UNITED STATES
                       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 June 30, 2004

                                       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, 20th Floor, New York, New York                   10022
-----------------------------------------------                 ----------
  (Address of principal executive offices)                      (Zip Code)


Registrant's telephone number, including area code       (212) 486-2323
                                                     ------------------------

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 [ ]

                                 Not applicable
              ----------------------------------------------------
              (Former name, former address and former fiscal year,
                          if changed since last report)

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes [ ]   No [X]

The number of shares of common stock outstanding as of August 11, 2004 was
1,046,350.

<PAGE>
                                TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION

           Item 1.   Financial Statements (Unaudited)
                     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
                     Investments
                     Results of Operations
                     Taxes
                     Liquidity and Capital Resources
                     Risk Factors
           Item 3.   Quantitative and Qualitative Disclosures about Market Risk
           Item 4.   Controls and Procedures

PART II. OTHER INFORMATION

           Item 1.   Legal Proceedings
           Item 2.   Changes in Securities, Use of Proceeds and Issuer Purchases
                       of Equity Securities
           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

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
                                                                                     (Unaudited)
                                                                                       June 30,               December 31,
                                                                                         2004                     2003
--------------------------------------------------------------------------------------------------------------------------
<S>                                                                                <C>                      <C>
ASSETS

Marketable investment securities, at market value (cost: June 30, 2004 -
    $26,249, December 31, 2003 - $40,899)  (Note 2)                                       $26,249                 $33,899
Investments, at fair value (cost: June 30, 2004 - $1,650,000;
    December 31, 2003 - $1,908,804)  (Note 2)
         Excelsior Radio Networks, Inc.                                                 1,739,210               1,921,270
         Other investments                                                              1,000,000               1,000,000
                                                                                      -----------             -----------
                                                                                        2,739,210               2,921,270
                                                                                      -----------             -----------

Cash and cash equivalents (Note 2)                                                        274,498                 224,225
Other assets                                                                               52,712                  78,638
                                                                                      -----------             -----------

                                                                                       $3,092,669              $3,258,032
                                                                                      ===========             ===========
TOTAL ASSETS

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

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES

Note payable                                                                             $904,714                $915,754
Accounts payable and accrued liabilities                                                  266,005                 318,140
                                                                                      -----------             -----------

TOTAL LIABILITIES                                                                       1,170,719               1,233,894
                                                                                      -----------             -----------

Commitments and contingencies  (Note 5)

STOCKHOLDERS' EQUITY

Convertible preferred stock, $1 par value, cumulative 7% dividend:
    5,000,000 shares authorized; 10,950 issued and outstanding
    at June 30, 2004 and December 31, 2003
    (Liquidation preference $1,095,000) (Note 4)                                           10,950                  10,950
Common stock, $1 par value: 5,000,000 shares authorized;
    1,505,888 shares issued: 1,046,350 and 1,020,100 shares outstanding
    at June 30, 2004 and December 31, 2003, respectively  (Note 7)                      1,505,888               1,505,888
Paid-in capital                                                                        10,442,080              10,439,610
Unrealized appreciation of investments                                                  1,089,210               1,005,466
Accumulated deficit                                                                    (8,548,721)             (8,320,944)
                                                                                      -----------             -----------

                                                                                        4,499,407               4,640,970
Deduct: 459,538 and 485,788 shares of common stock held in treasury,
    at cost, at June 30, 2004 and December 31, 2003, respectively  (Note 4)            (2,577,457)             (2,616,832)
                                                                                      -----------             -----------

    Net assets (See Note 9 for per share information)                                   1,921,950               2,024,138
                                                                                      -----------             -----------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                             $3,092,669              $3,258,032
                                                                                      ===========             ===========
--------------------------------------------------------------------------------------------------------------------------
</TABLE>

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


                                       4
<PAGE>
                          FRANKLIN CAPITAL CORPORATION
================================================================================

 Statements of Operations
(unaudited)

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
                                                                     Three Months Ended                     Six Months Ended
                                                                           June 30,                              June 30,
                                                                     2004            2003                 2004             2003
----------------------------------------------------------------------------------------------------------------------------------
<S>                                                               <C>            <C>                   <C>             <C>
INVESTMENT INCOME
    Interest and dividend income                                        $50             $80                 $215             $758
    Management fees                                                       0          45,000                    0           90,000
                                                                  ---------       ---------            ---------        ---------

                                                                         50          45,080                  215           90,758
                                                                  ---------       ---------            ---------        ---------

EXPENSES
    Salaries and employee benefits                                  127,936         135,629              256,837          311,194
    Professional fees                                               184,122          72,605              241,122          102,605
    Rent                                                             18,879          26,079               36,954           35,251
    Insurance                                                        17,037          17,910               34,075           35,323
    Directors' fees                                                   2,000           2,001                4,000            4,002
    Taxes other than income taxes                                     6,037           9,358               18,801           25,327
    Depreciation and amortization                                         -           4,243                    0            8,487
    Interest expense                                                  9,002           8,850               17,928           17,700
    General and administrative                                       32,684          46,331               80,828          102,522
                                                                  ---------       ---------            ---------        ---------

                                                                    397,697         323,006              690,545          642,411
                                                                  ---------       ---------            ---------        ---------

Net investment loss from operations                                (397,647)       (277,926)            (690,330)        (551,653)

Net realized gain on portfolio of investments:
     Investment securities:
          Affiliated                                                300,000               -              358,804                -
          Unaffiliated                                                    -               -               (9,326)               -
          Other realized gain (Note 6)                              151,400               -              151,400                -
                                                                  ---------       ---------            ---------        ---------

Net realized gain on portfolio of investments                       451,400               -              500,878                -
                                                                  ---------       ---------            ---------        ---------

Net realized gain (loss)                                             53,753        (277,926)            (189,452)        (551,653)

(Decrease) increase in unrealized appreciation of investments
     Investment securities:
          Affiliated                                                135,548        (524,599)              76,744         (477,055)
          Unaffiliated                                                    -               -                7,000                -
          Other decrease in unrealized appreciation (Note 6)       (154,563)              -                    -                -
                                                                  ---------       ---------            ---------        ---------

(Decrease) increase in unrealized appreciation of investments       (19,015)       (524,599)              83,744         (477,055)
                                                                  ---------       ---------            ---------        ---------

Net increase (decrease) in net assets from operations                34,738        (802,525)            (105,708)      (1,028,708)

Preferred dividends                                                  19,161          19,163               38,325           38,327
                                                                  ---------       ---------            ---------        ---------

Net increase (decrease) in net assets attributable to
   common stockholders                                              $15,577       ($821,688)           ($144,033)     ($1,067,035)
                                                                  =========       =========            =========      ===========
Basic and diluted net increase (decrease) in net
assets per common share (Note 8)                                      $0.02          ($0.79)              ($0.14)          ($1.02)
                                                                      =====          =======              =======          =======

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

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


                                       5
<PAGE>
                          FRANKLIN CAPITAL CORPORATION
================================================================================

Statements of Cash Flows
(unaudited)

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------

For the Six Months Ended June 30,                                                     2004                       2003
-------------------------------------------------------------------------------------------------------------------------
<S>                                                                               <C>                        <C>
Cash flows from operating activities:
  Net decrease in net assets from operations                                        ($105,708)               ($1,028,708)
  Adjustments to reconcile net (decrease) in net assets from
    operations to net cash used in operating activities:
      Depreciation and amortization                                                         -                      8,487
      (Increase) decrease in unrealized appreciation of investments                   (83,744)                   477,055
      Net realized gain on portfolio of investments                                  (500,878)                         -
      Changes in operating assets and liabilities:
        Decrease in other assets                                                       25,926                     10,093
        (Decrease) increase in accounts payable and accrued liabilities               (52,135)                   132,975
                                                                                   ----------                 ----------

          Total adjustments                                                          (610,831)                   628,610
                                                                                   ----------                 ----------

          Net cash used in operating activities                                      (716,539)                  (400,098)
                                                                                   ----------                 ----------

Cash flows from investing activities:
  Proceeds from sale of marketable investment securities                              171,972                      8,426
  Purchase of majority-owned affiliates                                                     -                    (87,444)
  Proceeds from sale of majority-owned affiliate                                      617,608                     87,444
  Purchases of marketable investment securities                                       (15,248)                         -
                                                                                   ----------                 ----------

          Net cash provided by investing activities                                   774,332                      8,426
                                                                                   ----------                 ----------

Cash flows from financing activities:
  Payment of preferred dividends                                                      (38,325)                   (38,327)
  Decrease in note payable                                                            (11,040)                    (7,110)
  Cash proceeds related to 16B filing.                                                  2,470                          -
  Issuance of treasury stock for exercise of director options                          39,375                          -
  Purchases of treasury stock                                                              -                     (13,561)
                                                                                   ----------                 ----------

          Net cash used in financing activities                                        (7,520)                   (58,998)
                                                                                   ----------                 ----------

Net increase (decrease) in cash and cash equivalents                                   50,273                   (450,670)

Cash and cash equivalents at beginning of period                                      224,225                    562,191
                                                                                   ----------                 ----------

Cash and cash equivalents at end of period                                           $274,498                   $111,521
                                                                                   ==========                 ==========

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

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


                                       6
<PAGE>
                          FRANKLIN CAPITAL CORPORATION
================================================================================

Statements of Changes in Net Assets
(unaudited)

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                           Three Months Ended                 Six Months Ended
                                                                                June 30,                           June 30,
                                                                          2004            2003               2004           2003
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                    <C>           <C>                 <C>           <C>
Increase (decrease) in net assets from operations:
   Net investment loss                                                  ($397,647)     ($277,926)         ($690,330)     ($551,653)
   Net realized gain on portfolio of investments,                         451,400              -            500,878              -
   (Decrease) increase in unrealized appreciation of investments          (19,015)      (524,599)            83,744       (477,055)
                                                                       ----------     ----------         ----------     ----------

       Net increase (decrease) in net assets from operations               34,738       (802,525)          (105,708)    (1,028,708)

Capital stock transactions:
   Payment of dividends on preferred stock                                (19,161)       (19,163)           (38,325)       (38,327)
   Cash proceeds related to 16B filing.                                     2,470              -              2,470              -
   Issuance of stock from treasury for exercise of director options        39,375              -             39,375              -
   Purchase of treasury stock                                                   -         (3,556)                 -        (13,561)
                                                                       ----------     ----------         ----------     ----------

       Total increase (decrease) in net assets                             57,422       (825,244)          (102,188)    (1,080,596)
                                                                       ----------     ----------         ----------     ----------

Net assets at beginning of period                                       1,864,528      3,012,188          2,024,138      3,267,540
                                                                       ----------     ----------         ----------     ----------

Net assets at end of period                                            $1,921,950     $2,186,944         $1,921,950     $2,186,944
                                                                       ==========     ==========         ==========     ==========

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

</TABLE>



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


                                       7
<PAGE>
                          FRANKLIN CAPITAL CORPORATION
================================================================================

Portfolio of Investments

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------

Marketable Investment Securities
                                                                                                                            Market
                                                                                            Number of                        Value
June 30, 2004 (2)                                                                            Shares        Cost(1)         (Note 2)
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                       <C>              <C>            <C>            <C>            <C>
Certificate of Deposit - 0.7%, due 08/02/2004                                                              $26,249          $26,249
                                                                                                          --------         --------

     Total Marketable Investment Securities
        (0.9% of total investments and 0.8% of net assets)                                                 $26,249          $26,249
                                                                                                          --------         --------

------------------------------------------------------------------------------------------------------------------------------------
Investments, at Fair Value
------------------------------------------------------------------------------------------------------------------------------------

                                                                                                                         Directors'
                                                                                Equity      Number of                    Valuation
June 30, 2004(2)                                            Investment         Interest      Shares         Cost(1)       (Note 2)
------------------------------------------------------------------------------------------------------------------------------------

Majority Owned Affiliate

Excelsior Radio Networks, Inc.                             Common stock         26.00%       650,000      $650,000       $1,625,000
Excelsior Radio Networks, Inc.                               Warrants            1.20%        87,111             -          114,210
                                                                                            --------     ---------      -----------
Total Excelsior Radio Networks, Inc.
   (58.8% of total investments and 84.5% of net assets)                         10.20%       737,111       650,000        1,739,210
     (Radio production and advertising sales)                              (fully diluted)

Other Investments

Alacra Corporation (36.2% of total investments and          Convertible
   52.0% of net assets)                                   Preferred Stock        1.68%       321,543     1,000,000        1,000,000
   (Internet-based information provider)                                                               -----------      -----------

     Investments, at Fair Value                                                                         $1,650,000        2,739,210
                                                                                                       -----------      -----------

------------------------------------------------------------------------------------------------------------------------------------
</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
JUNE 30, 2004


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. The Corporation has a working
capital deficiency of approximately $900,000 at June 30, 2004. (Working capital
is defined as total liabilities less liquid assets.) This condition raises
substantial doubt about the Corporation's ability to continue as a going
concern. 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.

On June 23, 2004, the Corporation entered into a Letter of Understanding (the
"LOU") with Ault Glazer & Company Investment Management LLC ("Ault Glazer").
This LOU sets forth the understandings and agreements of the Corporation and
Ault Glazer with respect to the initial steps in the execution of a strategic
restructuring and recapitalization plan for the Corporation (the "Restructuring
Plan"). Pursuant to the terms of the LOU, on July 30, 2004, the Company filed
with the SEC a preliminary proxy statement soliciting the approval by the
Corporation's stockholders of a number of proposals relating to the
Restructuring Plan. As described more fully in the Corporation's preliminary
proxy statement, certain of these proposals are intended to allow the
Corporation to attempt to raise additional capital. Even if the Corporation's
stockholders approve these proposals, however, there can be no assurance that
the Corporation will be able to raise additional capital.

In connection with the Restructuring Plan, Franklin also entered into a
Termination Agreement and Release (the "Termination Agreement") with Stephen
Brown, Franklin's Chairman and Chief Executive Officer, that contains the terms
of Mr. Brown's prospective resignation as an officer and director of Franklin.
Please see Note 5 for additional information regarding the Termination
Agreement.

Please refer to the preliminary proxy statement filed with the Securities and
Exchange Commission on July 30, 2004 for additional descriptions of, and
information relating to, the LOU, the Restructuring Plan, the Termination
Agreement and the proposals to be voted on by the Corporation's stockholders.

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.


                                       9
<PAGE>
FRANKLIN CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)


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 six months ended
June 30, 2004 and 2003.

At June 30, 2004 and 2003, the Corporation held cash and cash equivalents
primarily in money market funds at one commercial banking institution.

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

Property and equipment are stated at cost. 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 PER COMMON SHARE

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

3.  INCOME TAXES

For the six months ended June 30, 2004, and 2003, Franklin's tax (provision)
benefit was based on the following:

<TABLE>
<CAPTION>
                                                          2004                     2003
                                                     -------------            --------------
<S>                                                  <C>                      <C>
Net investment loss from operations                    $ (690,330)              $  (551,653)
Net realized gain on portfolio of investments             500,878                         -
Increase in unrealized appreciation                        83,744                  (477,055)
                                                     -------------            --------------
     Pre-tax book loss                                 $ (105,708)              $(1,028,708)
                                                     =============            ==============


                                                          2004                     2003
                                                     -------------            --------------

Federal tax benefit at 34% on $(105,708) and
  $(1,028,708), respectively                           $   36,000               $   350,000
Other                                                      30,000                    17,000
Change in valuation allowance                             (66,000)                 (367,000)
                                                     -------------            --------------
                                                       $        -               $         -
                                                     =============            ==============
</TABLE>

Deferred income tax benefit 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 June 30, 2004 and December 31, 2003, significant deferred tax assets and
liabilities consist of:

<TABLE>
<CAPTION>
                                                                              Asset (Liability)
                                                                    -------------------------------------
                                                                       June 30,             December 31,
                                                                         2004                   2003
                                                                    --------------         --------------
<S>                                                                 <C>                    <C>
Deferred Federal and state benefit from net operating
  loss carryforward                                                  $  2,686,000           $  2,605,000
Deferred Federal and state provision benefit on unrealized
  appreciation of investments                                            (392,000)              (377,000)
Valuation allowance                                                    (2,294,000)            (2,228,000)
                                                                    --------------         --------------
  Deferred taxes                                                     $          -           $          -
                                                                    ==============         ==============
</TABLE>

At December 31, 2003, Franklin had net operating loss carryforwards for income
tax purposes of approximately $7,236,000 that will begin to expire in 2011. At a
36% effective tax rate the after-tax net benefit from this loss would be
approximately $2,605,000.

4.  STOCKHOLDERS' EQUITY

The accumulated deficit at June 30, 2004, consists of accumulated net realized
gains of $5,987,000 and accumulated investment losses of $14,535,000.

The Board of Directors has authorized Franklin to repurchase up to an aggregate
of 575,000 shares of its common stock in open market purchases on the American
Stock Exchange when such purchases are deemed to be in the best interest of the
Corporation and its stockholders. As of June 30, 2004 and December 31, 2003, the
Corporation has purchased 536,950 shares of its common stock of which 459,538
shares remain in treasury.

                                       11
<PAGE>
FRANKLIN CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)


PREFERRED STOCK -

The preferred stock has a cumulative 7% quarterly dividend and is convertible
into the number of shares of common stock by dividing the purchase price for the
convertible preferred stock by conversion price in effect (which is currently
$13.33). The convertible preferred stock has antidilution provisions, which can
change the conversion price in certain circumstances if the Corporation issues
additional shares of common stock. The holder has the right to convert the
shares of convertible preferred stock at any time until February 22, 2010 into
common stock. Upon liquidation, dissolution or winding up of the Corporation,
the stockholders of the convertible preferred stock are entitled to receive $100
per share plus any accrued and unpaid dividends before distributions to any
holder of the Corporation's common stock.

5.  COMMITMENTS AND CONTINGENCIES

Franklin is obligated under an operating lease, which provides for annual
minimum rental payments through December 31, 2004 of $105,000.


Rent expense for the six months ended June 30, 2004 and 2003, was approximately
$37,000 and $35,000, respectively. For the six months ended June 30, 2004, and
2003, the Corporation collected rents of $18,000 from one subtenant under a
month-to-month lease, for a portion of its existing office space that 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. On February 25,
2003, the case against Franklin and Sunshine was dismissed, however the
plaintiffs have a right to appeal. The lawsuit alleges that the Winstar
defendants conspired to commit fraud and breached their fiduciary duty to the
plaintiffs in connection with the acquisition of the plaintiff's radio
production and distribution business. The complaint further alleges that
Franklin and Sunshine joined the alleged conspiracy. The plaintiffs seek
recovery of damages in excess of $10,000,000, costs and attorneys' fees. An
unfavorable outcome in an appeal, should it be brought, together with an
unfavorable outcome in the lawsuit may have a material adverse effect on
Franklin's business, financial condition and results of operations.

As a result of the acquisition by Ault Glazer of more than 30% of the
outstanding shares of the common stock of Franklin without the prior approval of
the Board, Mr. Stephen L. Brown, Chairman and Chief Executive Officer of
Franklin became entitled, if his employment with Franklin were to terminate
within one year thereafter, to receive certain severance payments under the
terms of his employment agreement and severance compensation agreement with
Franklin. In connection with the Restructuring Plan, Franklin entered into the
Termination Agreement, which replaces Mr. Brown's employment agreement and
severance compensation agreement and provides Mr. Brown with the same rights to
severance payments as were provided under the terms of the employment agreement
and severance compensation agreement. Pursuant to the Termination Agreement, the
amount of severance Mr. Brown would be eligible to receive is $1,093,750. This
amount has not been recorded as a liability on the books and records of the
Corporation as of June 30, 2004.

6. MARKETABLE INVESTMENT SECURITIES AND INVESTMENTS AT FAIR VALUE

Franklin valued its position in Excelsior Radio Networks, Inc. ("Excelsior") at
$2.50 per common share based on the sale of 200,000 common shares to Quince
Associates, L.P. ("Quince"), an affiliate of Sunshine, on June 30, 2004 and the
subsequent agreement entered into on July 5, 2004 whereby Franklin would sell
its remaining position in Excelsior to Quince. (See Note 11)

Franklin issued a $1,000,000 note as part of the purchase price of Excelsior.
This note was due February 28, 2002 with interest at 3.54% but has a right of
set-off against certain representations and warranties made by Winstar Radio
Networks, Inc. The due date of the note has been extended indefinitely until the
action described in Note 5 is settled.


                                       12
<PAGE>
FRANKLIN CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)


On October 1, 2002, Franklin received 74,232 warrants to acquire shares of
Excelsior common stock at an exercise price of $1.20 per share for arranging a
refinancing of Excelsior debt.

During the six months ended June 30, 2003, Franklin earned $90,000 in management
fees and was reimbursed $72,000 for salary and benefits for Franklin's chief
financial officer, which was recorded as a reduction of expenses on Franklin
under a management services agreement between Franklin and Excelsior. The
agreement expired December 31, 2003.

Franklin along with Sunshine initially purchased Excelsior on August 28, 2001.
On October 3, 2002, Franklin sold 773,196 common shares for $1.94 per share for
$1,500,000 realizing a gain of $726,804. On January 31, 2003, Franklin purchased
and subsequently on May 29, 2003, Franklin cancelled the purchase, 33,750 common
shares for $1.625 per share and 65,199 warrants to acquire shares of Excelsior
common stock at an exercise price of $1.125 per share for $0.50 per warrant. On
August 12, 2003, Franklin sold 193,000 common shares for $1.30 per share for
$250,900 realizing a gain of $57,900. Franklin has stock appreciation rights on
these common shares as follows, a) in the event that Excelsior is sold on or
before August 8, 2004 for gross proceeds of no less than $40,000,000, then
Franklin shall be entitled to receive fifty percent (50%) of any net value above
$1.30 per share not to exceed total proceeds to Franklin of $1.94 per share, and
b) in the event that Excelsior is sold on or before August 8, 2005 for gross
proceeds of no less than $40,000,000, then Franklin shall be entitled to receive
fifty percent (50%) of any net value above $1.30 per share not to exceed
proceeds to Franklin of $1.625 per share. On October 8, 2003, Franklin sold to
Sunshine 375,000 shares of the common stock of Excelsior for an aggregate
purchase price of $750,000, realizing a gain of $375,000, pursuant to a stock
purchase agreement between Sunshine and Franklin. On March 19, 2004, Franklin
sold to Sunshine 58,804 shares of the common stock of Excelsior for an aggregate
purchase price of $117,608, realizing a gain of $58,804, pursuant to a stock
purchase agreement between Sunshine and Franklin. On June 30, 2004, Franklin
sold to Quince 200,000 shares of the common stock of Excelsior for an aggregate
purchase price of $500,000, realizing a gain of $300,000, pursuant to a stock
purchase agreement between Quince and Franklin. Franklin has stock appreciation
rights on the common shares sold on October 8, 2003 and March 19, 2004, such
that if Excelsior is sold and the purchaser of the common shares from Franklin
receives more than $3.50 per share, Franklin is entitled to receive 80% of the
value greater than $3.50 per share. Franklin has stock appreciation rights on
the common shares sold on June 30, 2004 such that in the event of net proceeds
from a liquidation of Excelsior exceed $3.00 (or an amount equal to $3.00 plus
$0.50 multiplied by the number of years, up to 5 years elapsed since June 30,
2004), Franklin will be entitled to receive 80% of the value greater than $3.00
(or such other applicable amount) per share.

After giving effect to the purchase of the common stock on June 30, 2004,
Sunshine owns 74% and the Corporation owns 26% of the issued and outstanding
common stock, and voting power, of Excelsior. On a fully diluted basis, after
giving effect to the exercise of the outstanding warrants and the conversion of
Sunshine's outstanding preferred stock of Excelsior into common stock, the
Corporation owns approximately 10% of Excelsior.

On July 5, 2004 Franklin entered into an agreement with Quince to sell its
remaining interest in Excelsior. Please see Note 11 for additional information
on the terms of this agreement.

In 2001, Franklin maintained group life and dental insurance with Principal
Financial Group ("PFG"). Upon the demutualization of PFG in October 2001,
Franklin received 4,338 common shares of PFG. However, Franklin did not receive
any notification for the receipt of such shares. In 2004 Franklin became aware
of its ownership of PFG common shares, and recorded the fair value of such
shares within marketable investments. On April 23, 2004, Franklin sold the
common shares of PFG for $151,400, which was recorded as other realized gains in
the accompanying statement of operations.

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


                                       13
<PAGE>
FRANKLIN CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)


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.

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

<TABLE>
<CAPTION>
                                                              June 30, 2004                 June 30, 2003
                                                              -------------                 -------------
                                                                        Weighted                       Weighted
                                                                         Average                        Average
                                                          Shares     Exercise Price     Shares       Exercise Price
                                                          ------     --------------     ------       --------------
<S>                                                     <C>           <C>            <C>              <C>
Outstanding at beginning of year                          20,625         $11.39         20,625           $11.39
Granted                                                   26,250         $ 1.50            -                -
Exercised                                                 26,250         $ 1.50            -                -
Forfeited                                                    -              -              -                -
Expired                                                      -              -              -                -
                                                         --------                      --------
Outstanding at end of period                              20,625         $11.39         20,625           $11.39
                                                          ======                        ======
Exercisable at end of period                              20,625         $11.39         20,625           $11.39
                                                          ======                        ======
Weighted average fair value of options granted
                                                           $1.50                           -
</TABLE>


The options issued under the SIP have a remaining contractual life of 4.5 years.
The options issued under the SOP have a remaining contractual life of 6.5 years.

8.         NET INCREASE (DECREASE) IN NET ASSETS PER COMMON SHARE

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

<TABLE>
<CAPTION>
                                                                   Three Months ended                    Six Months ended
                                                                        June 30,                             June 30,
                                                             --------------------------------------------------------------------
                                                                 2004             2003                2004             2003
                                                             --------------------------------------------------------------------
<S>                                                          <C>              <C>                 <C>             <C>
Numerator:
           Net increase (decrease) in net
              assets from operations                           $34,738         $(802,525)          $(105,708)      $(1,028,708)
           Preferred stock dividends                           (19,161)          (19,163)            (38,325)          (38,327)
                                                              ---------       -----------         -----------     -------------
           Numerator for basic and diluted earnings per
              share - net increase (decrease) in net assets
              attributable to common stockholders              $15,577         $(821,688)          $(144,033)      $(1,067,035)
                                                              =========       ===========         ===========     =============

Denominator:
           Denominator for basic increase
             (decrease) in net assets from
             operations - weighted - average shares          1,027,888         1,040,931           1,024,016         1,043,360

Basic and diluted net increase (decrease) in net
           assets from operations per share                      $0.02            $(0.79)             $(0.14)           $(1.02)
                                                                 =====            =======             =======           =======
</TABLE>

                                       14
<PAGE>
FRANKLIN CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)


Common shares which would be issued upon conversion of the Corporation's
preferred stock or exercise of options have been excluded from the dilutive per
share computation as they are antidilutive (see Notes 4 and 7):

                                                      Period ended June 30,
                                                   ---------------------------
                                                       2004            2003
                                                   ---------------------------

Preferred stock convertible into common stock         82,125          82,125
Stock options                                         20,625          20,625


9. NET ASSET VALUE PER SHARE

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

<TABLE>
<CAPTION>
                                                                                     June 30,               December 31,
                                                                                       2004                     2003
                                                                                 ----------------------------------------
<S>                                                                              <C>                       <C>
Numerator:
           Numerator for net asset value per
             common share, as if converted basis                                   $1,921,950                $2,024,138
           Liquidation value of convertible preferred stock                        (1,095,000)               (1,095,000)
                                                                                  ------------              ------------
           Numerator for net asset value per share
             attributable to common stockholders                                   $  826,950                $  929,138
                                                                                  ============              ============

Denominator:
           Number of common shares outstanding,
             denominator for net asset value per share
             attributable to common stockholders                                    1,046,350                 1,020,100
           Number of shares of common stock to be
             issued upon conversion of preferred stock                                 82,125                    82,125
                                                                                  ------------              ------------
           Denominator for net asset value per common
             share as if converted basis                                            1,128,475                 1,102,225
                                                                                  ============              ============

           Net asset value per share attributable to common stockholders                $0.79                     $0.91
                                                                                        =====                     =====

           Net asset value per common share, as if converted basis                      $1.70                     $1.84
                                                                                        =====                     =====
</TABLE>

10.  PURCHASES AND SALES OF INVESTMENT SECURITIES

The cost of purchases and proceeds from sales of investment securities,
excluding short-term investments, aggregated $15,248 and $789,580, respectively,
for the six months ended June 30, 2004; $87,444 and $87,444, respectively, for
the six months ended June 30, 2003.

11. SUBSEQUENT EVENT

On July 5, 2004, Franklin entered into an agreement to sell Franklin's remaining
interest in Excelsior to Quince. The transactions contemplated by this agreement
are subject to Franklin shareholder approval. Should the shareholders approve
the sale, Franklin would sell 650,000 shares of Excelsior common stock for $2.50
per share, warrants exercisable for 74,232 shares of Excelsior common stock at
an exercise price of $1.20 per share for $1.30 per warrant, and warrants
exercisable for 12,789 shares of Excelsior common stock at an exercise price of
$1.125 per share for $1.375 per warrant. Franklin may receive additional
proceeds based on certain contingencies. Please refer to Franklin's preliminary
proxy statement filed with the SEC on July 30, 2004 for additional information
related to this proposed sale.

                                       15
<PAGE>
ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
           RESULTS OF OPERATIONS

           The following "Overview" section is a brief summary of the
significant issues addressed in Management's Discussion and Analysis of
Financial Condition and Results of Operations ("MD&A"). Investors should read
the relevant sections of the MD&A for a complete discussion of the issues
summarized below. The entire MD&A should be read in conjunction with Item 1.
Financial Statements appearing elsewhere in this Form 10-Q.

OVERVIEW

           During the six months ended June 30, 2004, the Corporation realized
approximately $359,000 in gains on its sale of Excelsior common stock and
approximately $142,000 in gains on its sale of marketable securities. The
Corporation continues to rely on the increase in the value of its investments
and the ability to sell them in order to fund its ongoing operations.

           On June 23, 2004, the Corporation entered into a letter of
understanding (the "LOU") with Ault Glazer & Company Investment Management LLC
("Ault Glazer"), which indirectly beneficially owns or controls a significant
percentage of the Corporation's voting stock. The LOU sets forth the
understandings and agreements of the Corporation and Ault Glazer with respect to
the initial steps in the execution of a strategic restructuring and
recapitalization plan for the Corporation (the "Restructuring Plan"). In
connection with the LOU, on June 23, 2004, the Corporation increased the size of
the Board of Directors and appointed Milton "Todd" Ault, III to fill the
resulting vacancy on the Board of Directors. Likewise, the Corporation agreed to
take all necessary actions, including the preparation and mailing of all
necessary preliminary and definitive proxy statements, to call and hold a
special meeting of the Corporation's stockholders (the "Special Meeting") for
the purpose of approving certain proposals (as described below) relating to the
Restructuring Plan. The LOU also outlines certain parameters for the operation
of the Corporation's business prior to the Special Meeting and subsequent steps
for the Restructuring Plan that both the Corporation and Ault Glazer have agreed
to use commercially reasonable efforts to take following the Special Meeting.

           The proposals that the Corporation's stockholders will be asked to
approve at the special meeting include each of the following:

           o          The election of four directors to hold office until the
                      next annual meeting of stockholders or until their
                      successors have been duly elected and qualified (two of
                      whom are to be elected by the holders of the Corporation's
                      Common Stock, voting together as a single class, and two
                      of whom are to be elected by the holders of Preferred
                      Stock, voting as a separate class)

           o          The approval of the amendment and restatement of the
                      Corporation's certificate of incorporation to: (i)
                      increase the authorized number of shares of Common Stock
                      from 5,000,000 shares to 50,000,000 shares; (ii) increase
                      the authorized number of shares of Preferred Stock from
                      5,000,000 shares to 10,000,000 shares; (iii) provide for
                      the exculpation of director liability to the fullest
                      extent permitted by law; and (iv) provide for the
                      classification of the Corporation's Board of Directors
                      into three classes of directors;

           o          The approval of the sale by the Corporation to Quince of
                      all of the shares of common stock, and warrants to
                      purchase shares of common stock, of Excelsior beneficially
                      owned by the Corporation;


                                       16
<PAGE>
           o          The approval of the issuance of an aggregate of up to
                      5,000,000 shares of the Corporation's Common Stock, and
                      warrants to purchase an aggregate of up to 1,500,000
                      additional shares of the Corporation's Common Stock upon
                      terms that are approved by a majority of the Board of
                      Directors consistent with its fiduciary duties and
                      consistent with prevailing market terms (which may require
                      a discount from the then-current market price of the
                      Common Stock) for such issuances at the time of such
                      issuances;

           o          The approval of the sale of equity securities of the
                      Corporation to certain "interested stockholders" (as such
                      term is defined in Section 203 of the Delaware General
                      Corporation Law (the "DGCL")) on terms that are approved
                      by a majority of the Board of Directors consistent with
                      its fiduciary duties and consistent with prevailing market
                      terms for such issuances at the time of such issuances

           Each of the above proposals, and any action by the Corporation in
pursuit of any transactions described in such proposals, is subject to the
approval by the Corporation's stockholders at the Special Meeting.

           As a result of the acquisition by Ault Glazer of more than 30% of the
outstanding shares of the common stock of Franklin without the prior approval of
the Board, Mr. Stephen L. Brown, Chairman and Chief Executive Officer of
Franklin became entitled, if his employment with Franklin were to terminate
within one year thereafter, to receive certain severance payments under the
terms of his employment agreement and severance compensation agreement with
Franklin. In connection with the Restructuring Plan, Franklin also entered into
a Termination Agreement and Release (the "Termination Agreement") with Mr. Brown
which contains the terms of Mr. Brown's prospective resignation from Franklin
and replaces Mr. Brown's employment agreement and severance compensation
agreement. The Termination Agreement provides that, upon the election of the new
slate of members of the Board of Directors and the approval of Franklin's sale
of Excelsior common stock and warrants to purchase Excelsior common stock to
Quince at the Special Meeting, Mr. Brown will resign as an officer and director
of Franklin. Pursuant to the Termination Agreement, the amount of severance Mr.
Brown would be eligible to receive is $1,093,750. This amount has not been
recorded as a liability on the books and records of the Corporation as of June
30, 2004.

           Please refer to the preliminary proxy statement filed with the SEC on
July 30, 2004 for additional descriptions of, and information relating to, the
LOU, the Restructuring Plan, the Termination Agreement and the proposals to be
voted on by the Corporation's stockholders.

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.

           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 may determine, if


                                       17
<PAGE>
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.

STATEMENT OF OPERATIONS

           The Corporation accounts for its operations under accounting
principles generally accepted in the United States for investment companies. On
this basis, the principal measure of its financial performance is captioned "Net
(decrease) increase in net assets from operations," which is composed of the
following:

           o          "Net investment loss from operations," which is the
                      difference between the Corporation's income from interest,
                      dividends and fees and its operating expenses;

           o          "Net realized gain on portfolio of investments," which is
                      the difference between the proceeds received from
                      dispositions of portfolio securities and their stated
                      cost;

           o          any applicable income tax provisions (benefits); and

           o          "Net (decrease) increase in unrealized appreciation of
                      investments," which is the net change in the fair value of
                      the Corporation's investment portfolio, net of any
                      (decrease) increase 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
(decrease) increase 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,
$3,092,669 and $1,921,950 at June 30, 2004, versus $3,258,032 and $2,024,138 at
December 31, 2003. Net asset value per share attributable to common shareholders
and on an as if converted basis was $0.79 and $1.70, respectively at June 30,
2004, versus $0.91 and $1.84 at December 31, 2003.

           The Corporation's financial condition is dependent on the success of
its investments. A summary of the Corporation's investment portfolio is as
follows:

                                       18
<PAGE>
                                       JUNE 30, 2004      DECEMBER 31, 2003
                                       -------------      -----------------

Investments, at cost                    $1,676,249           $1,949,703
Unrealized appreciation                  1,089,210            1,005,466
                                        ----------           ----------
Investments, at fair value              $2,765,459           $2,955,169
                                        ==========           ==========

           The accompanying financial statements have been prepared assuming
that the Corporation will continue as a going concern. The Corporation has a
working capital deficiency of approximately $900,000 at June 30, 2004. This
condition raises substantial doubt about the Corporation's ability to continue
as a going concern. There can be no assurance that the Corporation would be able
to find a suitable merger partner, should it seek to do so, or be able to obtain
alternative financing.

           Pursuant to the terms of the LOU, on July 30, 2004, the Company filed
with the SEC a preliminary proxy statement soliciting the approval by the
Corporation's stockholders of a number of proposals relating to the
Restructuring Plan. As described more fully in the "Overview" section of this
Item 2 (Management's Discussion and Analysis of Financial Condition and Results
of Operations) of this Quarterly Report on Form 10-Q, and in the Corporation's
preliminary proxy statement, certain of these proposals are intended to allow
the Corporation to attempt to raise additional capital. Even if the
Corporation's stockholders approve these proposals, however, there can be no
assurance that the Corporation will be able to raise additional capital. 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.

INVESTMENTS

           The Corporation's financial condition is dependent on the success of
its investments. The Corporation has invested a substantial portion of its
assets in thinly capitalized companies including one development stage company
that may lack management depth.

           Alacra Corporation

           At June 30, 2004, the Corporation had an investment in Alacra
Corporation ("Alacra"), valued at $1,000,000, which represents 32.3% of the
Corporation's total assets and 52.0% of its net assets. Alacra, based in New
York, is a leading global provider of business and financial information. Alacra
provides a diverse portfolio of fast, sophisticated online services that allow
users to quickly find, analyze, package and present mission-critical business
information. Alacra's customers include more than 750 leading financial
institutions, management consulting, law and accounting firms and other
corporations throughout the world.

           On April 20, 2000, the Corporation purchased $1,000,000 worth of
Alacra Series F Convertible Preferred Stock. Franklin has the right to have the
preferred stock redeemed by Alacra for face value plus accrued dividends on
December 31, 2005. In connection with this investment, Franklin was granted
observer rights on Alacra board of directors meetings.

           Excelsior Radio Networks

           At June 30, 2004, the Corporation had an investment in Excelsior,
formerly known as eCom Capital, Inc., valued at $1,739,210, which represents
52.5% of the Corporation's total assets and 84.5% of its net assets. This
valuation represents the same value as the last sales price realized by the
Corporation for the sale of 200,000 shares of Excelsior's common stock on June


                                       19
<PAGE>
30, 2004 as well as an agreement reached on July 5, 2004 to sell Franklin's
remaining position in Excelsior. Excelsior produces and syndicates programs and
services heard on more than 2,000 radio stations nationwide across most major
formats. Through its Dial Communications Global Media sales subsidiary,
Excelsior sells the advertising inventory radio stations provide, in exchange
for the Excelsior content. The programming and content includes prep services as
well as long form and short form programming. Additionally, Dial Communications
Global Media has a number of independent producer clients, which range from talk
and music programs to news and traffic services.

           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. As of December
31, 2003, the secured note was paid back to Franklin. Franklin sold 250,000
common shares for $1.00 per share on December 4, 2001 for no gain or loss. On
October 1, 2002, Franklin received 74,232 warrants to acquire shares of
Excelsior common stock at an exercise price of $1.20 per share for arranging a
financing of Excelsior. On October 3, 2002, Franklin sold 773,196 common shares
for $1.94 per share for total proceeds of $1,500,000 realizing a gain of
$726,804. On January 31, 2003, Franklin purchased and subsequently on May 29,
2003, Franklin cancelled the purchase, 33,750 common shares for $1.625 per share
and 65,199 warrants to acquire shares of Excelsior common stock at an exercise
price of $1.125 per share for $0.50 per warrant. On August 12, 2003, Franklin
sold 193,000 common shares for $1.30 per share for total proceeds of $250,900
realizing a gain of $57,900. Franklin has stock appreciation rights on these
common shares as follows, a) in the event that Excelsior is sold on or before
August 8, 2004 for gross proceeds of no less than $40,000,000, then Franklin
shall be entitled to receive fifty percent (50%) of any net value above $1.30
per share not to exceed proceeds to Franklin of $1.94 per share, and b) in the
event that the Excelsior is sold on or before August 8, 2005 for gross proceeds
of no less than $40,000,000, then Franklin shall be entitled to receive fifty
percent (50%) of any net value above $1.30 per share not to exceed proceeds to
Franklin of $1.625 per share. On October 8, 2003, Franklin sold to Sunshine
375,000 shares of the common stock of Excelsior for an aggregate purchase price
of $750,000, realizing a gain of $375,000, pursuant to a stock purchase
agreement between Sunshine and Franklin. On March 19, 2004, Franklin sold to
Sunshine 58,804 shares of common stock of Excelsior for an aggregate purchase
price of $117,608, realizing a gain of $58,804, pursuant to a stock purchase
agreement between Sunshine and Franklin. Franklin has stock appreciation rights
on the common shares sold on both October 8, 2003 and March 19, 2004, such that
if Excelsior is sold and the purchaser of the common shares from Franklin
receives more than $3.50 per share, Franklin is entitled to receive 80% of the
value greater than $3.50 per share. On June 30, 2004, Franklin sold to Quince
200,000 shares of the common stock of Excelsior for an aggregate purchase price
of $500,000, realizing a gain of $300,000, pursuant to a stock purchase
agreement between Quince and Franklin. Franklin has stock appreciation rights on
the common shares sold on June 30, 2004 such that in the event of net proceeds
from a liquidation of Excelsior exceed $3.00 (or an amount equal to $3.00 plus
$0.50 multiplied by the number of years, up to 5 years elapsed since June 30,
2004), Franklin will be entitled to receive 80% of the value greater than $3.00
(or such other applicable amount) per share.

           After giving effect to the purchase of the common stock on June 30,
2004, Sunshine owns 74% and the Corporation owns 26% of the issued and
outstanding common stock, and voting power, of Excelsior. On a fully diluted
basis, after giving effect to the exercise of the outstanding warrants and the
conversion of Sunshine's outstanding preferred stock of Excelsior into common
stock, the Corporation owns approximately 10% of Excelsior.


                                       20
<PAGE>
           On July 5, 2004, Franklin entered into an agreement to sell to Quince
Franklin's remaining interest in Excelsior. The transactions contemplated by
this agreement are subject to shareholder approval. Should the shareholders
approve the sale, Franklin would sell 650,000 shares of Excelsior common stock
for $2.50 per share, warrants exercisable for 74,232 shares of Excelsior common
stock at an exercise price of $1.20 per share for $1.30 per warrant, and
warrants exercisable for 12,789 shares of Excelsior common stock at an exercise
price of $1.125 per share for $1.375 per warrant. Franklin may receive
additional proceeds based on certain contingencies. Please refer to Franklin's
preliminary proxy statement filed with the SEC on July 30, 2004 for additional
information related to this proposed sale.

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 $215 and $90,758 for the six
months ended and $50 and $45,080 for the three months ended June 30, 2004 and
2003, respectively. The decrease in investment income for the six and three
months ended June 30, 2004 when compared to June 30, 2003, was primarily the
result of the management agreement with Excelsior expiring on December 31, 2003.

           Operating expenses were $690,545 and $642,411 for the six months
ended and $397,697 and $323,006 for the three months ended June 30, 2004 and
2003, 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.
Included in compensation is a $40,000 bonus paid to an officer of the
Corporation during 2003. Professional fees were $139,000 higher in 2004 due to
costs incurred due to the LOU with Ault Glazer. The Corporation was reimbursed
approximately $72,000 for salary and benefit expense for its chief financial
officer under the terms of the management agreement with Excelsior for the six
months ended June 30, 2003. This reimbursement has been recorded as a reduction
in operating expenses.

           Net investment losses from operations were $690,330 and $551,653 for
the six months and $397,647 and $277,926 for the three months ended June 30,
2004 and 2003, 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 six months ended June 30, 2004 and 2003, the Corporation
realized net gains before taxes of $500,878 and $0 respectively, primarily from
the disposition of a portion of the Corporation's Excelsior holdings and the


                                       21
<PAGE>
sale of common shares of Principal Financial Group ("PFG"). In 2001, Franklin
maintained group life and dental insurance with PFG. Upon the demutualization of
PFG in October 2001, Franklin received 4,338 common shares of PFG. However,
Franklin did not receive any notification for the receipt of such shares. In
2004 Franklin became aware of its ownership of PFG common shares, and recorded
the fair value of such shares within marketable investments.

UNREALIZED APPRECIATION OF INVESTMENTS:

           Unrealized appreciation of investments, increased by $83,744 during
the six months ended June 30, 2004, primarily due an increase in the value of
the Corporation's Excelsior holdings.

           Unrealized appreciation of investments, decreased by $477,055 during
the six months ended June 30, 2003, primarily from unrealized losses in
Excelsior.

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. The Corporation is taxed under Regulation C of the Code
and, therefore, it is subject to federal income tax on the portion of its
taxable income and net capital as well as such distribution to its stockholders.

LIQUIDITY AND CAPITAL RESOURCES

           The accompanying financial statements have been prepared assuming
that the Corporation will continue as a going concern. The Corporation has a
working capital deficiency of approximately $900,000 at June 30, 2004. This
condition raises substantial doubt about the Corporation's ability to continue
as a going concern.

           Pursuant to the terms of the LOU, on July 30, 2004, the Company filed
with the SEC a preliminary proxy statement soliciting the approval by the
Corporation's stockholders of a number of proposals relating to the
Restructuring Plan. As described more fully in the "Overview" section of this
Item 2 (Management's Discussion and Analysis of Financial Condition and Results
of Operations) of this Quarterly Report on Form 10-Q, and in the Corporation's
preliminary proxy statement, certain of these proposals are intended to allow
the Corporation to attempt to raise additional capital. Even if the
Corporation's stockholders approve these proposals, however, there can be no
assurance that the Corporation will be able to raise additional capital. 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.

           Cash and cash equivalents increased by $224,225 to $274,498 for the
six months ended June 30, 2004, compared to a decrease of $450,670 for the six
months ended June 30, 2003.

           Operating activities used $716,539 of cash for the six months ended
June 30, 2004, compared to using $400,098 for the six months ended June 30,
2003.

                                       22
<PAGE>
           Operating activities for the six months ended June 30, 2004,
exclusive of changes in operating assets and liabilities, used $690,330 of cash,
as the Corporation's net decrease in net assets from operations of $105,708
included non-cash charges for unrealized losses of $83,744 and net realized
gains of $500,878. For the six months ended June 30, 2003, operating activities,
exclusive of changes in operating assets and liabilities, used $543,166 of cash,
as the Corporation's net decrease in net assets from operations of $1,028,708
included non-cash charges for depreciation and amortization of $8,487 and
unrealized losses of $477,055.

           Changes in operating assets and liabilities decreased cash $26,209
for the six months ended June 30, 2004, principally due to a decrease in the
level of accounts payable and accrued expenses and a decrease in other assets.
For the six months ended June 30, 2003, changes in operating assets and
liabilities resulted in proceeds of $143,068 of cash.

             The principal factor in the $774,332 cash provided by investing
activities for the six months ended June 30, 2004 was the sale of common shares
of Excelsior and the sale of common shares of PFG. For the six months ended June
30, 2003, the $8,426 cash provided in investing activities was from the sale of
marketable investment securities.

           Cash used in financing activities for the six months ended June 30,
2004 of $7,520 was for preferred dividends of $38,325 and payments against the
note payable of $11,040 offset by $39,375 for the issuance of treasury stock for
the exercise of director options as well as $2,470 of proceeds related to a 16B
filing. Financing activities for the six months ended June 30, 2003 used $58,998
primarily from payment of preferred dividends of $38,327, the purchase of
treasury stock of $13,561, as well as $7,110 of payments against the note
payable.

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.

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


                                       23
<PAGE>
           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.

           The Restructuring Plan provides for the resignation of Stephen Brown
as Chairman and Chief Executive Officer of the Corporation pursuant to the
Termination Agreement and the resignation of the current members of senior
management and the Board of Directors, and calls for the election of new
directors and officers of the Corporation. These new directors and officers have


                                       24
<PAGE>
not previously been involved with the Corporation. Profitability of the
Corporation would be dependent on this new management, as opposed to current
management. As a result, there can be no assurance that the new senior
management would operate the Corporation in a profitable manner.

           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 annual financial
statements. Franklin is currently seeking alternative sources of financing to
continue operating through the current fiscal year.

           Pursuant to the terms of the LOU, on July 30, 2004, the Company filed
with the SEC a preliminary proxy statement soliciting the approval by the
Corporation's stockholders of a number of proposals relating to the
Restructuring Plan. As described more fully in the "Overview" section of this
Item 2 (Management's Discussion and Analysis of Financial Condition and Results
of Operations) of this Quarterly Report on Form 10-Q, and in the Corporation's
preliminary proxy statement, certain of these proposals are intended to allow
the Corporation to attempt to raise additional capital. Even if the
Corporation's stockholders approve these proposals, however, there can be no
assurance that the Corporation will be able to raise additional capital. If
funds are not raised, Franklin may not be able to continue its operations.

           RESTRUCTURING PLAN

           The Restructuring Plan would shift Franklin's investment strategy
away from the radio and telecommunications industry and to refocus it on the
medical products/health care solutions industry and the financial services
industry. Specifically, the sale of Excelsior, if approved by Franklin's
shareholders, would represent a shift of Franklin's investment strategy away
from the radio and telecommunications industry and new management would refocus
this strategy on the medical products/health care solutions industry and the
financial services industry. Franklin has not invested in these industries in
the past and therefore has not compiled a track record regarding the financial
performance to be expected in connection with these new investments. There can
be no assurance regarding the return on, or the recovery of, Franklin's
investments in businesses in these industries, and whether such investments will
be profitable.

           Moreover, there are a number of inherent risks for entities doing
business in the medical produces/health care solutions industry, including a
complex array of regulatory requirements. These risks could have a material
adverse effect on the profitability of the businesses in which Franklin invests,
which in turn could have a material adverse effect on the return on, or the
recovery of, Franklin's investment in such businesses.

           The Restructuring Plan provides for the resignation of Stephen Brown
as Chairman and Chief Executive Officer of the Corporation pursuant to the
Termination Agreement and the resignation of the current members of senior
management and the Board of Directors, and calls for the election of new
directors and officers of the Corporation. These new directors and officers have
not previously been involved with the Corporation. Profitability of the
Corporation would be dependent on this new management, as opposed to current
management. As a result, there can be no assurance that the new senior
management would operate the Corporation in a profitable manner.


                                       25
<PAGE>
           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 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.

                                       26
<PAGE>
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."

ITEM 4.    CONTROLS AND PROCEDURES

           The Corporation's management evaluated, with the participation of the
Corporation's principal executive and principal financial officers, the
effectiveness of the Corporation's disclosure controls and procedures (as
defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of
1934, as amended (the "Exchange Act")), as of June 30, 2004. Based on their
evaluation, the Corporation's principal executive and principal financial
officers concluded that the Corporation's disclosure controls and procedures
were effective as of June 30, 2004.

           There has been no change in the Corporation's internal control over
financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act) that occurred during the Corporations fiscal quarter ended June
30, 2004, that has materially affected, or is reasonably likely to materially
affect, the Corporation's internal control over financial reporting.


                                       27
<PAGE>
                           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. On February 25, 2003, the case against Franklin and Sunshine was dismissed,
however the plaintiffs have a right to appeal. The lawsuit alleges that the
Winstar defendants conspired to commit fraud and breached their fiduciary duty
to the plaintiffs in connection with the acquisition of the plaintiff's radio
production and distribution business. The complaint further alleges that
Franklin and Sunshine joined the alleged conspiracy. The plaintiffs seek
recovery of damages in excess of $10,000,000, costs and attorneys' fees. An
unfavorable outcome in an appeal, should it be brought, together with an
unfavorable outcome in the lawsuit may have a material adverse effect on
Franklin's business, financial condition and results of operations.

ITEM 2.    CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF
           EQUITY SECURITIES

           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

                Exhibit 31.1     Certification of the Chief Executive Officer
                                 required by Rule 13a-14(a) or Rule 15d-14(a) of
                                 the Securities Exchange Act, as amended

                Exhibit 31.2     Certification of the Chief Financial Officer
                                 required by Rule 13a-14(a) or Rule 15d-14(a) of
                                 the Securities Exchange Act, as amended

                Exhibit 32.1     Certification of Chief Executive Officer
                                 required by Rule 13a-14(b) or Rule 15d-14(b)
                                 and 18 U.S.C. Section 1350 (furnished herewith)

                Exhibit 32.2     Certification of Chief Financial Officer
                                 required by Rule 13a-14(b) or Rule 15d-14(b)
                                 and 18 U.S.C. Section 1350 (furnished herewith)

           (B)  REPORTS ON FORM 8-K.

                      1.         The Corporation filed a Current Report on Form
                                 8-K on April 1, 2004 announcing, under Item 5


                                       28
<PAGE>
                                 that its Board of Directors had authorized the
                                 retention of a financial advisor to advise
                                 Franklin on various strategic, financial and
                                 business alternatives available to it to
                                 maximize shareholder value.

                      2.         The Corporation filed a report on Form 8-K on
                                 May 25, 2004 announcing, under Item 5, that the
                                 Board of Directors had met with Ault Glazer and
                                 describing the substance of that meeting.

                      3.         The Corporation furnished a report on Form 8-K
                                 on June 2, 2004 announcing, under Item 9, that
                                 the Board of Directors had responded to a
                                 letter received from Ault Glazer demanding that
                                 the Board of Directors and all officers of
                                 Franklin immediately resign.

                      4.         The Corporation filed a report on Form 8-K on
                                 June 24, 2004 announcing, under Item 5, that
                                 the Board of Directors had entered into the LOU
                                 with Ault Glazer.


                                    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: August 13, 2004                By: /s/ Stephen L. Brown
                                         -------------------------------------
                                         Stephen L. Brown
                                         Chairman and Chief Executive Officer


                                         /s/ Hiram M. Lazar
                                         -------------------------------------
                                         Hiram M. Lazar
                                         Chief Financial Officer



                                       29
<PAGE>
                                  EXHIBIT INDEX



EXHIBIT
NUMBER               DESCRIPTION

Exhibit 31.1          Certification of the Chief Executive Officer required by
                      Rule 13a-14(a) or Rule 15d-14(a) of the Securities
                      Exchange Act, as amended

Exhibit 31.2          Certification of the Chief Financial Officer required by
                      Rule 13a-14(a) or Rule 15d-14(a) of the Securities
                      Exchange Act, as amended

Exhibit 32.1          Certification of Chief Executive Officer required by Rule
                      13a-14(b) or Rule 15d-14(b) and 18 U.S.C. Section 1350
                      (furnished herewith)

Exhibit 32.2          Certification of Chief Financial Officer required by Rule
                      13a-14(b) or Rule 15d-14(b) and 18 U.S.C. Section 1350
                      (furnished herewith)















                                       30