSIFICATION

Certain  amounts in prior  years  have been  reclassified  to  conform  with the
current year presentation.

3.   INCOME TAXES

For the three months ended March 31, 2002 and 2001, Franklin's tax (provision)
benefit was based on the following:

                                                          2002          2001
                                                      -----------   -----------
Net investment loss from operations ................  $  (254,441)  $  (390,097)
Net realized (loss) gain on portfolio
  of investments ...................................     (23,507)       225,044
Increase (decrease) in unrealized appreciation .....       37,833      (977,581)
                                                      -----------   -----------
  Pre-tax book income loss .........................  $  (240,115)  $(1,142,634)
                                                      ===========   ===========


                                                          2002          2001
                                                      -----------   -----------
Tax benefit at 34% on $(240,115) and
  $(1,142,634), respectively .......................  $    82,000   $   388,000
State and local, net of Federal benefit ............           --        15,000
Other ..............................................       (3,000)       (2,000)
Change in valuation allowance ......................      (79,000)     (412,000)
                                                      -----------   -----------
                                                      $        --   $   (11,000)
                                                      ===========   ===========

The components of the tax provision are as follows:

                                                          2002          2001
                                                      -----------   -----------
Current state and local tax provision ..............  $        --   $   (11,000)
Deferred tax expense ...............................           --            --
                                                      -----------   -----------
Provision for income taxes .........................  $        --   $   (11,000)
                                                      ===========   ===========

Deferred  income tax 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, 2002 and  December 31,  2001,  significant  deferred tax assets and
liabilities consist of:

                                                          Asset (Liability)
                                                      -------------------------
                                                       March 31,   December 31,
                                                          2002          2001
                                                      -----------   -----------
Deferred Federal and state benefit from
  net operating loss carryforward ..................  $ 1,998,000   $ 1,905,000
Deferred Federal and state provision on
  unrealized appreciation of investments ...........       52,000        66,000
Valuation allowance ................................   (2,050,000)   (1,971,000)
                                                      -----------   -----------
Deferred taxes .....................................  $        --   $        --
                                                      ===========   ===========

                                       11
<PAGE>


FRANKLIN CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)


At December 31, 2001,  Franklin had net operating loss  carryforwards for income
tax purposes of approximately $5,291,000 that will begin to expire in 2011. At a
36%  effective  tax rate the  after-tax  net  benefit  from this  loss  would be
approximately $1,905,000.

4.   STOCKHOLDERS' EQUITY

The accumulated  deficit at March 31, 2002, consists of accumulated net realized
gains of $4,995,000 and accumulated investment losses of $11,472,000.

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.  During the three months ended March 31, 2002,
Franklin  did not purchase  any shares of its common  stock.  As of December 31,
2001,  the  Corporation  has  repurchased  482,350 shares of its common stock of
which 431,188 shares remain in treasury at March 31, 2002.

5.   COMMITMENTS AND CONTINGENCIES

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

December 31,
2002 .................................................................  $149,600
2003 .................................................................   149,600
                                                                        --------
                                                                        $299,200
                                                                        ========

Rent expense for the three months ended March 31, 2002, and 2001 was $35,154 and
$29,784  respectively.  For the three months ended March 31, 2002 and 2001,  the
Corporation collected rents of $8,000 and $6,000, 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.

On October 15, 2001, Jeffrey A. Leve and Jeffrey Leve Family  Partnership,  L.P.
filed a lawsuit against Franklin,  Sunshine Wireless,  LLC ("Sunshine") and four
other defendants  affiliated with Winstar  Communications,  Inc. in the Superior
Court of the State of  California  for the County of Los  Angeles.  The lawsuit,
which has subsequently  been removed to the United States District Court for the
Central District of California, alleges that the Winstar defendents conspired to
commit fraud and breached  their  fiduciary duty to the plaintiffs in connection
with the  acquisition  of the  plaintiffs'  radio  production  and  distribution
business.  The complaint  further  alleges that Franklin and Sunshine joined the
alleged  conspiracy.  The business was  initially  acquired by certain  entities
affiliated with Winstar  Communications  and,  subsequently,  the assets of such
business were sold to Franklin and Sunshine (see Note 6). Concurrently with such
purchase,  Franklin  transferred  such assets to Excelsior.  The plaintiffs seek
recovery of damages in excess of  $10,000,000,  costs and  attorneys'  fees.  On
January  7, 2002,  Franklin  filed a motion to dismiss  the  lawsuit  or, in the
alternative,  to  transfer  venue to the  United  States  District  Court of the
Southern District of New York. The plaintiffs filed a motion opposing Franklin's
request on January 28,  2002.  Franklin's  motion for  dismissal  was granted on
February 25, 2002, due to improper venue.  The venue has been transferred to New
York. Franklin believes that plaintiffs' claims are without merit and intends to
defend this lawsuit

                                       12
<PAGE>


FRANKLIN CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)


vigorously, though the outcome cannot be predicted at this time. An unfavorable
outcome in this lawsuit may have a material adverse effect on Franklin's
business, financial condition and results of operations.

6.   TRANSACTIONS WITH AFFILIATES

On February  1, 2001,  Franklin  sold to Avery  Communications,  Inc.  ("Avery")
1,183,938  shares of common stock and 350,000 shares of preferred stock of Avery
representing  Franklin's  entire holding in Avery,  for $1,557,617  plus accrued
dividends  on the  preferred  stock  for a  realized  gain  net of  expenses  of
$137,759.  As part of the sale Franklin  retained the right to receive 1,533,938
shares of Primal Solutions,  Inc.  ("Primal") a then wholly-owned  subsidiary of
Avery.  On  February  13,  2001,  Primal  announced  that Avery had  completed a
spin-off  of  Primal  and  Franklin  received  1,533,938  fully  registered  and
marketable shares of Primal.  During the year ended December 31, 2001,  Franklin
sold 1,150,000 shares of Primal for total proceeds of $53,861,  realizing a loss
of $130,139.

On August 28, 2001,  Franklin  along with  Sunshine  Wireless  LLC  ("Sunshine")
purchased the assets of Winstar Radio  Networks,  Global Media and Winstar Radio
Productions  (collectively  "WRN") for a total  purchase price of $6.25 million.
Change Technology Partners,  Inc. ("Change"),  a public company,  provided $2.25
million  of senior  financing  for the deal.  The  acquisition  was  consummated
through eCom Capital Inc.,  subsequently renamed Excelsior Radio Networks,  Inc.
("Excelsior"),  a then  wholly-owned  subsidiary of Franklin.  Franklin's  total
investment was $2.5 million  consisting of $1.5 million in cash and a $1 million
note payable to WRN.  The note is due  February 28, 2002 with  interest at 3.54%
and has a right of set-off against certain  representations  and warranties made
by WRN. In October 2001, a legal  proceeding  was filed against WRN,  which also
named Franklin as a defendant,  in which the representations and warranties made
by WRN have been challenged.  Until the time that this action is settled the due
date of the note is extended  indefinitely (see Note 5). Additionally,  Franklin
provided a $150,000 note receivable to Excelsior.  The note bore interest at 10%
per annum and was issued for a ninety-day  rolling  period.  In connection  with
this note,  Franklin was granted  warrants to acquire 12,879 shares of Excelsior
common  stock at an exercise  price of $1.125 per share.  As of March 31,  2002,
this note has been repaid.  In  contemplation  of the proposed merger  agreement
between  Franklin  and Change  (see Note 11),  Franklin  sold to Change  250,000
shares  of  common  stock  in  Excelsior  for  $250,000.  If the  merger  is not
consummated,   Franklin  is  required  to  repurchase   the  250,000  shares  of
Excelsior's  common  stock for $250,000  plus  interest at an annual rate of 10%
from December 4, 2001 to the date of repurchase. As a result of the transaction,
Franklin now owns 50.8% of Excelsior on a fully  diluted  basis and has 58.2% of
voting control.  In addition,  Franklin has the right to nominate four directors
to Excelsior's seven-person board of directors.

At the  closing,  Franklin  entered  into a services  agreement  with  Excelsior
whereby Franklin will provide Excelsior with certain services.  In consideration
for the services  provided,  for a period of six months  Franklin  would receive
$30,000  per month and be  reimbursed  for all  direct  expenses.  Subsequently,
Franklin's  monthly fee will be  determined  by a majority  of the  non-Franklin
directors;  however, said management fee will be no less than $15,000 per month.
Franklin  will  continue  to be  reimbursed  for all direct  expenses.  Finally,
Franklin's chief financial officer will serve in that capacity for Excelsior and
his salary and benefits will be allocated  between  Excelsior and Franklin on an
80/20  basis.  During the three months  ended March 31,  2002,  Franklin  earned
$90,000 in management  fees and was  reimbursed  $30,234 for salary and benefits
for Franklin's  chief  financial  officer,  which was recorded as a reduction of
expenses on Franklin.

                                       13
<PAGE>


FRANKLIN CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)


7.   STOCK OPTION 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).  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.  Because the issuance of
options  to  "outside"  directors  is not  permitted  under the Act  without  an
exemptive  order by the  Securities  and  Exchange  Commission,  the issuance of
options under the SOP was conditioned upon the granting of such order. The order
was granted by the Commission on January 18, 2000.

Franklin  accounts for the options issued to employees under APB Opinion No. 25,
under  which no  compensation  cost has been  recognized.  Proforma  information
determined  consistent with the fair value method required by FASB Statement No.
123, is as follows for the years ended:

                                                  March 31, 2002  March 31, 2001
                                                  --------------  --------------
Net decrease in net assets attributable
  to common stockholders:
As reported                                         ($268,903)    ($1,181,953)
Pro forma                                           ($270,087)    ($1,191,449)

Basic and diluted net decrease in net assets
  attributable to common stockholders per share:
As reported                                         ($0.25)       ($1.08)
Pro forma                                           ($0.25)       ($1.09)

No options were granted during the three months ended March 31, 2002 and 2001.

The  following  is a summary of the status of the Stock  Option Plans during the
three months ended:

                                         March 31, 2002         March 31, 2001
                                       ------------------     ------------------
                                                 Weighted               Weighted
                                                  Average                Average
                                                 Exercise               Exercise
                                       Shares     Price       Shares     Price
                                       ------     ------      ------     ------
Outstanding at beginning of period     39,375     $11.27      39,375     $11.27

Granted                                    --         --          --         --
Exercised                                  --         --          --         --
Forfeited                                  --         --          --         --
Expired                                    --         --          --         --
                                       ------                 ------
Outstanding at end of period           39,375     $11.27      39,375     $11.27
                                       ======                 ======
Exercisable at end of period           36,875     $11.27      14,375     $10.73
                                       ======                 ======

                                       14
<PAGE>


FRANKLIN CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)


The options issued under the SIP have a remaining contractual life of 6.8 years.
The options issued under the SOP have a remaining contractual life of 7.9 years.

8.   NET DECREASE IN NET ASSETS ATTRIBUTABLE TO COMMON STOCKHOLDERS PER SHARE

The following  table sets forth the  computation  of basic and diluted change in
net assets attributable to common stockholders per share:

                                                              March 31,
                                                      -------------------------
                                                          2002          2001
                                                      -------------------------
Numerator:
    Net decrease in net
      assets from operations                            ($240,115)  ($1,153,166)
    Preferred stock dividends                             (28,788)      (28,787)
                                                      -----------   -----------
    Numerator for basic and diluted earnings
      per share - net decrease in net assets
      attributable to common stockholders               ($268,903)  ($1,181,953)
                                                      ===========   ===========

Denominator:
    Denominator for basic and diluted
      decrease in net assets from operations -
      weighted - average shares                         1,074,700     1,097,166

Basic and diluted net decrease in net
    assets from operations per share                       $(0.25)       $(1.08)
                                                           ======        ======

The  following  securities  have  been  excluded  from the  dilutive  per  share
computation as they are antidilutive:

                                                        Period ended March 31,
                                                      -------------------------
                                                          2002          2001
                                                      -------------------------
Preferred stock convertible into 123,375
    shares of common stock                                123,375       123,375
Stock options                                              39,375        39,375

For additional information on the above securities, see Notes 4 and 7.

9.   NET ASSET VALUE PER SHARE

The  following  table sets forth the  computation  of net asset value per common
share attributable to common stockholders:

                                       15
<PAGE>


FRANKLIN CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)


                                                        March 31,   December 31,
                                                      -------------------------
                                                          2002          2001
                                                      -------------------------
Numerator:
    Numerator for net asset value per
      common share, as if converted basis              $2,652,842    $2,921,745
    Liquidation value of convertible
      preferred stock                                  (1,645,000)   (1,645,000)
                                                      -----------   -----------
    Numerator for net asset value per share
      attributable to common stockholders              $1,007,842    $1,276,745
                                                      ===========   ===========

Denominator:
    Number of common shares outstanding,
      denominator for net asset value per share
      attributable to common stockholders               1,074,700     1,074,700
    Number of shares of common stock to be
      issued upon conversion of preferred stock           123,375       123,375
                                                      -----------   -----------
    Denominator for net asset value per common
      share as if converted basis                       1,198,075     1,198,075
                                                      ===========   ===========

    Net asset value per share attributable
      to common stockholders                                $0.94         $1.19
                                                            =====         =====

    Net asset value per common share,
      as if converted basis                                 $2.21         $2.44
                                                            =====         =====

10.  PURCHASES AND SALES OF INVESTMENT SECURITIES

The cost of purchases and proceeds from sales of investment securities excluding
short-term  investments,  aggregated $22,985 and $95,093  respectively,  for the
three months ended March 31, 2002, and $239,728 and $1,854,632 respectively, for
the three months ended March 31, 2001.

11.  MERGER WITH CHANGE TECHNOLOGY PARTNERS, INC.

On December 4, 2001, Change and Franklin entered into a definitive agreement and
plan of merger  pursuant to which Change will be merged with and into  Franklin.
Under the terms of the  merger  agreement,  Change's  common  stockholders  will
receive one share of Franklin for each 40.985 shares of Change common stock that
they own.  Change's  Series A preferred  stockholders  will receive one share of
Franklin  Series B preferred  stock for each share of Change  Series A preferred
stock they own. As a result of the  merger,  Franklin  will issue  approximately
4,442,000  shares of its common  stock and 645 shares of its Series B  preferred
stock  to  Change  stockholders.   Upon  closing  of  the  transaction,   Change
shareholders  will own approximately 80% of Franklin with the balance being held
by Franklin's current  stockholders.  The boards of both companies have approved
the transaction.

Concurrently  with the execution of the merger  agreement,  the parties  entered
into a stock  purchase  agreement  pursuant to which  Change  agreed to purchase
250,000  shares of common  stock of  Excelsior  from  Franklin  for an aggregate
purchase price of $250,000.  In the event the merger between Franklin and Change
is terminated  pursuant to the terms of the merger agreement,  Franklin shall be
required  to  repurchase  all of

                                       16
<PAGE>


FRANKLIN CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)


such common  stock from Change at a  repurchase  price equal to  $250,000,  plus
interest  thereon at an annual rate of 10% from  December 4, 2001 to the date of
repurchase.

12.  SUBSEQUENT EVENT

     On April 3, 2002, Dial Communications Global Media, Inc. ("Newco"), a newly
formed  wholly-owned  subsidiary of  Excelsior,  a  majority-owned  affiliate of
Franklin,  completed the acquisition of substantially  all of the assets of Dial
Communications Group, Inc. ("DCGI"),  and Dial Communications Group, LLC ("DCGL"
and together with DCGI, the "Dial  Entities")  used in connection  with the Dial
Entities'  business of selling  advertising  relating to radio  programming (the
"Dial  Acquisition").  The Dial Acquisition was completed  pursuant to the Asset
Purchase Agreement (the "Purchase Agreement"), dated as of April 1, 2002, by and
among  the Dial  Entities,  Franklin  and  Excelsior.  Immediately  prior to the
closing of the transactions  contemplated by the Purchase  Agreement,  Excelsior
assigned all of its rights and obligations under the Purchase Agreement, as well
as certain other assets and  liabilities  relating to the portion of Excelsior's
business dedicated to the sale of advertising relating to radio programming,  to
Newco.

     The total purchase price for the Dial Acquisition will be an amount between
$8,880,000 and $13,557,500.  The initial  consideration for the Dial Acquisition
consisted  of  $6,500,000  in cash  and a three  year  promissory  note  bearing
interest  at 4.5%  issued by Newco in favor of DCGL in the  aggregate  principal
amount of $460,000. In addition, the Purchase Agreement provides for the minimum
payment of $1,920,000 of additional consideration,  which is subject to increase
to a maximum amount of $6,597,500  based upon the attainment of certain  revenue
and earnings  objectives in 2002 and 2003. The additional  consideration will be
comprised of both cash and two  additional  promissory  notes issued by Newco in
favor of DCGL,  each with an  initial  aggregate  principal  amount of  $460,000
bearing interest at 4.5% that is subject to increase upon the attainment of such
revenue  and  earnings  objectives.  Each  of the  promissory  notes  issued  in
consideration  of the Dial  Acquisition is convertible into shares of Franklin's
common  stock at a  premium  of 115% to 120% of the  average  closing  prices of
Franklin's  common  stock during a specified  pre and post  closing  measurement
period.  Excelsior  has  paid  to  Franklin  an  amount  equal  to  $300,000  in
consideration  of Franklin's  obligations in connection with any Franklin common
stock that may be issued pursuant to the terms of the Purchase  Agreement or the
promissory notes issued in consideration of the Dial Acquisition. For each share
of common stock  Franklin is required to issue under the  Purchase  Agreement or
the  promissory  notes,  Franklin  will  receive  0.86 shares of common stock in
Excelsior.

     Change and  Sunshine,  both  existing  stockholders  of  Excelsior,  loaned
Excelsior an aggregate amount of $7,000,000 to finance the initial consideration
of the Dial Acquisition.  The obligations under the loans are secured by certain
of Excelsior's assets.

                                       17
<PAGE>


ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

CRITICAL ACCOUNTING POLICIES

     Franklin's  discussion and analysis of its financial  condition and results
of operations are based upon the Corporation's financial statements,  which have
been prepared in accordance with accounting principles generally accepted in the
United  States.  The  preparation  of these  financial  statements  requires the
Corporation to make estimates and judgments that affect the reported  amounts of
assets, liabilities,  revenues and expenses and related disclosure of contingent
assets and  liabilities.  On an ongoing  basis,  the  Corporation  evaluates its
estimates, the most critical of which are those related to the fair value of the
portfolio of investments.

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,
$3,887,764 and $2,652,842 at March 31, 2002, versus $4,098,866 and $2,921,745 at
December 31, 2001. Net asset value per share and on an as if converted basis was
$0.94 and  $2.21,  respectively  at March 31,  2001,  versus  $1.19 and $2.44 at
December 31, 2001.

     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,          DECEMBER 31,
                                                    2002                2001
                                                -----------         -----------
Investments, at cost                            $ 3,815,490         $ 3,911,105
Unrealized depreciation                            (144,400)           (182,233)
                                                -----------         -----------
Investments, at fair value                      $ 3,671,090         $ 3,728,872
                                                ===========         ===========

     The accompanying  financial statements have been prepared assuming that the
Corporation  will continue as a going concern.  For the three months ended March
31, 2002 and for the years ended December 31, 2001,  and 2000,  the  Corporation
has incurred a net investment loss

                                       18
<PAGE>


from operations of  approximately  $0.3 million,  $1.4 million and $2.3 million,
respectively, a net decrease in net assets from operations of approximately $0.3
million, $2.4 million and $4.4 million,  respectively, and has a working capital
deficiency of  approximately  $1,000,000 at December 31, 2001.  These conditions
raise substantial  doubt about the Corporation's  ability to continue as a going
concern.  The  Corporation  has  entered  into a  proposed  merger  with  Change
Technology Partners,  Inc. ("Change"),  which management believes will alleviate
the doubt as to whether the Corporation, as the surviving company in the merger,
will be able to continue as a going concern,  although there can be no assurance
in this regard. See Note 11 to the Franklin financial statements.  The merger is
subject  to a number  of  conditions,  however,  and  therefore  there can be no
assurance  that the merger  will be  completed  on or before June 30, 2002 or at
all. If the merger is not completed by June 30, 2002, either party may terminate
the  merger  agreement.  In the  event  merger  is not  completed,  in  order to
alleviate the substantial doubt about the Corporation's ability to continue as a
going concern,  the Corporation would likely seek another merger partner or seek
alternative  financing.  There can be no assurance that the Corporation would be
able  to find a  suitable  merger  partner  or be  able  to  obtain  alternative
financing.  The financial  statements do not include any  adjustments to reflect
the possible  future effects on the  recoverability  of assets or the amounts of
liabilities that may result from the outcome of this uncertainty.

PROPOSED MERGER WITH CHANGE TECHNOLOGY PARTNERS, INC.

     On  December  4,  2001,  Change  and  Franklin  entered  into a  definitive
agreement  and plan of merger  pursuant to which  Change will be merged with and
into  Franklin.  Under  the  terms  of the  merger  agreement,  Change's  common
stockholders will receive one share of Franklin for each 40.985 shares of Change
common  stock  that they own.  Change's  Series A  preferred  stockholders  will
receive one share of Franklin  Series B preferred stock for each share of Change
Series A  preferred  stock they own. As a result of the  merger,  Franklin  will
issue  approximately  4,442,000 shares of its common stock and 645 shares of its
Series B preferred stock to Change stockholders.

     Upon closing of the transaction, Change stockholders will own approximately
80% of Franklin  common stock with the balance being held by Franklin's  current
stockholders.  The  boards of both  companies  have  approved  the  transaction,
subject to stockholder approval by both Franklin and Change common and preferred
stockholders and the satisfaction or waiver of conditions to the merger.

     Concurrently  with the  execution  of the  merger  agreement,  the  parties
entered  into a stock  purchase  agreement  pursuant to which  Change  agreed to
purchase  250,000  shares of common  stock of  Excelsior  Radio  Networks,  Inc.
("Excelsior") from Franklin for an aggregate purchase price of $250,000.  In the
event the merger between Franklin and Change is terminated, Franklin is required
to repurchase  all of such common stock from Change at a repurchase  price equal
to $250,000,  plus  interest  thereon at an annual rate of 10% from  December 4,
2001 to the date of repurchase.  As a result of this transaction,  Franklin owns
50.8% of Excelsior on a fully diluted basis and has 58.2% of voting  control and
Change owns 16.5% on a fully diluted basis and has 6.5% of voting  control.

                                       19
<PAGE>


     The  transactions  contemplated  by the merger  agreement  are  intended to
result in  Franklin  no longer  being  subjected  to the 1940 Act because of the
change in the nature of its business; however, Franklin cannot change the nature
of its  business so as to cease to be  regulated  as a BDC unless such change is
approved by  Franklin's  stockholders  in  accordance  with the 1940 Act. At the
special meeting to approve the merger with Change,  Franklin  stockholders  will
also be asked to approve the  withdrawal of Franklin's  election to be regulated
as a BDC.

INVESTMENTS

     Franklin's primary investment is in Excelsior.  A description of Franklin's
other investments follows the description of Excelsior.

     EXCELSIOR

     At March 31, 2002, the Corporation had an investment in Excelsior, formerly
known as eCom Capital, Inc., valued at $2,250,000, which represents 57.9% of the
Corporation's total assets and 84.8% of its net assets. As of December 31, 2001,
Franklin  owned 50.8% of  Excelsior  on a fully  diluted  basis and had 58.2% of
Excelsior's voting control.

     If the merger with Change is consummated,  Franklin will change its name to
Excelsior Communications  Corporation.  The business of the new combined company
will focus on creating, producing and selling programs to the radio industry. In
order to develop its business, Excelsior Communications will expand and grow the
business of its majority-owned subsidiary, Excelsior through acquisitions, joint
ventures and other efforts.

     Excelsior is a majority-owned affiliate of Franklin and was incorporated in
1999 under the laws of the State of Delaware.  Excelsior had no operations until
August 2001 when a group led by Franklin  invested in Excelsior  for the purpose
of acquiring  certain assets from Winstar Radio  Networks,  LLC,  Winstar Global
Media, Inc. and Winstar Radio Productions,  LLC. Excelsior's principal executive
offices are located at 450 Park Avenue, 10th Floor, New York, NY 10022.

     On April 3, 2002, Dial Communications Global Media, Inc. ("Newco"), a newly
formed wholly-owned  subsidiary of Excelsior Radio Networks, Inc. ("Excelsior"),
completed  the  acquisition  of   substantially   all  of  the  assets  of  Dial
Communications Group, Inc. ("DCGI"),  and Dial Communications Group, LLC ("DCGL"
and together with DCGI, the "Dial  Entities")  used in connection  with the Dial
Entities'  business of selling  advertising  relating to radio  programming (the
"Dial  Acquisition").  The Dial Acquisition was completed  pursuant to the Asset
Purchase Agreement (the "Purchase Agreement"), dated as of April 1, 2002, by and
among  the Dial  Entities,  Franklin  and  Excelsior.  Immediately  prior to the
closing of the transactions  contemplated by the Purchase  Agreement,  Excelsior
assigned all of its rights and obligations under the Purchase Agreement, as well
as certain other assets and  liabilities  relating to the portion of Excelsior's
business dedicated to the sale of advertising relating to radio programming,  to
Newco.

     The total purchase price for the Dial Acquisition will be an amount between
$8,880,000 and $13,557,500.  The initial  consideration for the Dial Acquisition
consisted  of  $6,500,000  in cash  and a three  year  promissory  note  bearing
interest  at 4.5%  issued by Newco in favor of DCGL in the  aggregate  principal
amount of $460,000. In addition, the Purchase Agreement provides for the minimum
payment of $1,920,000 of additional consideration,  which is subject to increase
to a maximum amount of $6,597,500  based upon the attainment of certain  revenue
and

                                       20
<PAGE>


earnings  objectives  in 2002 and 2003.  The  additional  consideration  will be
comprised of both cash and two additional  promissory  notes bearing interest at
4.5% issued by Newco in favor of DCGL, each with an initial aggregate  principal
amount of  $460,000  that is subject to  increase  upon the  attainment  of such
revenue  and  earnings  objectives.  Each  of the  promissory  notes  issued  in
consideration  of the Dial  Acquisition is convertible into shares of Franklin's
common  stock at a  premium  of 115% to 120% of the  average  closing  prices of
Franklin's  common  stock during a specified  pre and post  closing  measurement
period. The promissory notes are not convertible for at least a one-year period.
Excelsior has paid to Franklin an amount equal to $300,000 in  consideration  of
Franklin's  obligations in connection with any Franklin common stock that may be
issued pursuant to the terms of the Purchase  Agreement or the promissory  notes
issued in consideration of the Dial Acquisition.

     The  assets  purchased  in the  Dial  Acquisition  will  be  combined  with
Excelsior's   Global   Media   division   to  create  a  national   radio  sales
representation  company  with 2001  advertising  sales  revenues  of almost  $50
million  and  a  client  roster  of  over  forty  independent  radio  production
companies.

     Excelsior creates, produces,  distributes and is a sales representative for
national  radio  programs and offers other  miscellaneous  services to the radio
industry.  Excelsior  offers  radio  programs to the  industry  in exchange  for
commercial  broadcast  time,  which  Excelsior  sells to  national  advertisers.
Excelsior  currently  offers  approximately  100  programs  to over 2,000  radio
stations  across the country.  The group of radio  stations  who  contract  with
Excelsior  to  broadcast  a  particular  program  constitutes  a radio  network.
Excelsior derives its revenue from selling the commercial  broadcast time on its
radio networks to advertisers desiring national coverage.

     Excelsior currently produces 23 network programs targeting the most popular
radio formats, including adult contemporary,  rock, urban oldies, album oriented
rock,  comedy  and  country.  Excelsior  produces  both short form and long form
programs.  Short form  features  are two to three  minute  daily  vignettes  and
include such programs as "African Americans Making History." Long form programs,
such as "Walt `Baby'  Love's The  Countdown"  and "Gospel  Traxx,"  "Keeping The
Seventies  Alive,"  "Behind the Hits" and "All Star Mix Party" are programs that
range from one to four hours in length. Excelsior offers these programs to radio
stations  free of  charge.  The radio  stations  airing  these  programs  become
networks for Excelsior to sell advertising time.  Excelsior sells the commercial
broadcast  time  inside  of these  networks  to  advertisers  desiring  national
coverage.

     On August 28, 2001, the Corporation purchased $2,500,000 worth of Excelsior
Common Stock and issued a secured note for  $150,000.  In  connection  with this
note, Franklin was granted warrants to acquire 12,879 shares of Excelsior common
stock at an exercise price of $1.125 per share. On November 28, 2001, $75,000 of
the secured note was paid back to Franklin.  On February 28, 2002, the remaining
$75,000 of the  secured  note was paid back to  Franklin.  As part of the merger
agreement between Franklin and Change, Franklin sold to Change 250,000 shares of
its common stock in Excelsior.

     ALACRA CORPORATION

     At March 31, 2002, the Corporation had an investment in Alacra  Corporation
("Alacra"),  valued at $1,000,000,  which represents 25.7% of the  Corporation's
total assets and 37.7% of its net assets. Alacra,  headquartered in New York and
London, is a leading provider of  Internet-based  online  information  services.
Alacra provides a service called .xls, which aggregates and  cross-indexes  over
70 premier  business  databases,  delivering  information  directly to Microsoft

                                       21
<PAGE>


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 Alacra
Series F  Convertible  Preferred  Stock.  In  connection  with this  investment,
Franklin was granted observer rights for Alacra Board of Directors meetings.

     EXCOM VENTURES, LLC

     At March 31, 2002, the Corporation had an investment in Excom Ventures, LLC
("Excom")  valued  at $0 at March  31,  2002.  Excom  was  formed  as a  limited
liability 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 $140,000 worth of Excom Units.
At December 31, 2001, the Board of Franklin had determined  that this investment
had no value and had marked these securities down to reflect that determination.

     PRIMAL SOLUTIONS, INC.

     The  Corporation  has an investment in Primal  Solutions,  Inc.  ("Primal")
valued at $8,915 at March 31, 2002, which  represents 0.2% of the  Corporation's
total assets and 0.3% of its net assets.  Primal's common stock is quoted on the
OTC Electronic Bulletin Board under the symbol "PSOL." 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 support
billing and customer care back-office requirements,  including those of emerging
IP billing markets.

     On February 13, 2001, Primal was spun-off from Avery  Communications,  Inc.
("Avery").  As a result  of this  spin-off  Franklin  received  1,533,938  fully
registered and marketable  shares of common stock of Primal at an allocated cost
basis of $245,430.  During the three months ended March 31, 2002,  Franklin sold
272,500 shares of common stock for $20,093 realizing a loss of $23,507.

     STRUCTURED WEB, INC.

     At March 31, 2002,  the  Corporation  had an investment in Structured  Web,
Inc.  ("Structured  Web")  valued  at  $350,000,  which  represents  9.0% of the
Corporation's total assets and 13.2% 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.

                                       22
<PAGE>


     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 on Structured Web board of directors.

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 investment  income of $91,549 and $42,557 for the three
months ended March 31, 2002 and 2001,  respectively.  The increase in investment
income for the three  months  ended  March 31,  2002 when  compared to March 31,
2001,  was  primarily  the  result  of the  receipt  of a  management  fee  from
Excelsior.

     Operating  expenses  were  $345,990 and $432,654 for the three months ended
March 31, 2002 and 2001, respectively. A majority of the Corporation's operating
expenses  consist  of  employee  compensation,  office and rent  expense,  other
expenses  related to  identifying  and reviewing  investment  opportunities  and
professional  fees.  Professional  fees consist of general legal fees, audit and
tax fees and  investment  related legal fees.  The  Corporation  was  reimbursed
approximately  $30,000  for salary and benefit  expense for its chief  financial
officer  under  the  terms of the  management  agreement  with  Excelsior.  This
reimbursement has been recorded as a reduction in operating expenses.

     Net investment  losses from  operations  were $254,441 and $390,097 for the
three months ended March 31, 2002 and 2001, 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, 2002 and 2001,  the  Corporation
realized net (loss) gains before taxes of ($23,507)  and $225,044  respectively,
from the disposition of various investments.

UNREALIZED APPRECIATION OF INVESTMENTS:

     Unrealized  appreciation  of  investments,  increased by $37,833 during the
three months ended March 31, 2002,  primarily from  unrealized  gains due to the
sale of Primal.

     Unrealized  appreciation of  investments,  decreased by $977,581 during the
three months ended March 31, 2001,  primarily from  unrealized  gains due to the
decrease in value of Franklin's

                                       23
<PAGE>


investment  in Go America.  This  increase was  partially  offset by the sale of
Franklin's investment in Avery Communications.

LIQUIDITY AND CAPITAL RESOURCES

     The accompanying  financial statements have been prepared assuming that the
Corporation  will continue as a going concern.  For the three months ended March
31, 2002 and for the years ended December 31, 2001,  and 2000,  the  Corporation
has incurred a net investment loss from operations of  approximately  $0.3, $1.4
million  and $2.3  million,  respectively,  a net  decrease  in net assets  from
operations of approximately  $0.3, $2.4 million and $4.4 million,  respectively,
and has a working capital deficiency of approximately $1,000,000 at December 31,
2001. These conditions raise substantial  doubt about the Corporation's  ability
to continue as a going  concern.  The  Corporation  has entered  into a proposed
merger with Change  Technology  Partners,  Inc., which management  believes will
alleviate the doubt as to whether the Corporation,  as the surviving  company in
the merger,  will be able to continue as a going concern,  although there can be
no assurance in this regard. See Note 11 to the Franklin  financial  statements.
The merger is subject to a number of conditions,  however,  and therefore  there
can be no assurance that the merger will be completed on or before June 30, 2002
or at all. If the merger is not  completed  by June 30,  2002,  either party may
terminate the merger agreement.  In the event merger is not completed,  in order
to alleviate the substantial doubt about the  Corporation's  ability to continue
as a going concern,  the Corporation would likely seek another merger partner or
seek alternative financing. There can be no assurance that the Corporation would
be able to find a  suitable  merger  partner  or be able to  obtain  alternative
financing.  The financial  statements do not include any  adjustments to reflect
the possible  future effects on the  recoverability  of assets or the amounts of
liabilities that may result from the outcome of this uncertainty.

RISK FACTORS

     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 one  bulletin  board listed  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 RELATED TO FRANKLIN

     INVESTING  IN  PRIVATE  COMPANIES  INVOLVES  A HIGH  DEGREE  OF  RISK.  The
Corporation's  portfolio consists primarily of investments in private companies.
Investments  in  private  businesses  involve  a high  degree  of  business  and
financial risk, which can result in substantial losses and accordingly should be
considered  speculative.  There is generally no publicly  available  information
about the companies in which Franklin invests, and Franklin relies significantly
on the diligence of its employees and agents to obtain information in connection
with  the  Corporation's   investment  decisions.   In  addition,  some  smaller
businesses have narrower product lines and market shares than their competitors,
and may be more vulnerable to customer

                                       24
<PAGE>


preferences, market conditions or economic downturns, which may adversely affect
the  return  on,  or the  recovery  of,  the  Corporation's  investment  in such
businesses.

     THE PORTFOLIO OF  INVESTMENTS  IS ILLIQUID.  Franklin  acquires most of its
investments directly from private companies.  The majority of the investments in
its portfolio  will be subject to  restrictions  on resale or otherwise  have no
established  trading  market.  The  illiquidity  of  most of the  portfolio  may
adversely affect Franklin's  ability to dispose of loans and securities at times
when it may be advantageous to liquidate such investments.

     FRANKLIN'S  PORTFOLIO  INVESTMENTS ARE RECORDED AT FAIR VALUE AS DETERMINED
BY THE BOARD OF  DIRECTORS  IN ABSENCE OF READILY  ASCERTAINABLE  PUBLIC  MARKET
VALUES. Pursuant to the requirements of the 1940 Act, the Corporation's board of
directors is required to value each asset quarterly, and Franklin is required to
carry  the  portfolio  at a fair  market  value as  determined  by the  board of
directors.  Since there is typically  no public  market for the loans and equity
securities of the companies in which  Franklin makes  investments,  the board of
directors estimates the fair value of these loans and equity securities pursuant
to written valuation policy and a consistently applied valuation process. Unlike
banks,  Franklin is not permitted to provide a general  reserve for  anticipated
loan losses; instead, Franklin is required by the 1940 Act to specifically value
each  individual  investment and record an unrealized  loss for an asset that it
believes has become impaired.  Without a readily ascertainable market value, the
estimated  value of the  portfolio  of loans and  equity  securities  may differ
significantly  from the values  that would be placed on the  portfolio  if there
existed a ready  market for the loans and equity  securities.  Franklin  adjusts
quarterly  the  valuation of the  portfolio  to reflect the board of  directors'
estimate of the current realizable value of each investment in the Corporation's
portfolio.  Any changes in  estimated  value are  recorded in the  Corporation's
statement of operations as "Net unrealized gains (losses)."

     FRANKLIN  OPERATES IN A COMPETITIVE  MARKET FOR  INVESTMENT  OPPORTUNITIES.
Franklin  competes for investments  with many other  companies and  individuals,
some of whom have greater  resources than does Franklin.  Increased  competition
would make it more difficult to purchase or originate  investments at attractive
prices.  As a result of this  competition,  sometimes  Franklin may be precluded
from making otherwise attractive investments.

     QUARTERLY  RESULTS  MAY  FLUCTUATE  AND MAY  NOT BE  INDICATIVE  OF  FUTURE
QUARTERLY  PERFORMANCE.  The  Corporation's  quarterly  operating  results could
fluctuate,  and  therefore,  you  should  not rely on  quarterly  results  to be
indicative  of Franklin's  performance  in future  quarters.  Factors that could
cause quarterly operating results to fluctuate include, among others, variations
in the  investment  origination  volume,  variation  in timing  of  prepayments,
variations in and the timing of the recognition of realized and unrealized gains
or losses,  the degree to which Franklin  encounters  competition in its markets
and general economic conditions.

     FRANKLIN IS DEPENDENT  UPON KEY  MANAGEMENT  PERSONNEL FOR FUTURE  SUCCESS.
Franklin is dependent for the selection,  structuring, closing and monitoring of
its investments on the diligence and skill of its senior management  members and
other  management  members.  The future success of the Corporation  depends to a
significant  extent on the  continued  service  and  coordination  of its senior
management  team,  particularly  the Chairman and Chief Executive  Officer.  The
departure of any of the  executive  officers or key employees  could  materially
adversely affect the Corporation's  ability to implement its business  strategy.
Franklin  does not  maintain  key man life  insurance  on any of its officers or
employees.

                                       25
<PAGE>


     THERE IS SUBSTANTIAL DOUBT AS TO FRANKLIN'S  ABILITY TO CONTINUE AS A GOING
CONCERN.  Franklin has determined  that it may not have sufficient cash and cash
equivalents to meet its working capital  requirements over the next fiscal year.
Franklin's  independent auditors have issued an opinion in which the independent
auditors have indicated that there is substantial doubt as to Franklin's ability
to continue as a going concern as noted in their  explanatory  paragraph  within
their opinion, which is noted in Franklin's financial statements.  If the merger
with Change  Technology  is not  consummated,  Franklin will be required to seek
alternative  sources of  financing  to  continue  operating  through the current
fiscal year. If funds were not raised,  Franklin may not be able to continue its
operations.   See  Note  11  to  Franklin's  financial  statements  for  further
information.

RISKS RELATED TO THE MERGER WITH CHANGE

     THE PROPOSED MERGER MAY NOT OCCUR. If the merger agreement is terminated or
if the  merger is not  completed  for any  reason,  Franklin  may not be as well
positioned to effectuate its  developing  business plan. The success of Franklin
depends on its ability to effectuate  such a plan  subsequent to the merger.  If
the merger is not consummated,  Franklin will be forced to reassess its position
and future  business  strategy.  If the merger is not  completed for any reason,
Franklin may be subject to a number of other risks, including:

     o    Franklin may be required under certain  circumstances  to pay Change a
          termination fee of $750,000.

     o    The price of the common stock may decline.

     o    Transaction costs related to the merger, such as financial,  advisory,
          legal, accounting and printing fees must be paid even if the merger is
          not completed.  The amount of the transaction  costs may substantially
          exceed  our  estimates  and,  could  have  an  adverse  effect  on the
          business,  financial  condition and operating  results of the combined
          company.

     o    If the merger is terminated  and the board of directors  seeks another
          merger or  business  combination,  Franklin's  stockholders  cannot be
          certain that Franklin will be able to find a partner.

     NO FAIRNESS OPINION WAS OBTAINED REGARDING THE MERGER. Because the terms of
the merger were  negotiated at arm's length  between the  management of Franklin
and Change,  and taking into  consideration  the time and expense  that would be
incurred in  obtaining  an  investment  banker's  opinion on the fairness of the
terms of the  merger,  Franklin  has not  sought or  obtained  such an  opinion.
Accordingly,  there can be no assurance that  consummation of the merger will be
fair from a financial point of view to stockholders of Franklin.

     THE COMBINED  COMPANY MAY BE UNABLE TO REALIZE THE BENEFITS  ANTICIPATED BY
FRANKLIN AND CHANGE.  The merger  involves the integration of two companies that
have  previously  operated  independently.  There can be no assurances  that the
companies  will not encounter  significant  difficulties  in  integrating  their
respective  operations or that the benefits  expected from such integration will
be  realized.  Incurring  unexpected  costs or  delays in  connection  with such
integration  could  have a material  adverse  effect on the  combined  company's
business, financial condition or results of operations.

                                       26
<PAGE>


     THE  COMBINED  COMPANY  MAY  EXPERIENCE   ADVERSE  EFFECTS  FROM  COMBINING
OPERATIONS OF FRANKLIN AND CHANGE.  The boards of directors  approved the merger
and the merger  agreement with the expectation  that the merger will result in a
number of benefits,  including operating efficiencies,  revenue enhancements and
other  synergies.  However,  as a result of the merger,  the  management  of the
combined company will be faced with unfamiliar business issues. In addition, the
current management of Change, who will take on management  positions in Franklin
upon  consummation  of the merger,  have no  experience  with  Franklin's  radio
business.

     INVESTMENT IN SMALL, PRIVATE COMPANIES

     There are significant risks inherent in the  Corporation's  venture capital
business.  The Corporation  has invested a substantial  portion of its assets in
private development stage or start-up  companies.  These private businesses tend
to be thinly capitalized, unproven, small companies with risky technologies that
lack management depth and have not attained  profitability or have no history of
operations.  Because of the  speculative  nature and the lack of a public market
for these investments,  there is significantly  greater risk of loss than is the
case with traditional investment  securities.  The Corporation expects that some
of  its  venture  capital  investments  will  be a  complete  loss  or  will  be
unprofitable  and that some will  appear to be likely to become  successful  but
never realize their potential. The Corporation has been risk seeking rather than
risk averse in its approach to venture  capital and other  investments.  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.

     ILLIQUIDITY OF PORTFOLIO INVESTMENTS

     Most of the investments of the Corporation are or will be equity securities
acquired directly from small companies.  The  Corporation's  portfolio of equity
securities is and will usually be subject to restrictions on resale or otherwise
have no established trading market. The illiquidity of most of the Corporation's
portfolio  of  equity  securities  may  adversely  affect  the  ability  of  the
Corporation to dispose of such  securities at times when it may be  advantageous
for the Corporation to liquidate such investments.

     THE INABILITY OF THE CORPORATION'S PORTFOLIO COMPANIES TO
     SUCCESSFULLY MARKET THEIR PRODUCTS WOULD HAVE A NEGATIVE IMPACT
     ON ITS INVESTMENT RETURNS

     Even  if  the  Corporation's   portfolio  companies  are  able  to  develop
commercially viable products, the market for new products and services is highly
competitive and rapidly changing. Commercial success is difficult to predict and
the  marketing  efforts  of the  Corporation's  portfolio  companies  may not be
successful.

     VALUATION OF PORTFOLIO INVESTMENTS

     There is  typically  no public  market of  equity  securities  of the small
private companies in which the Corporation  invests.  As a result, the valuation
of the equity securities in the  Corporation's  portfolio is subject to the good
faith determination of the Corporation's Board of Directors. In the absence of a
readily  ascertainable  market value,  the estimated value of the  Corporation's
portfolio of equity  securities  may differ  significantly  from the values that
would be placed on the  portfolio  if a ready  market for the equity  securities
existed. Any changes in

                                       27
<PAGE>


estimated  net asset  value  are  recorded  in the  Corporation's  statement  of
operations as "Change in unrealized appreciation on investments."

     FLUCTUATIONS OF QUARTERLY RESULTS

     The Corporation's  quarterly  operating results could fluctuate as a result
of a number of factors.  These  include,  among  others,  variations  in and the
timing of the recognition of realized and unrealized gains or losses, the degree
to which the  Corporation  encounters  competition  in its  markets  and general
economic conditions.  As a result of these factors,  results for any one quarter
should not be relied upon as being indicative of performance in future quarters.

ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The  Corporation's  business  activities  contain  elements  of  risk.  The
Corporation  considers a principal  type of market  risk to be  valuation  risk.
Investments  are  stated at "fair  value" as  defined in the 1940 Act and in the
applicable regulations of the Securities and Exchange Commission. All assets are
valued at fair value as  determined in good faith by, or under the direction of,
the Board of Directors.

     Neither the Corporation's  investments nor an investment in the Corporation
is intended to constitute a balanced  investment  program.  The  Corporation has
exposure  to  public-market  price  fluctuations  to the extent of its  publicly
traded portfolio.

     The Corporation has invested a substantial portion of its assets in private
development  stage or start-up  companies.  These private  businesses tend to be
thinly  capitalized,  unproven,  small companies that lack management  depth and
have not attained profitability or have no history of operations. Because of the
speculative nature and the lack of public market for these investments, there is
significantly greater risk of loss than is the case with traditional  investment
securities. The Corporation expects that some of its venture capital investments
will be a complete loss or will be unprofitable  and that some will appear to be
likely to become successful but never realize their potential.

     Because there is typically no public market for the equity interests of the
small  companies in which the Corporation  invests,  the valuation of the equity
interests  in the  Corporation's  portfolio  is subject to the  estimate  of the
Corporation's  Board of Directors.  In making its  determination,  the Board may
consider  valuation  information  provided by an independent  third party or the
portfolio  company  itself.  In the  absence of a readily  ascertainable  market
value,  the estimated value of the  Corporation's  portfolio of equity interests
may differ  significantly  from the values that would be placed on the portfolio
if a ready market for the equity interests existed. Any changes in valuation are
recorded in the  Corporation's  consolidated  statements  of  operations as "Net
increase (decrease) in unrealized appreciation on investments."

                           PART II. OTHER INFORMATION

Item 1.   Legal Proceedings

          On  October  15,  2001,  Jeffrey  A.  Leve  and  Jeffrey  Leve  Family
     Partnership,  L.P. filed a lawsuit against Franklin, Sunshine Wireless, LLC
     ("Sunshine")   and  four   other   defendants   affiliated   with   Winstar
     Communications,  Inc. in the Superior  Court of the State of California for
     the County of Los Angeles. The lawsuit, which has subsequently been removed
     to the United States District Court for the Central District of California,

                                       28
<PAGE>


     alleges that the Winstar defendents  conspired to commit fraud and breached
     their  fiduciary duty to the plaintiffs in connection  with the acquisition
     of  the  plaintiffs'  radio  production  and  distribution   business.  The
     complaint  further  alleges that  Franklin and Sunshine  joined the alleged
     conspiracy.  The  business  was  initially  acquired  by  certain  entities
     affiliated with Winstar  Communications  and,  subsequently,  the assets of
     such business were sold to Franklin and Sunshine (see Note 6). Concurrently
     with such  purchase,  Franklin  transferred  such assets to Excelsior.  The
     plaintiffs  seek  recovery of damages in excess of  $10,000,000,  costs and
     attorneys' fees. On January 7, 2002, Franklin filed a motion to dismiss the
     lawsuit  or, in the  alternative,  to transfer  venue to the United  States
     District Court of the Southern District of New York. The plaintiffs filed a
     motion opposing  Franklin's request on January 28, 2002.  Franklin's motion
     for dismissal was granted on February 25, 2002, due to improper venue.  The
     venue has been  changed to New York.  Franklin  believes  that  plaintiffs'
     claims are without  merit and intends to defend  this  lawsuit  vigorously,
     though the outcome cannot be predicted at this time. An unfavorable outcome
     in this lawsuit may have a material adverse effect on Franklin's  business,
     financial condition and results of operations.

Item 2.   Changes in Securities and Use of Proceeds

                    Not applicable

Item 3.   Defaults Upon Senior Securities Holders

                    Not applicable

Item 4.   Submission of Matters to a Vote of Security Holders

                    Not applicable

Item 5.   Other Information

                    Not applicable

Item 6.   Exhibits and Reports on Form 8-K

          (a)  Exhibits

                    Not applicable

          (b)  Reports on Form 8-K. The  Corporation  filed a report on Form 8-K
               on April 3, 2002 announcing the acquisition of the Dial Entities.


                                    SIGNATURE

          Pursuant to the  requirements of the Securities  Exchange Act of 1934,
the  Registrant  has duly  caused  this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

                                    FRANKLIN CAPITAL CORPORATION

Date: May 15, 2002                  By: /s/
                                        ----------------------------------------
                                        Hiram M. Lazar
                                        CHIEF FINANCIAL OFFICER

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