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, 2002
                                     -------------

                                            or

     _       Transition report pursuant to Section 13 or 15(d) of the Securities
             and Exchange Act of 1934

     For the transition period from ________________ to ___________________

Commission File No.   1-9727
                     -------

                          Franklin Capital Corporation
                          ----------------------------
               (Exact name of registrant specified in its charter)

         Delaware                                       13-3419202
---------------------------                 ------------------------------------
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
 incorporation or organization)

450 Park Avenue, 10th Floor, New York, New York                    10022
-----------------------------------------------              -------------------
(Address of principal executive offices)                         (Zip Code)

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

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such shorter  period that the  Corporation  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes X No
                                       -   -

The  number of shares of common  stock  outstanding  as of August  12,  2002 was
1,064,500.
<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
                  Proposed Merger with Change Technology Partners, Inc.
                  Investments
                  Results of Operations
                  Liquidity and Capital Resources
                  Risks
         Item 3.  Quantitative and Qualitative Disclosures about Market Risk

PART II. OTHER INFORMATION
         Item 1.  Legal Proceedings
         Item 2.  Changes in Securities and Use of Proceeds
         Item 3.  Defaults Upon Senior Securities
         Item 4.  Submission of Matters to a Vote of Security Holders
         Item 5.  Other Information
         Item 6.  Exhibits and Reports on Form 8-K

SIGNATURE

EXHIBIT INDEX

                           FORWARD LOOKING STATEMENTS

WHEN  USED  IN THIS  QUARTERLY  REPORT  ON  FORM  10-Q,  THE  WORDS  "BELIEVES,"
"ANTICIPATES,"  "EXPECTS"  AND  SIMILAR  EXPRESSIONS  ARE  INTENDED  TO IDENTIFY
FORWARD-LOOKING  STATEMENTS.  STATEMENTS LOOKING FORWARD IN TIME ARE INCLUDED IN
THIS QUARTERLY REPORT ON FORM 10-Q. SUCH STATEMENTS ARE SUBJECT TO CERTAIN RISKS
AND  UNCERTAINTIES  WHICH  COULD  CAUSE  ACTUAL  RESULTS  TO DIFFER  MATERIALLY,
INCLUDING,  BUT NOT LIMITED TO, THOSE SET FORTH IN "MANAGEMENT'S  DISCUSSION AND
ANALYSIS  OF  FINANCIAL  CONDITION  AND  RESULTS  OF  OPERATIONS."  READERS  ARE
CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS, WHICH
SPEAK ONLY AS OF THE DATE HEREOF.  THE  CORPORATION  UNDERTAKES NO OBLIGATION TO
PUBLICLY   REVISE  THESE   FORWARD-LOOKING   STATEMENTS  TO  REFLECT  EVENTS  OR
CIRCUMSTANCES  OCCURRING  AFTER THE DATE HEREOF OR TO REFLECT THE  OCCURRENCE OF
UNANTICIPATED EVENTS.


                                       2
<PAGE>

                         PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements

         The  information  furnished in the  accompanying  financial  statements
reflects all adjustments  consisting of normal  recurring  accruals 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>
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                   JUNE 30,             DECEMBER 31,
                                                                                                     2002                  2001
                                                                                                 (UNAUDITED)
------------------------------------------------------------------------------------------------------------------------------------

<S>                                                                                              <C>                   <C>
ASSETS

Marketable investment securities, at market value (cost: June 30,
    2002 - $57,660; December 31, 2001 - $34,675)  (Note 2)                                       $     51,675          $     34,675
Investments, at fair value (cost: June 30, 2002 - $3,640,000;
    December 31, 2001 - $3,876,430)  (Note 2)
         Excelsior Radio Networks, Inc.                                                             5,500,000             2,325,000
         Other investments                                                                          1,000,000             1,369,197
                                                                                                 ------------          ------------
                                                                                                    6,500,000             3,694,197
                                                                                                 ------------          ------------

Cash and cash equivalents (Note 2)                                                                    181,215               279,728
Other assets                                                                                           78,980                90,266
                                                                                                 ------------          ------------

TOTAL ASSETS                                                                                     $  6,811,870          $  4,098,866
                                                                                                 ============          ============


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

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES

Note payable                                                                                     $  1,000,000          $  1,000,000
Accounts payable and accrued liabilities                                                              668,310               177,121
                                                                                                 ------------          ------------

TOTAL LIABILITIES                                                                                   1,668,310             1,177,121
                                                                                                 ------------          ------------

Commitments and contingencies  (Note 5)

STOCKHOLDERS' EQUITY

Convertible preferred stock, $1 par value, cumulative 7% dividend:
    5,000,000 shares authorized; 16,450 shares issued and outstanding
    at June 30, 2002 and December 31, 2001
    (Liquidation preference $1,645,000) (Note 4)                                                       16,450                16,450
Common stock, $1 par value: 5,000,000 shares authorized;
    1,505,888 shares issued:1,065,100 shares outstanding at June 30,
    2002 and 1,074,700 at December 31,2001 (Note 6)                                                 1,505,888             1,505,888
Additional paid-in capital                                                                         10,571,610            10,271,610
Unrealized appreciation (depreciation) of investments (Notes 2 and 3)                               2,854,015              (182,233)
Accumulated deficit                                                                                (7,249,801)           (6,170,614)
                                                                                                 ------------          ------------
                                                                                                    7,698,162             5,441,101
Deduct common stock held in treasury, at cost, 440,788 shares at
    June 30, 2002, and 431,188 shares at December 31, 2001 (Note 4)                                (2,554,602)           (2,519,356)
                                                                                                 ------------          ------------
    Net assets (See Note 9 for per share information)                                               5,143,560             2,921,745
                                                                                                 ------------          ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                                       $  6,811,870          $  4,098,866
                                                                                                 ============          ============
</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,
                                                                             2002            2001            2002            2001
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                            <C>          <C>              <C>            <C>
INVESTMENT INCOME
    Interest and dividend income                                               $560         $14,802          $2,109         $57,359
    Management fees                                                         120,000            --           210,000            --
                                                                        -----------     -----------     -----------     -----------
                                                                            120,560          14,802         212,109          57,359
                                                                        -----------     -----------     -----------     -----------

EXPENSES
    Salaries and employee benefits                                          212,115         225,081         393,891         477,271
    Professional fees                                                        35,325          41,325          71,250          82,650
    Rent                                                                     28,242          29,783          63,396          59,567
    Insurance                                                                10,982          10,599          22,130          21,199
    Directors' fees                                                             501             501           1,001          19,001
    Taxes other than income taxes                                             9,194           8,505          28,090          29,259
    Newswire and promotion                                                      999           1,000           1,999           2,000
    Depreciation and amortization                                             4,242           4,999           8,485           9,997
    Interest expense                                                          8,850            --            17,700            --
    Expenses related to proposed merger                                     200,000            --           200,000            --
    General and administrative                                               44,565          64,300          93,063         117,803
                                                                        -----------     -----------     -----------     -----------
                                                                            555,015         386,093         901,005         818,747
                                                                        -----------     -----------     -----------     -----------

Net investment loss from operations                                        (434,455)       (371,291)       (688,896)       (761,388)

Net realized (loss) gain on portfolio of investments:
     Investment securities:
          Affiliated                                                           --              --              --           137,757
          Unaffiliated                                                     (309,209)        499,911        (332,716)        587,198
                                                                        -----------     -----------     -----------     -----------

Net realized (loss) gain on portfolio of investments                       (309,209)        499,911        (332,716)        724,955

Benefit for current income taxes                                               --           (12,208)           --            (1,676)
                                                                        -----------     -----------     -----------     -----------

Net realized (loss) gain                                                   (743,664)        140,828      (1,021,612)        (34,757)

Increase (decrease) in unrealized appreciation of investments
     Investment securities:
          Affiliated                                                      3,000,000            --         3,000,000         419,699
          Unaffiliated                                                       (1,585)       (555,140)         36,248      (1,952,420)
                                                                        -----------     -----------     -----------     -----------

Increase (decrease) in unrealized appreciation of investments             2,998,415        (555,140)      3,036,248      (1,532,721)
                                                                        -----------     -----------     -----------     -----------

Net increase (decrease) in net assets from operations                     2,254,751        (414,312)      2,014,636      (1,567,478)

Preferred dividends                                                          28,787          28,788          57,575          57,575
                                                                        -----------     -----------     -----------     -----------

Net increase (decrease) in net assets attributable to
   common stockholders                                                   $2,225,964       ($443,100)     $1,957,061     ($1,625,053)
                                                                         ==========     ===========     ===========     ===========

Basic net increase (decrease) per share in net assets
  attributable to common stockholders per share (Note 8)                      $2.08          ($0.41)          $1.83          ($1.49)
                                                                         ==========     ===========     ===========     ===========

Diluted net increase (decrease) per share in net assets
  attributable to common stockholders per share (Note 8)                      $1.89          ($0.41)          $1.69          ($1.49)
                                                                         ==========     ===========     ===========     ===========
</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,                                                                            2002              2001
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                                   <C>               <C>
Cash flows from operating activities:
  Net increase (decrease) in net assets from operations                                                $2,014,636       ($1,567,478)
  Adjustments to reconcile net increase (decrease) in net assets from
    operations to net cash used in operating activities:
      Depreciation and amortization                                                                         8,485             9,997
      (Increase) decrease in unrealized appreciation of investments                                    (3,036,248)        1,532,721
      Net realized loss (gain) on portfolio of investments, net of current income taxes                   332,715          (726,631)

      Changes in operating assets and liabilities:
        Decrease in other assets                                                                            2,801             7,556
        Decrease (increase) in accounts payable and accrued liabilities,
        excluding change in current income taxes payable                                                  241,189           (97,041)
                                                                                                       ----------        -----------
          Total adjustments                                                                            (2,451,058)          726,602
                                                                                                       ----------        -----------

          Net cash used in operating activities                                                          (436,422)         (840,876)
                                                                                                       ----------        -----------

Cash flows from investing activities:
  Proceeds from sale of affiliates                                                                           --           1,519,421
  Proceeds from sale of other investments                                                                  78,715           985,583
  Proceeds from sale of marketable investment securities                                                     --             442,960
  Loan payments from majority-owned affiliate                                                              75,000              --
  Purchases of other investments                                                                             --             (49,095)
  Purchases of marketable investment securities                                                           (22,985)         (512,449)
                                                                                                       ----------        -----------

          Net cash provided by investing activities                                                       130,730         2,386,420
                                                                                                       ----------        -----------

Cash flows from financing activities:
  Payment of preferred dividends                                                                          (57,575)          (57,575)
  Proceeds for conversion right                                                                           300,000              --
  Purchases of treasury stock                                                                             (35,246)         (115,359)
                                                                                                       ----------        -----------

          Net cash provided by (used in) financing activities                                             207,179          (172,934)
                                                                                                       ----------        -----------

Net (decrease) increase in cash and cash equivalents                                                      (98,513)        1,372,610

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

Cash and cash equivalents at end of period                                                               $181,215        $2,020,175
                                                                                                       ==========        ===========
</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,
                                                                               2002          2001            2002          2001
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                                                          <C>            <C>            <C>            <C>
(Decrease) increase in net assets from operations:
   Net investment loss                                                       ($434,455)     ($371,291)     ($688,896)     ($761,388)
   Net realized (loss) gain on portfolio of investments,
       net of current income taxes                                            (309,209)       512,119       (332,716)       726,631
   Increase (decrease) in unrealized appreciation of investments             2,998,415       (555,140)     3,036,248     (1,532,721)
                                                                           -----------    -----------    -----------    -----------

       Net increase (decrease) in net assets from operations                 2,254,751       (414,312)     2,014,636     (1,567,478)

Capital stock transactions:
   Payment of dividends on preferred stock                                     (28,787)       (28,788)       (57,575)       (57,575)
   Proceeds for conversion right                                               300,000           --          300,000           --
   Purchase of treasury stock                                                  (35,246)      (105,700)       (35,246)      (115,359)
                                                                           -----------    -----------    -----------    -----------

       Total increase (decrease) in net assets                               2,490,718       (548,800)     2,221,815     (1,740,412)
                                                                           -----------    -----------    -----------    -----------

Net assets at beginning of period                                            2,652,842      4,387,468      2,921,745      5,579,080
                                                                           -----------    -----------    -----------    -----------

Net assets at end of period                                                $ 5,143,560    $ 3,838,668    $ 5,143,560    $ 3,838,668
                                                                           ===========    ===========    ===========    ===========
</TABLE>

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

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


                                       7
<PAGE>

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

PORTFOLIO OF INVESTMENTS

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

MARKETABLE INVESTMENT SECURITIES
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                                                NUMBER OF
                                                                                                SHARES OR                MARKET
                                                                                                PRINCIPAL                 VALUE
JUNE 30, 2002 (2)                                                                               AMOUNT ($)    COST(1)    (NOTE 2)
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                             <C>              <C>         <C>
Communications Intelligence Corporation (Common Stock)                                                          $22,985     $17,000
Certificate of Deposit - 1.21%, due 07/03/2002                                                                   34,675      34,675
                                                                                                               -------       ------

     Total Marketable Investment Securities
          (0.8% of total investments and 1.0% of net assets)                                                    $57,660     $51,675
                                                                                                               ========     =======

<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
INVESTMENTS, AT FAIR VALUE
-----------------------------------------------------------------------------------------------------------------------------------
                                                                                                NUMBER OF
                                                                                                SHARES OR               DIRECTORS'
                                                                                      EQUITY    PRINCIPAL               VALUATION
JUNE 30, 2002 (2)                                               INVESTMENT           INTEREST    AMOUNT($)    COST(1)    (NOTE 2)
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                                       <C>                        <C>         <C>          <C>         <C>
MAJORITY OWNED AFFILIATE

Excelsior Radio Networks, Inc.                            Common stock and warrants    100.00%   2,512,87    $2,500,000  $5,500,000
Total Excelsior Radio Networks, Inc.
  (83.9% of total investments and 106.9% of net assets)                                 56.41%
     (Radio production and advertising sales)                                     (fully diluted)

AFFILIATES

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

OTHER INVESTMENTS

Alacra Corporation
   (15.3% of total investments and
   19.4% of net assets)                                  Convertible Preferred Stock     1.68%     321,543    1,000,000   1,000,000
                                                                                                             ----------   ---------
    (Internet-based information provider)

     Investments, at Fair Value                                                                               3,640,000   6,500,000
                                                                                                             ==========   =========
</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, 2002

1. DESCRIPTION OF BUSINESS

Franklin Capital  Corporation  ("Franklin",  or the "Corporation") is a Delaware
corporation  operating  as a  Business  Development  Company  ("BDC")  under the
Investment  Company  Act of 1940 (the  "Act").  A BDC is a  specialized  type of
investment  company  under  the Act.  A BDC  must be  primarily  engaged  in the
business of  furnishing  capital and making  available  managerial  expertise to
companies  that  do not  have  ready  access  to  capital  through  conventional
financial channels.  Such companies are termed "eligible  portfolio  companies".
The Corporation,  as a BDC,  generally may invest in other securities;  however,
such  investments may not exceed 30% of the  Corporation's  total asset value at
the time of any such investment.

The  accompanying  financial  statements  have been  prepared  assuming that the
Corporation will continue as a going concern.  For the six months ended June 30,
2002 and for the years ended December 31, 2001, and 2000,  the  Corporation  has
incurred a net investment  loss from operations of  approximately  $0.7 million,
$1.4  million,  and  $2.3  million,  respectively,  and  has a  working  capital
deficiency of approximately  $1.4 million at June 30, 2002.  (Working capital is
defined  as total  liabilities  less  liquid  assets.)  These  conditions  raise
substantial  doubt  about  the  Corporation's  ability  to  continue  as a going
concern.  In order to alleviate the  substantial  doubt about the  Corporation's
ability to  continue as a going  concern,  the  Corporation  is seeking a merger
partner or an alternative  financing source.  There can be no assurance that the
Corporation would be able to find a suitable merger partner or be able to obtain
alternative  financing.  The financial statements do not include any adjustments
to reflect the possible  future effects on the  recoverability  of assets or the
amounts of liabilities that may result from the outcome of this uncertainty.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

USE OF ESTIMATES

The preparation of financial statements in conformity with accounting principles
generally  accepted in the United States  requires  management to make estimates
and assumptions  that affect the reported  amounts of assets and liabilities and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting period. Actual results could differ from those estimates.

STATEMENTS OF CASH FLOWS

For purposes of the  Statements of Cash Flows,  Franklin  considers  only highly
liquid  investments  such as  money  market  funds  and  commercial  paper  with
maturities  of 90  days or less at the  date  of  their  acquisition  to be cash
equivalents.

The  Corporation  paid no interest or income  taxes  during the six months ended
June 30, 2002 and 2001.

At June 30,  2002 and  2001,  the  Corporation  held  cash and cash  equivalents
primarily in money market funds at two commercial banking institutions,  and one
broker/dealer.

VALUATION OF INVESTMENTS

Security  investments which are publicly traded on a national exchange or Nasdaq
Stock  Market  are  stated  at the  last  reported  sales  price  on the  day of
valuation,  or if no sale was  reported on that date,  then the  securities


                                       9
<PAGE>

FRANKLIN CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

are stated at the last quoted bid price. The Board of Directors of Franklin (the
"Board of Directors") may determine, if appropriate, to discount the value where
there is an impediment to the marketability of the securities held.

Investments for which there is no ready market are initially valued at cost and,
thereafter,  at fair value  based upon the  financial  condition  and  operating
results of the issuer and other pertinent factors as determined in good faith by
the Board of Directors.  The financial condition and operating results have been
derived  utilizing  both audited and  unaudited  data. In the absence of a ready
market for an  investment,  numerous  assumptions  are inherent in the valuation
process.  Some or all of these  assumptions may not  materialize.  Unanticipated
events and  circumstances  may occur subsequent to the date of the valuation and
values may change due to future events. Therefore, the actual amounts eventually
realized  from  each  investment  may vary  from the  valuations  shown  and the
differences  may be  material.  Franklin  reports  the  unrealized  gain or loss
resulting from such valuation in the Statements of Operations.

GAINS (LOSSES) ON PORTFOLIO OF INVESTMENTS

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

INCOME TAXES

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

Franklin accounts for income taxes in accordance with the provision of Statement
of Financial  Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS
109").  The  significant  components of deferred tax assets and  liabilities are
principally related to the Corporation's net operating loss carryforward and its
unrealized appreciation of investments.

DEPRECIATION AND AMORTIZATION

Depreciation  is  recorded  using the  straight-line  method at rates based upon
estimated  useful lives for the respective  assets.  Leasehold  Improvements are
included  in other  assets  and are  amortized  over their  useful  lives or the
remaining life of the lease, whichever is shorter.

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

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

RECLASSIFICATION

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


                                       10
<PAGE>

FRANKLIN CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

3.  INCOME TAXES

For the six months  ended June 30,  2002 and 2001,  Franklin's  tax  (provision)
benefit was based on the following:

<TABLE>
<CAPTION>
                                                                                                   2002                      2001
                                                                                               -----------              -----------
<S>                                                                                            <C>                      <C>
Net investment loss from operations ..............................................             $  (688,896)             $  (761,388)
Net realized (loss) gain on portfolio of investments .............................                (332,716)                 724,955
Increase (decrease) in unrealized appreciation ...................................               3,036,248               (1,532,721)
                                                                                               -----------              -----------
     Pre-tax book income (loss) ..................................................             $ 2,014,636              $(1,569,154)
                                                                                               ===========              ===========

                                                                                                   2002                      2001
                                                                                               -----------              -----------
Tax (provision) benefit at 34% on $2,014,636 and
  $(1,569,154), respectively .....................................................             $  (685,000)             $   533,000
State and local, net of Federal benefit ..........................................                    --                     41,000
Other ............................................................................                 (44,000)                  (7,000)
Change in valuation allowance ....................................................                 729,000                 (565,000)
                                                                                               -----------              -----------
                                                                                               $      --                $     2,000
                                                                                               ===========              ===========
The components of the tax provision are as follows:

                                                                                                   2002                      2001
                                                                                               -----------              -----------
Current state and local tax provision ............................................             $      --                $     2,000
Deferred tax expense .............................................................                    --                       --
                                                                                               -----------              -----------
Provision for income taxes .......................................................             $      --                $     2,000
                                                                                               ===========              ===========
</TABLE>

Deferred  income tax provision  reflects the impact of  "temporary  differences"
between amounts of assets and liabilities for financial  reporting  purposes and
such amounts as measured by tax laws.

At June 30, 2002 and  December  31,  2001,  significant  deferred tax assets and
liabilities consist of:

<TABLE>
<CAPTION>
                                                                                                         Asset (Liability)
                                                                                               -------------------------------------
                                                                                                 June 30,               December 31,
                                                                                                   2002                     2001
                                                                                               -----------              -----------
<S>                                                                                            <C>                      <C>
Deferred Federal and state benefit from net operating
  loss carryforward ..............................................................             $ 2,293,000              $ 1,905,000
Deferred Federal and state provision on unrealized
  (appreciation) depreciation of investments .....................................              (1,051,000)                  66,000
Valuation allowance ..............................................................              (1,242,000)              (1,971,000)
                                                                                               -----------              -----------
Deferred taxes ...................................................................             $      --                $      --
                                                                                               ===========              ===========
</TABLE>

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

4. STOCKHOLDERS' EQUITY

The accumulated  deficit at June 30, 2002,  consists of accumulated net realized
gains of $4,657,000 and accumulated investment losses of $11,907,000.


                                       11
<PAGE>

FRANKLIN CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

The Board of Directors has authorized  Franklin to repurchase up to an aggregate
of 525,000  shares of its common stock in open market  purchases on the American
Stock  Exchange when such purchases are deemed to be in the best interest of the
Corporation  and its  stockholders.  During the six months  ended June 30, 2002,
Franklin  purchased  9,600 shares of its common stock for an aggregate  price of
$35,246.  As of June 30, 2002, the Corporation has repurchased 491,950 shares of
its common stock of which 440,788 shares remain in treasury at June 30, 2002.

5.  COMMITMENTS AND CONTINGENCIES

On October 15, 2001, Jeffrey A. Leve and Jeffrey Leve Family  Partnership,  L.P.
filed a lawsuit against Franklin,  Sunshine Wireless,  LLC ("Sunshine") and four
other defendants  affiliated with Winstar  Communications,  Inc. in the Superior
Court of the State of  California  for the County of Los  Angeles.  The lawsuit,
which has subsequently  been removed to the United States District Court for the
Central District of California, alleges that the Winstar defendants conspired to
commit fraud and breached  their  fiduciary duty to the plaintiffs in connection
with the  acquisition  of the  plaintiffs'  radio  production  and  distribution
business.  The complaint  further  alleges that Franklin and Sunshine joined the
alleged  conspiracy.  The business was  initially  acquired by certain  entities
affiliated with Winstar  Communications  and,  subsequently,  the assets of such
business were sold to Franklin and Sunshine (see Note 6). Concurrently with such
purchase,  Franklin  transferred  such assets to Excelsior.  The plaintiffs seek
recovery of damages in excess of  $10,000,000,  costs and  attorneys'  fees.  On
January  7, 2002,  Franklin  filed a motion to dismiss  the  lawsuit  or, in the
alternative,  to  transfer  venue to the  United  States  District  Court of the
Southern District of New York. The plaintiffs filed a motion opposing Franklin's
request on January 28,  2002.  Franklin's  motion for  dismissal  was granted on
February 25, 2002, due to improper venue. On June 7, 2002, the plaintiffs  filed
their complaint to the United States District Court of the Southern  District of
New York. On July 12, 2002,  Franklin  filed a motion to dismiss the  complaint.
Franklin  believes  that  plaintiffs'  claims are  without  merit and intends to
defend this lawsuit  vigorously,  though the outcome cannot be predicted at this
time. An unfavorable  outcome in this lawsuit may have a material adverse effect
on Franklin's business, financial condition and results of operations.

6. TRANSACTIONS WITH AFFILIATES

On February  1, 2001,  Franklin  sold to Avery  Communications,  Inc.  ("Avery")
1,183,938  shares of common stock and 350,000 shares of preferred stock of Avery
representing  Franklin's  entire holding in Avery,  for $1,557,617  plus accrued
dividends  on the  preferred  stock  for a  realized  gain  net of  expenses  of
$137,759.  As part of the sale Franklin  retained the right to receive 1,533,938
shares of Primal Solutions,  Inc.  ("Primal") a then wholly-owned  subsidiary of
Avery.  On  February  13,  2001,  Primal  announced  that Avery had  completed a
spin-off  of  Primal  and  Franklin  received  1,533,938  fully  registered  and
marketable shares of Primal.  During the year ended December 31, 2001,  Franklin
sold 1,150,000 shares of Primal for total proceeds of $53,861,  realizing a loss
of  $130,139.  During the six  months  ended June 30,  2002,  Franklin  sold its
remaining position of 383,938 shares for total proceeds of $28,715,  realizing a
loss of $32,715.

On August 28, 2001,  Franklin  along with  Sunshine  Wireless  LLC  ("Sunshine")
purchased the assets of Winstar Radio  Networks,  Global Media and Winstar Radio
Productions  (collectively  "WRN") for a total  purchase price of $6.25 million.
Change Technology Partners,  Inc. ("Change"),  a public company,  provided $2.25
million  of senior  financing  for the deal.  The  acquisition  was  consummated
through eCom Capital Inc.,  subsequently renamed Excelsior Radio Networks,  Inc.
("Excelsior"),  a then  wholly-owned  subsidiary of


                                       12
<PAGE>

FRANKLIN CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

Franklin.  Franklin's  total  investment  was $2.5  million  consisting  of $1.5
million in cash and a $1 million  note payable to WRN. The note was due February
28,  2002 with  interest  at 3.54% and has a right of  set-off  against  certain
representations  and warranties made by WRN. In October 2001, a legal proceeding
was filed against WRN,  which also named  Franklin as a defendant,  in which the
representations and warranties made by WRN have been challenged.  Until the time
that this action is settled  the due date of the note is  extended  indefinitely
(see Note 5).  Additionally,  Franklin  provided a $150,000  note  receivable to
Excelsior.  The  note  bore  interest  at 10% per  annum  and was  issued  for a
ninety-day  rolling period.  In connection with this note,  Franklin was granted
warrants to acquire 12,879 shares of Excelsior common stock at an exercise price
of  $1.125  per  share.  As of June 30,  2002,  this  note has been  repaid.  In
contemplation  of a proposed merger  agreement  between Franklin and Change (see
Note 11),  Franklin sold to Change  250,000  shares of common stock in Excelsior
for  $250,000.  Franklin  is  obligated  to  repurchase  the  250,000  shares of
Excelsior's  common stock by August 29, 2002,  for $250,000  plus interest at an
annual rate of 10% from  December 4, 2001 to the date of  repurchase.  After its
repurchase of the shares from Change,  Franklin will own 56.4% of Excelsior on a
fully diluted basis and will have 64.7% of voting control. In addition, Franklin
has the right to nominate four  directors to Excelsior's  seven-person  board of
directors.

At the  closing,  Franklin  entered  into a services  agreement  with  Excelsior
whereby Franklin will provide Excelsior with certain services.  In consideration
for the services  provided,  for a period of six months  Franklin  would receive
$30,000  per month and be  reimbursed  for all  direct  expenses.  Subsequently,
Franklin's  monthly fee will be  determined  by a majority  of the  non-Franklin
directors;  however, said management fee will be no less than $15,000 per month.
Franklin  will  continue  to be  reimbursed  for all direct  expenses.  Finally,
Franklin's chief financial officer will serve in that capacity for Excelsior and
his salary and benefits will be allocated  between  Excelsior and Franklin on an
80/20 basis. During the six months ended June 30, 2002, Franklin earned $210,000
in  management  fees and was  reimbursed  $60,468  for salary and  benefits  for
Franklin's  chief  financial  officer,  which was  recorded  as a  reduction  of
expenses on Franklin.

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

The total  purchase  price for the Dial  Acquisition  will be an amount  between
$8,880,000 and $13,557,500.  The initial  consideration for the Dial Acquisition
consisted  of  $6,500,000  in cash  and a three  year  promissory  note  bearing
interest  at 4.5%  issued  by DCGM in favor of DCGL in the  aggregate  principal
amount of $460,000. In addition, the Purchase Agreement provides for the minimum
payment of $1,920,000 of additional consideration,  which is subject to increase
to a maximum amount of $6,597,500  based upon the attainment of certain  revenue
and earnings  objectives in 2002 and 2003. The additional  consideration will be
comprised  of both cash and two  additional  promissory  notes issued by DCGM in
favor of DCGL,  each with an  initial  aggregate  principal  amount of  $460,000
bearing interest at 4.5% that is subject to increase upon the


                                       13
<PAGE>

FRANKLIN CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

attainment of such revenue and earnings objectives. Each of the promissory notes
issued in  consideration  of the Dial  Acquisition is convertible into shares of
Franklin's  common  stock at a premium  of 115% to 120% of the  average  closing
prices of  Franklin's  common  stock  during a  specified  pre and post  closing
measurement  period.  Excelsior has paid to Franklin an amount equal to $300,000
in  consideration  of Franklin's  obligations  in  connection  with any Franklin
common stock that may be issued pursuant to the terms of the Purchase  Agreement
or the promissory  notes issued in consideration  of the Dial  Acquisition.  For
each share of common  stock  Franklin is  required  to issue under the  Purchase
Agreement or the promissory  notes,  Franklin will receive 0.86 shares of common
stock in Excelsior.

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

7. STOCK OPTION PLANS

On September 9, 1997, Franklin's stockholders approved two Stock Option Plans: a
Stock  Incentive  Plan ("SIP") to be offered to the  Corporation's  consultants,
officers and employees (including any officer or employee who is also a director
of the Corporation) and a Non-Statutory  Stock Option Plan ("SOP") to be offered
to the Corporation's  "outside"  directors,  (i.e.,  those directors who are not
also officers or employees of  Franklin).  112,500  shares of the  Corporation's
Common Stock have been reserved for issuance under these plans,  of which 67,500
shares have been  reserved for the SIP and 45,000  shares have been reserved for
the SOP.  Shares  subject to options that  terminate or expire prior to exercise
will be available  for future  grants  under the Plans.  Because the issuance of
options  to  "outside"  directors  is not  permitted  under the Act  without  an
exemptive  order by the  Securities  and  Exchange  Commission,  the issuance of
options under the SOP was conditioned upon the granting of such order. The order
was granted by the Commission on January 18, 2000.

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

                                              June 30, 2002        June 30, 2001
                                              -------------        -------------
Net increase (decrease) in net assets
   attributable to common stockholders:
As reported                                   $ 1,957,061           ($1,625,053)
Pro forma                                     $ 1,954,694           ($1,644,046)

Basic net increase (decrease) in net assets
   attributable to common stockholders per share:
As reported                                      $   1.83              ($  1.49)
Pro forma                                        $   1.83              ($  1.51)

Diluted net increase (decrease) in net assets
   attributable to common stockholders per share:
As reported                                      $   1.69              ($  1.49)
Pro forma                                        $   1.69              ($  1.51)


                                       14
<PAGE>

FRANKLIN CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

No options were granted during the six months ended June 30, 2002 and 2001.

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

<TABLE>
<CAPTION>
                                                                           June 30, 2002                       June 30, 2001
                                                                           -------------                       -------------
                                                                                        Weighted                           Weighted
                                                                                         Average                            Average
                                                                                        Exercise                           Exercise
                                                                     Shares               Price            Shares            Price
                                                                     ------             ---------          -------         ---------
<S>                                                                  <C>                <C>                <C>             <C>
Outstanding at beginning of
   period                                                            39,375             $   11.27          39,375          $   11.27
Granted                                                                --                    --              --                --
Exercised                                                              --                    --              --                --
Forfeited                                                            18,750             $   11.13            --                --
Expired                                                                --                    --              --                --
                                                                     ------                                ------
Outstanding at end of period                                         20,625             $   11.39          39,375          $   11.27
                                                                     ======                                ======
Exercisable at end of period                                         20,625             $   11.39          26,875          $   10.73
                                                                     ======                                ======
</TABLE>

The options issued under the SIP have a remaining contractual life of 6.5 years.
The options issued under the SOP have a remaining contractual life of 7.6 years.

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

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

<TABLE>
<CAPTION>
                                                                        Three Months ended                Six Months ended
                                                                               June 30,                          June 30,
                                                                    ----------------------------------------------------------------
                                                                         2002             2001             2002            2001
                                                                    ----------------------------------------------------------------
<S>                                                                  <C>              <C>              <C>              <C>
Numerator:
         Net increase (decrease) in net
            assets from operations                                   $ 2,254,751      ($  414,312)     $ 2,014,636      ($1,567,478)
         Preferred stock dividends                                       (28,787)         (28,788)         (57,575)         (57,575)
                                                                     -----------      -----------      -----------      -----------
         Numerator for basic and diluted earnings per
            share - net increase (decrease) in net assets
            attributable to common stockholders                      $ 2,225,964      ($  443,100)     $ 1,957,061      ($1,625,053)
                                                                     ===========      ===========      ===========      ===========

Denominator:
         Denominator for basic increase
           (decrease) in net assets from
           operations - weighted - average shares                      1,069,232        1,086,081        1,068,534        1,091,624

         Conversion of preferred stock                                   123,375             --            123,375             --
                                                                     -----------      -----------      -----------      -----------
</TABLE>


                                       15
<PAGE>

FRANKLIN CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

<TABLE>
<S>                                                                    <C>              <C>              <C>              <C>
         Denominator for diluted increase
           (decrease) in net assets from
           operations - weighted - average shares                      1,192,607        1,086,081        1,191,909        1,091,624

Basic net increase (decrease) in net
         assets from operations per share                                  $2.08           ($0.41)           $1.83           ($1.49)
                                                                     ===========      ===========      ===========      ===========

Diluted net increase (decrease) in net
         assets from operations per share                                  $1.89           ($0.41)           $1.69           ($1.49)
                                                                     ===========      ===========      ===========      ===========
</TABLE>

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

Preferred stock convertible into 123,375 shares of common stock was antidilutive
for  the  three  and  six  months  ended  June  30,  2001.  Stock  options  were
antidilutive for the three and six months ended June 30, 2002.

For additional information on the above securities, see Note 7.

9. NET ASSET VALUE PER SHARE

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

<TABLE>
<CAPTION>
                                                                                                     June 30,          December 31,
                                                                                                   --------------------------------
                                                                                                       2002                2001
                                                                                                   --------------------------------
<S>                                                                                                 <C>                  <C>
Numerator:
         Numerator for net asset value per
           common share, as if converted basis                                                      $5,143,560           $2,921,745
         Liquidation value of convertible preferred
           stock                                                                                    (1,645,000)          (1,645,000)
                                                                                                   -----------          -----------

         Numerator for net asset value per share
           attributable to common stockholders                                                      $3,498,560           $1,276,745
                                                                                                   ===========          ===========

Denominator:
         Number of common shares outstanding,
           denominator for net asset value per share
           attributable to common stockholders                                                       1,065,100            1,074,700
         Number of shares of common stock to be
           issued upon conversion of preferred stock                                                   123,375              123,375
                                                                                                   -----------          -----------
         Denominator for net asset value per common
           share as if converted basis                                                               1,188,975            1,198,075
                                                                                                   ===========          ===========

         Net asset value per share attributable to common stockholders                                   $3.28                $1.19
                                                                                                   ===========          ===========

         Net asset value per common share, as if converted basis                                         $4.33                $2.44
                                                                                                   ===========          ===========
</TABLE>


                                       16
<PAGE>

FRANKLIN CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

10.  PURCHASES AND SALES OF INVESTMENT SECURITIES

The cost of purchases and proceeds from sales of investment securities excluding
short-term investments, aggregated $22,985 and $78,715 respectively, for the six
months ended June 30, 2002,  and $561,544 and $2,947,141  respectively,  for the
six months ended June 30, 2001.

11. MERGER WITH CHANGE TECHNOLOGY PARTNERS, INC.

On July 1, 2002,  Franklin  executed its right to terminate the merger agreement
that had been  entered  into on  December  4, 2001,  between  Change  Technology
Partners,  Inc. ("Change") and Franklin pursuant to which Change would have been
merged with and into Franklin.  Had the merger gone through Change  shareholders
would  have  owned  approximately  80% of  Franklin  with  the  balance  held by
Franklin's current stockholders.

Concurrently  with the execution of the merger  agreement,  the parties  entered
into a stock  purchase  agreement  pursuant to which  Change  agreed to purchase
250,000  shares of common  stock of  Excelsior  from  Franklin  for an aggregate
purchase  price of $250,000.  Since the merger  between  Franklin and Change has
terminated  pursuant to the terms of the merger agreement,  Franklin is required
to repurchase  all of such common stock from Change at a repurchase  price equal
to $250,000,  plus  interest  thereon at an annual rate of 10% from  December 4,
2001 to the date of  repurchase.  Franklin is obligated to repurchase the shares
no later  than  August 29,  2002.  As of June 30,  2002,  the  $250,000  for the
repurchase as well as $200,000 in estimated  expenses related to the merger have
been accrued for by Franklin.


                                       17
<PAGE>

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

CRITICAL ACCOUNTING POLICIES

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

STATEMENT OF OPERATIONS

         The Corporation  accounts for its operations  under generally  accepted
accounting  principles for investment  companies.  On this basis,  the principal
measure of its financial  performance is captioned  "Net increase  (decrease) in
net assets from operations", which is composed of the following: "Net investment
loss from operations," which is the difference between the Corporation's  income
from interest, dividends and fees and its operating expenses; "Net realized gain
on  portfolio  of  investments,"  which is the  difference  between the proceeds
received from  dispositions  of portfolio  securities and their stated cost; any
applicable  income tax provisions  (benefits);  and "Net increase  (decrease) in
unrealized  appreciation  of  investments,"  which is the net change in the fair
value of the Corporation's  investment portfolio, net of any increase (decrease)
in  deferred   income  taxes  that  would  become   payable  if  the  unrealized
appreciation  were  realized  through  the  sale  or  other  disposition  of the
investment portfolio.

         "Net  realized  gain  (loss)  on  portfolio  of  investments"  and "Net
increase  (decrease) in unrealized  appreciation  of  investments"  are directly
related.  When a  security  is  sold to  realize  a  gain,  the  net  unrealized
appreciation  decreases and the net realized gain increases.  When a security is
sold to realize a loss,  the net unrealized  appreciation  increases and the net
realized gain decreases.

FINANCIAL CONDITION

         The  Corporation's  total  assets  and net assets  were,  respectively,
$6,811,870 and $5,143,560 at June 30, 2002,  versus $4,098,866 and $2,921,745 at
December 31, 2001. Net asset value per share  attributable  common  stockholders
and on an as if converted  basis was $3.28 and $4.33,  respectively  at June 30,
2002, versus $1.19 and $2.44 at December 31, 2001.

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

                                             JUNE 30, 2000     DECEMBER 31, 2001
                                             --------------    -----------------
Investments, at cost                           $3,697,660         $3,911,105
Unrealized appreciation (depreciation)          2,854,015           (182,233)
                                              -----------        -----------
Investments, at fair value                     $6,551,675         $3,728,872
                                              ===========        ===========

         The accompanying  financial statements have been prepared assuming that
the Corporation will continue as a going concern.  For the six months ended June
30, 2002 and for the years ended December 31, 2001,  and 2000,  the  Corporation
has  incurred  a net  investment  loss from  operations  of  approximately  $0.7
million, $1.4 million, and $2.3 million, respectively, and has a working capital
deficiency of approximately  $1.4 million at June 30, 2002.  (Working capital is
defined  as total  liabilities  less  liquid  assets.)  These  conditions  raise
substantial  doubt  about  the  Corporation's  ability  to  continue  as a going
concern.  In order to alleviate the  substantial  doubt about the  Corporation's
ability to  continue as a going  concern,  the  Corporation  is seeking a merger
partner or an alternative  financing source.  There can be no assurance that the
Corporation would be able to find a suitable merger partner or be able to obtain
alternative  financing.


                                       18
<PAGE>


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.

MERGER WITH CHANGE TECHNOLOGY PARTNERS, INC.

         On July 1, 2002,  Franklin  executed its right to terminate  the merger
agreement  that had been  entered  into on  December  4,  2001,  between  Change
Technology Partners, Inc. ("Change") and Franklin pursuant to which Change would
have been merged with and into  Franklin.  Had the merger  gone  through  Change
shareholders  would have owned  approximately  80% of Franklin  with the balance
held by Franklin's current stockholders.

         Concurrently  with the execution of the merger  agreement,  the parties
entered  into a stock  purchase  agreement  pursuant to which  Change  agreed to
purchase  250,000  shares of common  stock of  Excelsior  from  Franklin  for an
aggregate  purchase  price of $250,000.  Since the merger  between  Franklin and
Change has terminated pursuant to the terms of the merger agreement, Franklin is
required  to  repurchase  all of such common  stock from Change at a  repurchase
price equal to  $250,000,  plus  interest  thereon at an annual rate of 10% from
December 4, 2001 to the date of repurchase.  Franklin is obligated to repurchase
the shares no later than August 29, 2002. As of June 30, 2002,  the $250,000 for
the repurchase as well as $200,000 in estimated  expenses  related to the merger
have been accrued for by Franklin.

INVESTMENTS

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

         EXCELSIOR

         At June 30, 2002,  the  Corporation  had an  investment  in  Excelsior,
formerly known as eCom Capital,  Inc.,  valued at $5,500,000,  which  represents
83.9% of the Corporation's  total assets and 106.9% of its net assets. After its
repurchase of the shares from Change, Franklin will own 56.4% on a fully diluted
basis and have 64.7% of voting control.

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

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

         The total  purchase  price for the Dial  Acquisition  will be an amount
between  $8,880,000  and  $13,557,500.  The initial  consideration  for the Dial
Acquisition  consisted of  $6,500,000 in cash and a three year  promissory  note
bearing  interest  at 4.5%  issued  by DCGM in  favor  of DCGL in the  aggregate
principal amount of $460,000.  In addition,  the Purchase Agreement provides for
the minimum payment of $1,920,000 of additional consideration,  which is subject
to increase  to a maximum  amount of  $6,597,500  based upon the  attainment  of
certain  revenue  and  earnings  objectives  in 2002 and  2003.  The  additional


                                       19
<PAGE>

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

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

         Excelsior creates, produces,  distributes and is a sales representative
for national radio programs and offers other miscellaneous services to the radio
industry.  Excelsior  offers  radio  programs to the  industry  in exchange  for
commercial  broadcast  time,  which  Excelsior  sells to  national  advertisers.
Excelsior  currently  offers  approximately  150  programs  to over 2,000  radio
stations  across the country.  The group of radio  stations  who  contract  with
Excelsior  to  broadcast  a  particular  program  constitutes  a radio  network.
Excelsior derives its revenue from selling the commercial  broadcast time on its
radio networks to advertisers desiring national coverage.

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

         On August 28,  2001,  the  Corporation  purchased  $2,500,000  worth of
Excelsior  Common Stock and issued a secured note for  $150,000.  In  connection
with this note,  Franklin  was  granted  warrants  to acquire  12,879  shares of
Excelsior common stock at an exercise price of $1.125 per share. On November 28,
2001,  $75,000 of the secured  note was paid back to  Franklin.  On February 28,
2002,  the remaining  $75,000 of the secured note was paid back to Franklin.  As
part of the merger  agreement  between  Franklin  and Change,  Franklin  sold to
Change 250,000 shares of its common stock in Excelsior. Franklin is obligated to
repurchase the 250,000  shares of  Excelsior's  common stock by August 29, 2002,
for $250,000 plus interest at an annual rate of 10% from December 4, 2001 to the
date of repurchase.

         ALACRA CORPORATION

         At  June  30,  2002,  the  Corporation  had  an  investment  in  Alacra
Corporation  ("Alacra"),  valued at $1,000,000,  which  represents  14.7% of the
Corporation's total assets and 19.4% of its net assets. Alacra, headquartered in
New York and London, is a leading provider of Internet-based  online information
services.   Alacra  provides  a  service  called  .xls,   which  aggregates  and
cross-indexes  over  70  premier  business  databases,   delivering  information
directly to Microsoft Excel, HTML, Microsoft Word or PDF formats at the desktop.
Other products include  privatesuite(TM),  a fast, easy,  cost-effective  way to
identify and retrieve  profiles of privately  held  companies  around the world;
compbook(TM),  a tool for  company  peer  analysis;  and Portal  B(TM),  a fully
integrated business information portal.

         On April 20, 2000, the Corporation purchased $1,000,000 worth of Alacra
Series F  Convertible  Preferred  Stock.  In  connection  with this  investment,
Franklin was granted observer rights for Alacra Board of Directors meetings.


                                       20
<PAGE>

         EXCOM VENTURES, LLC

         At June 30, 2002, the  Corporation had an investment in Excom Ventures,
LLC  ("Excom")  valued at $0.  Excom was formed as a limited  liability  holding
company  for  the  purpose  of  investing  in  Expert  Commerce,  Inc.  ("Expert
Commerce"). Expert Commerce is a Business-to-Business purchase evaluation engine
that simulates the way people make  decisions.  Based on intelligent  and proven
technology,  the engine helps structure  complex decisions and provides an audit
trail to justify transactions, empowering buyers to make purchase decisions with
confidence.

         On June 26, 2000,  the  Corporation  purchased  $140,000 worth of Excom
Units.  At December 31, 2001,  the Board of Franklin  had  determined  that this
investment  had no value and had marked  these  securities  down to reflect that
determination.

         PRIMAL SOLUTIONS, INC.

         The Corporation no longer has an investment in Primal  Solutions,  Inc.
("Primal"). On February 13, 2001, Primal was spun-off from Avery Communications,
Inc.  ("Avery").  As a result of this spin-off Franklin received 1,533,938 fully
registered and marketable  shares of common stock of Primal at an allocated cost
basis of $245,430.  During the six months ended June 30, 2002, Franklin sold its
remaining position of 383,938 shares for total proceeds of $28,715,  realizing a
loss of $32,715.

         STRUCTURED WEB, INC.

         At June 30, 2002, the  Corporation had an investment in Structured Web,
Inc.  ("Structured  Web")  valued at $0.  Structured  Web  develops web building
blocks to enable small  businesses  to create and manage their own digital nerve
system  easily  and  at  an  affordable  price.  Structured  Web's  object-based
proprietary  technology  enables customers to choose from a growing selection of
"WebBlocks" including content, communication, commerce and services.

         On  August  8,  2000,  the  Corporation  purchased  $350,000  worth  of
Structured Web  convertible  preferred  stock.  On May 30, 2002, the Corporation
sold its position in Structured Web for $50,000 realizing a loss of $300,000. As
part of the sale price,  the Corporation  maintained the right to receive 50% of
any proceeds  received by the purchaser in excess of the $50,000 purchase price.
The  Corporation has valued this right at $0, as it cannot be determined at this
time if the Corporation will receive any funds from this right.

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 $212,109 and $57,359 for the
six  months  ended  June 30,  2002  and  2001,  respectively.  The  increase  in
investment  income for the six months ended June 30, 2002 when  compared to June
30,  2001,  was  primarily  the result of the receipt of a  management  fee from
Excelsior. The Corporation had investment income of $120,560 and $14,802 for the
three  months  ended  June 30,  2002 and 2001,  respectively.  The  increase  in
investment income for the three months ended June 30, 2002 when compared to June
30, 2001, was primarily the result of a management fee from Excelsior.


                                       21
<PAGE>

         Operating  expenses were $901,005 and $818,747 for the six months ended
and  $555,015  and  $386,093  for the three months ended June 30, 2002 and 2001,
respectively.  A majority of the  Corporation's  operating  expenses  consist of
employee  compensation,  office  and rent  expense,  other  expenses  related to
identifying  and  reviewing  investment  opportunities  and  professional  fees.
Professional  fees  consist  of  general  legal  fees,  audit  and tax  fees and
investment  related legal fees.  The  Corporation  accrued  $200,000 in expenses
related to the terminated  merger with Change.  The  Corporation  was reimbursed
approximately  $60,000  for salary and benefit  expense for its chief  financial
officer  under  the  terms of the  management  agreement  with  Excelsior.  This
reimbursement has been recorded as a reduction in operating expenses.

         Net investment  losses from  operations  were $688,896 and $761,388 for
the six months  ended and  $434,455 and $371,291 for the three months ended June
30,  2002 and 2001,  respectively.  The  decrease  resulted  primarily  from the
decrease in expenses noted above.

         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,  2002 and 2001,  the  Corporation
realized  net  (losses)   gains   before  taxes  of   ($332,716)   and  $724,955
respectively, from the disposition of various investments.

UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENTS:

         Unrealized appreciation of investments,  increased by $3,036,248 during
the six months ended June 30, 2002, primarily from unrealized gains on the value
of Excelsior.

         Unrealized appreciation of investments,  decreased by $1,532,721 during
the six months ended June 30, 2001,  primarily from unrealized losses due to the
decrease in value of Franklin's  investment in Go America as well as the sale of
a significant  portion of Franklin's  holdings in Go America.  This decrease was
partially offset by the sale of Franklin's investment in Avery Communications.

LIQUIDITY AND CAPITAL RESOURCES

         The accompanying  financial statements have been prepared assuming that
the Corporation will continue as a going concern.  For the six months ended June
30, 2002 and for the years ended December 31, 2001,  and 2000,  the  Corporation
has  incurred  a net  investment  loss from  operations  of  approximately  $0.5
million, $1.4 million, and $2.3 million, respectively, and has a working capital
deficiency of approximately  $1.4 million at June 30, 2002.  (Working capital is
defined  as total  liabilities  less  liquid  assets.)  These  conditions  raise
substantial  doubt  about  the  Corporation's  ability  to  continue  as a going
concern.  In order to alleviate the  substantial  doubt about the  Corporation's
ability to  continue as a going  concern,  the  Corporation  is seeking a merger
partner or an alternative  financing source.  There can be no assurance that the
Corporation would be able to find a suitable merger partner or be able to obtain
alternative  financing.  The financial statements do not include any adjustments
to reflect the possible  future effects on the  recoverability  of assets or the
amounts of  liabilities  that may result from the  outcome of this  uncertainty.
Franklin is obligated to repurchase  the 250,000  shares of  Excelsior's  common
stock by August 29,  2002 for  $250,000  plus  interest at an annual rate of 10%
from  December  4,  2001 to the date of  repurchase.  As of June 30,  2002,  the
$250,000 for the repurchase as well as $200,000 in estimated expenses related to
the merger have been accrued for by Franklin.


                                       22
<PAGE>

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.

         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


                                       23
<PAGE>

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.

         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 year-end financial
statements.  Franklin is seeking  financing  alternatives to continue  operating
through the current  fiscal year. If funds were not raised,  Franklin may not be
able to continue its operations.

         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.

         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


                                       24
<PAGE>

economic conditions.  As a result of these factors,  results for any one quarter
should not be relied upon as being indicative of performance in future quarters.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

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

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

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

                           PART II. OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

                  On October 15,  2001,  Jeffrey A. Leve and Jeffrey Leve Family
         Partnership,  L.P. filed a lawsuit against Franklin, Sunshine Wireless,
         LLC  ("Sunshine")  and four other  defendants  affiliated  with Winstar
         Communications,  Inc. in the Superior  Court of the State of California
         for the County of Los Angeles. The lawsuit, which has subsequently been
         removed to the United States District Court for the Central District of
         California,  alleges  that the Winstar  defendents  conspired to commit
         fraud and breached their fiduciary duty to the plaintiffs in connection
         with  the   acquisition  of  the  plaintiffs'   radio   production  and
         distribution  business. The complaint further alleges that Franklin and
         Sunshine  joined the alleged  conspiracy.  The business  was  initially
         acquired by certain  entities  affiliated  with Winstar  Communications
         and,  subsequently,  the assets of such  business were sold to Franklin
         and Sunshine (see Note 6).  Concurrently  with such purchase,  Franklin
         transferred  such assets to Excelsior.  The plaintiffs seek recovery of
         damages in excess of $10,000,000, costs and attorneys' fees. On January
         7, 2002,  Franklin  filed a motion to dismiss  the  lawsuit  or, in the
         alternative,  to transfer venue to the United States  District Court of
         the  Southern  District  of New  York.  The  plaintiffs  filed a motion
         opposing Franklin's request on January 28, 2002.  Franklin's motion for
         dismissal was granted on February 25, 2002, due to improper  venue.  On
         June 7, 2002, the plaintiffs filed their complaint to the United States
         District Court of the Southern  District of New York. On July 12, 2002,
         Franklin  filed a motion to dismiss the  complaint.  Franklin  believes
         that  plaintiffs'  claims are without  merit and intends to defend this
         lawsuit  vigorously,  though the outcome  cannot be  predicted  at this
         time.  An  unfavorable


                                       25
<PAGE>

         outcome  in  this  lawsuit  may  have  a  material  adverse  effect  on
         Franklin's business, financial condition and results of operations.

Item 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

                  Not applicable

Item 3.  DEFAULTS UPON SENIOR SECURITIES HOLDERS

                  Not applicable

Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

                  Not applicable

Item 5.  OTHER INFORMATION

                  Not applicable

Item 6.  EXHIBITS AND REPORTS ON FORM 8-K

         (a)  Exhibits
                 Exhibit 99.1  Certification Pursuant To 18 U.S.C. Section 1350,
                               As  Adopted  By Section 906 Of The Sarbanes-Oxley
                               Act Of 2002

         (b)  Reports on Form 8-K. The Corporation filed a report on Form 8-K on
              April 3, 2002  announcing the acquisition of the Dial Entities and
              filed  a  report  on  Form  8-K on July  1,  2002  announcing  the
              termination of the merger with Change Technology Partners, Inc.

                                    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 14, 2002                By:   /s/
                                           ------------------------------------
                                           Stephen L. Brown
                                           CHAIRMAN AND CHIEF EXECUTIVE OFFICER


                                           /s/
                                           -------------------------------------
                                           Hiram M. Lazar
                                           CHIEF FINANCIAL OFFICER


                                       26