SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    Form 10-K

                      Annual Report Pursuant to Section 13
                 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended                            Commission File No. 1-9727
December 31, 2003                                                        -------

                          FRANKLIN CAPITAL CORPORATION
               (Exact name of registrant specified in its charter)

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

450 PARK AVENUE, 20TH FLOOR, NEW YORK, NEW YORK                    10022
-----------------------------------------------               ----------------
(Address of principal executive offices)                         (Zip Code)

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

         Securities registered pursuant to Section 12(b) of the Act:

     Title of each class             Name of each exchange on which  registered

     Common Stock,  $1.00 par value  The American Stock  Exchange

Securities registered pursuant to Section 12(g) of the Act:
                                      None

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such shorter  period that the  Corporation  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes X  No
                                      --  --
Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this form 10-K or any amendment to this
Form 10-K.___

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

The  aggregate  market value of the voting stock held by  non-affiliates  of the
Registrant as of June 30, 2003 was $699,411.

As of March 9, 2004,  there were 1,020,100 shares of common stock ($1 par value)
outstanding.



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                                TABLE OF CONTENTS
PART I

     Item 1.   Business
     Item 2.   Properties
     Item 3.   Legal Proceedings
     Item 4.   Submission of Matters to a Vote of Security Holders

PART II

     Item 5.   Market for Registrant's Common Equity and Related Stockholder
               Matters
     Item 6.   Selected Financial Data
     Item 7.   Management's Discussion and Analysis of Financial Condition and
               Results of Operations
     Item7a.   Quantitative and Qualitative Disclosures about Market Risk
     Item 8.   Financial Statements and Supplementary Data
     Item 9.   Changes in and Disagreements with Accountants on Accounting and
               Financial Disclosure
     Item 9a.  Controls and Procedures

PART III

     Item 10.  Directors and Executive Officers of the Registrant
     Item 11.  Executive Compensation
     Item 12.  Security Ownership of Certain Beneficial Owners and Management
               and Related Stockholder Matters
     Item 13.  Certain Relationships and Related Transactions
     Item 14.  Principal Accountant Fees and Services

PART IV

     Item 15. Exhibits, Financial Statements, Schedules and Reports on Form 8-K



                           FORWARD LOOKING STATEMENTS

WHEN  USED  IN  THIS  ANNUAL  REPORT  ON  FORM  10-K,   THE  WORDS   "BELIEVES,"
"ANTICIPATES,""EXPECTS"   AND  SIMILAR  EXPRESSIONS  ARE  INTENDED  TO  IDENTIFY
FORWARD-LOOKING  STATEMENTS.  STATEMENTS LOOKING FORWARD IN TIME ARE INCLUDED IN
THIS ANNUAL REPORT ON FORM 10-K.  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.



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<PAGE>

                                     PART I

ITEM 1. BUSINESS

         Franklin  Capital  Corporation  (the  "Registrant",  "Franklin," or the
"Corporation")  was  incorporated on March 31, 1987, under the laws of the state
of Delaware and operates as a business  development  company  ("BDC")  under the
Investment Company Act of 1940 (the "1940 Act"). The Corporation's common stock,
par value $1.00 per share,  has been listed on The American Stock Exchange since
October 1, 1987.

         As  a  BDC,  the   Corporation's   objective  is  to  achieve   capital
appreciation  through  long-term  investments  in  businesses  believed  to have
favorable growth potential. In the past the Corporation participated in start-up
and early stage  financing,  expansion or growth  financing,  leveraged  buy-out
financing and  restructurings in a variety of industries.  At December 31, 2003,
Franklin had $2,024,138 in net assets.

EXCELSIOR RADIO NETWORKS, INC.

         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.  The  acquisition  was  consummated  through eCom Capital  Inc.,
subsequently  renamed  Excelsior  Radio  Networks,  Inc.  ("Excelsior"),  a then
wholly-owned  subsidiary  of  Franklin.  Franklin's  total  investment  was $2.5
million consisting of $1.5 million in cash and a $1 million note payable to WRN.
The note 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 Item 3 Legal Proceedings) Additionally,  Franklin
provided a $150,000 note receivable to Excelsior.  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.  The note bears  interest at 10% per
annum and is issued for a ninety-day  rolling  period.  As of December 31, 2003,
this note has been repaid. On October 1, 2002, Franklin received 74,232 warrants
to acquire  shares of Excelsior  common stock at an exercise  price of $1.20 per
share for arranging a financing for Excelsior.

         At the  closing,  Franklin  entered  into  a  services  agreement  with
Excelsior whereby Franklin provided Excelsior with certain management  services.
In consideration for the services provided,  for a period of six months from the
closing  of the  transaction,  Franklin  received  $30,000  per  month  and  was
reimbursed  for all direct  expenses.  Since  then,  Franklin's  monthly fee was
$15,000 per month and  Franklin  was  reimbursed  for all direct  expenses.  The
agreement  expired on December 31, 2003.  Finally,  Franklin's  chief  financial
officer  served as  Excelsior's  chief  financial  officer,  and his  salary and
benefits   were   allocated   between   Excelsior  and  Franklin  80%  and  20%,
respectively.  During the year ended December 31, 2003, Franklin earned $180,000
in  management  fees and was  reimbursed  $144,000  for salary and  benefits for
Franklin's  chief  financial  officer,  which was  recorded  as a  reduction  of
expenses of Franklin.

PROPOSED 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.


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<PAGE>


CURRENT PORTFOLIO OF INVESTMENTS

         The Corporation  invests  primarily in equity  securities,  for example
common  stock,  preferred  stock,  convertible  preferred  stock or other equity
derivatives such as options, warrants or rights to acquire stock. As of December
31, 2003, the  Corporation  had invested a substantial  portion of its assets in
private companies.  The current  portfolio,  other than Excelsior is invested in
securities  issued by a company  involved in Internet  software and  information
services.

EXCELSIOR

         Franklin's most significant investment is in Excelsior.  As of December
31, 2003, Franklin owned 36.4% of Excelsior (13.8% on a fully diluted basis).

         Excelsior is a  subsidiary  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.

         On April 3, 2002, Excelsior purchased Dial Communications, whose assets
were combined with Excelsior's  Global Media division to create a national radio
sales  representation  company with 2003 advertising  sales revenues of over $50
million  and  a  client  roster  of  over  forty  independent  radio  production
companies.

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

         Excelsior  currently  produces over 20 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.  Excelsior  offers  these  programs  to radio  stations  in
exchange for  advertising  time. 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.

         Excelsior intends to focus its programming  growth with both short-form
and  long-form  programs.  For example  during  2003,  Excelsior  announced  the
launching  of two new shows:  "Daily Dose" and the "Ross  Brittain  Morning Prep
Show."  Daily  Dose is a  morning  prep  show  that is a joint  venture  between
Excelsior  and The  Source  Magazine,  "Ross  Brittain  Morning  Prep Show" is a
morning prep show written by Mr. Brittain, a nationally  recognized morning disc
jockey.  Excelsior  believes  that  it  has  developed  a  niche  in  short-form
programming  specifically  in the  prep  services  that  it  provides  to  radio
stations.  Moreover,  Excelsior  believes that it has a strong presence in urban
programming.  Developing more programming that complements its existing programs
will provide Excelsior with more broadcast  commercial  inventory to sell on its
network. A typical short form program will have 2 to 4 commercials available for
sale while a typical long form  program has 8 to 48  commercials  available  for
sale.  Excelsior  intends to offer additional  programming in the future through
internal  development,  joint  ventures,  and the  acquisition  of businesses or
assets that complement Excelsior's operations.


                                       4
<PAGE>

         The creation of a radio network  allows  Excelsior to sell the acquired
commercial broadcast inventory to advertisers desiring national coverage.  Rates
for the sale of network  advertising  are  established  on the basis of audience
delivery or ratings and the demographic  composition of the listening  audience.
Thus, if Excelsior expands its network, as previously discussed, it will be able
to charge more for  broadcast  commercial  time on the  network.  In addition to
being  able  to  charge  more  for  its  advertising   time,  by  expanding  its
programming,  there will also be more commercial  broadcast  inventory available
for sale by Excelsior.

         Excelsior  sells  commercial  broadcast  time by  guaranteeing  certain
ratings and  demographics.  There can be no assurance that the guarantee will be
achieved.  If the radio network on which the  commercial  broadcast time is sold
does not  achieve  the  guarantee,  Excelsior  may be  obligated  to  offer  the
advertiser  additional  advertising  time on the  same  radio  network  or on an
alternate radio network. These "make goods" or "bonus spots" are the predominant
means   whereby   Excelsior   satisfies   such   obligations   to   advertisers.
Alternatively, Excelsior could be obligated to refund or credit a portion of the
advertising revenue derived from such sales. Historically, Excelsior has not had
to refund any cash received as revenues.

         According to the National  Association of Broadcasters  ("NAB"),  there
are  approximately  10,000  commercial  radio  stations  in the  United  States.
Excelsior  currently has broadcast  commercial time on over 2,000 of these radio
stations. Radio is one of the most cost effective forms of advertising given its
wide  reach and low cost in  comparison  to print and  television  media.  Radio
advertising is attractive to advertisers for a variety of reasons:

      o  short lead time between commercial production and broadcast time;

      o  low cost of commercial production; and

      o  the fact that most radio listening occurs away from home, closer to the
         point of purchase.

         Radio stations attempt to develop formats, such as news/talk,  music or
other  types  of  entertainment  programming,  in order  to  appeal  to a target
listening audience that will attract local,  regional,  and national advertisers
to their  station.  Most radio  stations do not have the creative and  financial
resources  to  produce  nationally  accepted  programming.  As a  result,  radio
stations look to syndicators, such as Excelsior, to enhance their existing local
programming. As a national network, Excelsior licenses radio stations to air its
programs in exchange for  commercial  broadcast  time on the station.  Excelsior
then resells the advertising time to advertisers  requiring  national  coverage.
The commercial  broadcast time may vary from market to market within a specified
time period depending on the  requirements of the particular radio station.  The
advertising  rates are based upon audience ratings for the specific  demographic
the  advertiser  is trying to reach.  These  ratings are  determined by Arbitron
Research  Company,  which  periodically  measures  the  percentage  of the radio
audience  in a market  area  listening  to a  specific  radio  station  during a
specific time period.

         COMPETITION

         Competition for radio advertising is very intense. The industry is made
up of a variety of competitive forces,  including:  (1) ownership groups,  which
own  blocks  of radio  stations  across  the  industry;  (2)  syndicators,  like
Excelsior,  that offer programming and marketing services to radio stations; and
(3) independent  producers and  distributors  that offer programs or services to
radio  stations.   Several  of  Excelsior's  syndicating  competitors  also  are
associated  with major radio station group  owners.  In addition,  many of these
competitors  have  recognized  brand  names and will pay  compensation  to radio
stations to broadcast their network commercials.


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<PAGE>


         Excelsior's  largest  competitors that are associated with an ownership
group  are  Westwood  One,  Premier  Radio  Networks,  and ABC  Radio  Networks.
Excelsior  estimates that these competitors account for about 80% of the network
advertising  revenues.  Excelsior is a leader of the  syndication  companies not
associated with an ownership  group.  The principal  competitive  factors in the
radio industry are the quality and creativity of programming  and the ability to
provide  advertisers  with  a  cost-effective  method  of  reaching  the  target
demographic.  In this  respect,  Excelsior has  positioned  itself by adding top
producers  like Walt "Baby" Love,  Mike Harvey,  John Tesh,  Talk Radio  Network
featuring Michael Savage and Laura Ingraham, and WOR Radio featuring Joan Rivers
and Jim  Cramer.  Excelsior's  principal  operating  strategy  is to continue to
provide high quality  programming  in the most popular  formats.  Excelsior  has
developed and expanded its network through internal  operations and will look to
continue  this in the  future as well as  acquire  assets  and  businesses  that
compliment Excelsior's operations.

         GOVERNMENT REGULATIONS

         Radio  broadcasting and station  ownership are regulated by the Federal
Communication  Commission ("FCC").  Excelsior,  as a producer and distributor of
radio  programs,  is  generally  not subject to  regulation  by the FCC. The FCC
regulates the radio stations that air  Excelsior's  programs.  The radio station
affiliates  are ultimately  responsible  for what material is broadcast on their
airwaves.

         EMPLOYEES

         As of  February  1,  2004,  Excelsior  had 90 full time  employees.  In
addition,  Excelsior maintains continuing relationships with over 40 independent
hosts,  writers,  and  producers.  Excelsior  is not  party  to  any  collective
bargaining  agreements.  Excelsior  believes its relationship with its employees
and independent contractors is good.

OTHER INVESTMENTS

         See "Management's Discussion and Analysis of Financial Condition."

PRESENTATION OF FINANCIAL INFORMATION

         Franklin   presents  its  financial   statements  in  accordance   with
Securities and Exchange  Commission ("SEC") regulations in the format applicable
to investment companies and with accounting principles generally accepted in the
United States.  Generally,  investments are reported at fair market value rather
than cost, including investments in wholly-owned  subsidiaries.  Because of such
reporting  requirements,  the operating results of Excelsior are not included in
the consolidated  operating results of Franklin,  and instead,  Franklin reports
only the fair value of its investment in such companies.

ILLIQUIDITY OF INVESTMENTS

         A majority  of the  Corporation's  investments  consist  of  securities
acquired directly from the issuer in private  transactions.  They may be subject
to restrictions on resale or otherwise be illiquid.  Franklin  anticipates  that
there  may  not  be  an  established   trading   market  for  such   securities.
Additionally, many of the securities that the Corporation may invest in will not
be eligible for sale to the public without registration under the Securities Act
of 1933,  which  could  prevent  or delay  any sale by the  Corporation  of such
investments  or reduce the amount of proceeds  that might  otherwise be realized
therefrom.  Restricted  securities  generally sell at a price lower than similar
securities not subject to restrictions on resale.  Further,  even if a portfolio
company  registers its securities and becomes a reporting  corporation under the
Securities Exchange Act of 1934, the Corporation may be considered an insider by
virtue of its board  representation  and  would be  restricted  in sales of such
corporation's securities.


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<PAGE>


MANAGERIAL ASSISTANCE

         The  Corporation,  as a BDC,  is  required  by  the  1940  Act to  make
significant managerial assistance available to its portfolio companies.  "Making
available  significant  managerial  assistance"  as defined in the 1940 Act with
respect  to a BDC such as  Franklin  means  (a) any  arrangement  whereby a BDC,
through  its  directors,  officers,  employees  or general  partners,  offers to
provide,  and if  accepted,  does so provide  significant  guidance  and counsel
concerning the management,  operations or business  objectives and policies of a
portfolio  company;  or (b) the  exercise of a  controlling  influence  over the
management or policies of a portfolio company by a BDC acting individually or as
a part of a group acting  together which controls such  portfolio  company.  The
nature,  timing and amount of managerial  assistance provided by the Corporation
vary depending upon the particular requirements of each portfolio company.

         In connection  with its managerial  assistance,  the Corporation may be
represented  by one or  more  of its  officers  or  directors  on the  board  of
directors of a portfolio company. The Corporation's goal has been to assist each
portfolio  company in  establishing  its own  independent and effective board of
directors and management.

NEED FOR FOLLOW-ON INVESTMENTS

         Following  its  initial   investments  in  portfolio   companies,   the
Corporation  has made  additional  investments  in such  portfolio  companies as
"follow-on"  investments,  in order to increase  its  investment  in a portfolio
company,  and exercised  warrants,  options or convertible  securities that were
acquired in the original financing. Such follow-on investments may be made for a
variety of reasons  including:  1) to increase the  Corporation's  exposure to a
portfolio  company,  2) to acquire  securities  issued as a result of exercising
convertible securities that were purchased in a prior financing,  3) to preserve
or  reduce  dilution  of  Franklin's  proportionate  ownership  in a  subsequent
financing,  or 4) in an  attempt  to  preserve  or  enhance  the  value  of  the
Corporation's  investment.  There can be no assurance that the Corporation  will
make follow-on  investments or have sufficient  funds to make such  investments;
the Corporation will have the discretion to make any follow-on investments as it
determines,  subject to the  availability of capital  resources.  The failure to
make such follow-on  investments may, in certain  circumstances,  jeopardize the
continued  viability  of a  portfolio  company  and  the  Corporation's  initial
investment,  or may  result  in a  missed  opportunity  for the  Corporation  to
increase its  participation in a successful  operation.  Even if the Corporation
has sufficient capital to make a desired follow-on investment,  the Company may,
under certain  circumstances  be prohibited  from doing so if such an investment
would result in non-compliance with BDC regulations.

COMPETITION

         Numerous  companies and  individuals are engaged in the venture capital
business and such business is extremely  competitive.  The Corporation  competes
for attractive  investment  opportunities with venture capital  partnerships and
corporations,  merchant  banks,  venture  capital  affiliates of industrial  and
financial  companies,  Small Business  Investment  Companies,  other  investment
companies,  pension plans, other BDCs and private individual investors.  Many of
these   competitors  have   significantly   greater   resources  and  managerial
capabilities   than  the   Corporation  to  obtain  access  to  venture  capital
investments.  There can be no  assurance  that the  Corporation  will be able to
compete against those competitors for attractive investments.

DETERMINATION OF NET ASSET VALUE

         Security investments that 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



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the securities  are stated at the last quoted bid price.  The board of directors
of the  Corporation 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 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.

EMPLOYEES

         At December 31, 2003, the Corporation had three employees.

GOVERNMENT REGULATIONS IMPACTING FRANKLIN

         Franklin  operates  in a highly  regulated  environment  as a BDC.  The
following discussion generally summarizes certain regulations.

         A BDC is defined and  regulated  by the 1940 Act.  It is an  investment
company  that  primarily  focuses on  investing  in or lending to small  private
companies  and making  managerial  assistance  available  to them. A BDC may use
capital  provided  by public  stockholders  and from other  sources to invest in
long-term,  private  investments  in growing  small  businesses.  A BDC provides
stockholders  the ability to retain the  liquidity of a publicly  traded  stock,
while sharing in the possible benefits,  if any, of investing in privately-owned
growth companies.

         As a BDC,  Franklin  may not acquire  any asset other than  "Qualifying
Assets" unless, at the time the acquisition is made, Qualifying Assets represent
at least 70% of the value of the total  assets (the "70% test").  The  principal
categories of Qualifying Assets relevant to Franklin's business are:

        (1) securities  purchased  in  transactions  not  involving  any  public
            offering,  the issuer of which is an eligible portfolio company.  An
            eligible portfolio company is defined to include any issuer that (a)
            is organized and has its  principal  place of business in the United
            States,  (b)  is  not an  investment  company  other  than  an  SBIC
            wholly-owned  by a business  development  company,  and (c) does not
            have any class of publicly traded securities with respect to which a
            broker may extend margin credit;

        (2) securities  received in exchange for or distributed  with respect to
            securities  described  in (1) above or pursuant  to the  exercise of
            options, warrants, or rights relating to such securities; and

        (3) cash,  cash  items,  government  securities  and high  quality  debt
            securities  (within  the  meaning of the 1940 Act),  maturing in one
            year or less from the time of the investment.

         To include certain securities  described above as Qualifying Assets for
the purpose of the 70% test,  a BDC must make  available  to the issuer of those
securities  significant  managerial  assistance  such as


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<PAGE>

providing   significant   guidance  and  counsel   concerning  the   management,
operations,  or business  objectives  and  policies of a portfolio  company,  or
making loans to a portfolio company.

         As a BDC,  Franklin is entitled to issue senior  securities in the form
of  stock  or  senior  securities  representing  indebtedness,   including  debt
securities and preferred  stock, as long as each class of senior security has an
asset coverage of at least 200% immediately after each such issuance.

         Franklin has adopted a Code of Ethics that  establishes  procedures for
personal investments and restricts certain transactions by its personnel.

         The  Corporation  is permitted to adopt  either a  profit-sharing  plan
pursuant to which management (including  disinterested  directors) could receive
up to 20% of the net  after-tax  profits of the  Corporation  or an option  plan
covering up to 20% of the stock of the  Corporation.  Presently the  Corporation
has incentive  plans in effect covering 46,875 shares (4.6% on a diluted basis).
See "Item 11 Executive Compensation - Compensation Plans - Stock Option Plans."

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.  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


                                       9
<PAGE>


pursuant  to written  valuation  policy  and a  consistently  applied  valuation
process.  Unlike banks,  Franklin is not permitted to provide a general  reserve
for anticipated  loan losses;  instead,  Franklin is required by the 1940 Act to
specifically value each individual  investment and record an unrealized loss for
an asset that it believes has become impaired.  Without a readily  ascertainable
market  value,  the  estimated  value  of the  portfolio  of  loans  and  equity
securities may differ  significantly from the values that would be placed on the
portfolio if there  existed a ready market for the loans and equity  securities.
Franklin  adjusts  quarterly the valuation of the portfolio to reflect the board
of directors' estimate of the current realizable value of each investment in the
Corporation's  portfolio.  Any changes in  estimated  value are  recorded in the
Corporation's statement of operations as "Net unrealized gains (losses)."

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

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

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

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

ITEM 2. PROPERTIES

         Franklin  maintains its offices at 450 Park Avenue,  New York, New York
10022, where it leases  approximately 2,000 square feet of office space pursuant
to a lease  agreement  expiring  December  31,  2004.  As of December  31, 2003,
Franklin had a sublet arrangement with one subtenant for a portion of Franklin's
office space.


                                       10
<PAGE>


ITEM 3. LEGAL PROCEEDINGS

         On  October  15,  2001,   Jeffrey  A.  Leve  and  Jeffrey  Leve  Family
Partnership,  L.P. filed a lawsuit  against  Franklin,  Sunshine  Wireless,  LLC
("Sunshine"),  and four other defendants affiliated with Winstar Communications,
Inc. On February 25, 2003, the case against Franklin and Sunshine was dismissed,
however the  plaintiffs  have a right to appeal.  The lawsuit  alleges  that the
Winstar  defendants  conspired to commit fraud and breached their fiduciary duty
to the plaintiffs in connection with the  acquisition of the  plaintiff's  radio
production  and  distribution  business.  The  complaint  further  alleges  that
Franklin  and  Sunshine  joined the  alleged  conspiracy.  The  plaintiffs  seek
recovery of damages in excess of  $10,000,000,  costs and  attorneys'  fees.  An
unfavorable  outcome  in an  appeal,  should  it be  brought,  together  with an
unfavorable  outcome  in the  lawsuit  may have a  material  adverse  effect  on
Franklin's business, financial condition and results of operations.

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

         On December 17, 2003,  the  Corporation  held an annual  meeting of its
common and preferred stockholders.  Stephen L. Brown, Irving Levine, Laurence I.
Foster and David T. Lender were elected to serve as directors of the Corporation
for a term of one year or until their successors are duly elected and qualified.
The number of common and preferred  shares,  voting  together as a single class,
voted for and against each director is as follows:

----------------------------  ---------------------  ---------------------------
                                FOR                    WITHHELD
----------------------------  ---------------------  ---------------------------
----------------------------  ---------------------  ---------------------------
Stephen L. Brown                787,779                84,803
----------------------------  ---------------------  ---------------------------
----------------------------  ---------------------  ---------------------------
David Lender                    793,580                79,002
----------------------------  ---------------------  ---------------------------
----------------------------  ---------------------  ---------------------------
Laurence I. Foster *              9,000                     0
----------------------------  ---------------------  ---------------------------
----------------------------  ---------------------  ---------------------------
Irving Levine*                    9,000                     0
----------------------------  ---------------------  ---------------------------

* - Only preferred stockholders voted for these directors.

         In addition, stockholders were asked to ratify the selection of Ernst &
Young LLP as the  Corporation's  independent  auditors for the fiscal year ended
December 31, 2003.  796,918  shares voted for,  56,037  shares voted against and
19,627 shares  abstained from ratifying  Ernst & Young LLP as the  Corporation's
independent auditors.

                                     PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

STOCK TRANSFER AGENT

         Mellon  Investor  Services,   85  Challenger  Road,   Overpack  Center,
Ridgefield  Park, NJ 07660  (Telephone  (800) 851-9677) serves as transfer agent
for the  Corporation's  common stock.  Certificates to be transferred  should be
mailed directly to the transfer agent, preferably by registered mail.

MARKET PRICES

         The Corporation's common stock is traded on The American Stock Exchange
under the symbol "FKL." The following table sets forth the range of the high and
low selling  price of the  Corporation's  shares during each quarter of the last
two years, as reported by the American Stock Exchange.


                                       11
<PAGE>


         2003 QUARTER ENDING                         LOW               HIGH
         -------------------                         ---               ----

         March 31                                    $  1.10           $   1.62
         June 30                                     $  0.77           $   1.26
         September 30                                $  0.75           $   1.05
         December 31                                 $  0.50           $   1.55

         2002 QUARTER ENDING                         LOW               HIGH
         -------------------                         ---               ----

         March 31                                    $  3.76           $   4.24
         June 30                                     $  3.46           $   4.02
         September 30                                $  2.90           $   3.72
         December 31                                 $  1.45           $   2.97

DIVIDENDS

         The Corporation paid $76,652, and $115,152 and $115,150 in dividends to
preferred  stockholders  during 2003, 2002 and 2001,  respectively,  and has not
paid any dividends to common stockholders during the past three years.

STOCKHOLDERS

         As of March 9, 2004,  there were 562 registered  shareholders of record
of the  Corporation's  common stock.  The  Corporation  has 5,000,000  shares of
common stock authorized,  of which 1,505,888 are issued and 1,020,100 shares are
outstanding  at  March  9,  2004.  The  Corporation  has  5,000,000   shares  of
convertible preferred stock authorized,  of which 16,450 were issued on February
22,  2000 and  10,950  shares  are  outstanding  at March 9,  2004.  (See Item 7
Management's  Discussion  and  Analysis of Financial  Condition - Liquidity  and
Capital Resources.)

ITEM 6.           SELECTED FINANCIAL DATA

         The following  tables should be read in conjunction  with the Financial
Statements included in Item 8 of this Form 10-K.

BALANCE SHEET DATA

FINANCIAL POSITION AS OF DECEMBER 31:
<TABLE>
<CAPTION>

                                                                    2003          2002      2001        2000          1999
                                                                    ----          ----      ----        ----          ----

<S>                                                            <C>          <C>          <C>          <C>          <C>
Total assets                                                   $3,258,032   $4,632,338   $4,098,866   $5,766,712   $8,995,965

Liabilities                                                    $1,233,894   $1,364,798   $1,177,121   $  187,632   $  555,583


Net asset value                                                $2,024,138   $3,267,540   $2,921,745   $5,579,080   $8,440,382

Net asset value per share attributable to common
   stockholders                                                $     0.91   $     2.07   $     1.19   $     3.58   $     7.70

Net asset value per share, as if converted basis               $     1.84   $     2.89   $     2.44   $     4.57   $     7.70

Shares outstanding                                              1,020,100    1,049,600    1,074,700    1,098,200    1,095,882
</TABLE>





                                       12
<PAGE>


OPERATING DATA FOR THE YEAR ENDED DECEMBER 31:
<TABLE>
<CAPTION>


                                                                2003           2002          2001            2000*          1999
                                                                ----           ----          ----            ----           ----

<S>                                                         <C>            <C>            <C>            <C>            <C>
Investment income                                              $183,159       $455,081       $192,697       $115,015        $72,382

Expenses                                                     $1,279,526     $1,985,450     $1,579,382     $2,372,797     $1,621,780

Net investment loss from operations                         $(1,096,367)   $(1,530,369)   $(1,386,685)   $(2,257,782)   $(1,549,398)

Net realized  gain on portfolio of  investments,
   net of current  income taxes                                $430,883       $237,327       $522,131     $1,195,875       $688,259

Net (decrease) increase in
   unrealized appreciation of investments, net
   of deferred income taxes                                   $(475,605)    $1,663,304    $(1,553,756)   $(3,365,513)    $3,086,958

Net (decrease) increase in net
assets attributable to common stockholders                  $(1,217,741)      $255,110    $(2,533,460)   $(4,526,053)    $2,225,819

Basic and diluted net (decrease) increase in net
   assets from operations per weighted
   average number of shares outstanding                          $(1.17)         $0.24         $(2.34)        $(4.14)         $1.98
</TABLE>

            *  Expenses in the year ended  December  31, 2000  include  non-cash
               compensation   of  $349,644  due  to  the  exercise  of  employee
               incentive stock options.

ITEM 7. MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF FINANCIAL  CONDITION  AND
        RESULTS OF OPERATIONS

THE INFORMATION CONTAINED IN THIS SECTION SHOULD BE READ IN CONJUNCTION WITH THE
CORPORATION'S 2003 FINANCIAL STATEMENTS AND NOTES THERETO IN ITEM 8.

         The following  "Overview" section is a brief summary of the significant
issues addressed in Management's  Discussion and Analysis of Financial Condition
and Results of Operations ("MD&A").  Investors should read the relevant sections
of the MD&A for a complete discussion of the issues summarized below. The entire
MD&A should be read in conjunction with Item 6. Selected Financial Data and Item
8. Financial  Statements and Supplementary Data appearing elsewhere in this Form
10K.

OVERVIEW

         During 2003, the Corporation realized  approximately  $433,000 in gains
on its sale of Excelsior common stock. The Corporation  continues to rely on the
increase in the value of its  investments  and the ability to sell them in order
to fund its ongoing operations. Operating expenses were reduced by approximately
$706,000 due to the salary of one senior  officer of the  Corporation  moving to
Excelsior  whereby that officer  became the CEO of  Excelsior,  Franklin's  most
significant  investment as well as the one-time  expenses  related to the failed
Change merger in 2002.


                                       13
<PAGE>


CRITICAL ACCOUNTING POLICIES

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

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

STATEMENT OF OPERATIONS

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

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

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

      o  any applicable income tax provisions (benefits); and

      o  "Net (decrease)  increase in unrealized  appreciation of  investments,"
         which  is  the  net  change  in the  fair  value  of the  Corporation's
         investment portfolio, net of any (decrease) increase in deferred income
         taxes that would become  payable if the  unrealized  appreciation  were
         realized  through  the  sale or  other  disposition  of the  investment
         portfolio.

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


                                       14
<PAGE>


FINANCIAL CONDITION

         The  Corporation's  total  assets  and net assets  were,  respectively,
$3,258,032 and $2,024,138 at December 31, 2003 versus  $4,632,338 and $3,267,540
at  December  31,  2002.  Net  asset  value  per  share  attributable  to common
stockholders and on an as if converted basis was $0.91 and $1.84 at December 31,
2003, respectively,  versus $2.07 and $2.89, respectively, at December 31, 2002.
The  change in total  assets  and net assets is  primarily  attributable  to the
Corporation's operating losses.

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

                                        DECEMBER 31, 2003     DECEMBER 31, 2002
                                        -----------------     -----------------

Investments, at cost ..........             $1,949,703          $2,511,479
Unrealized appreciation, net of
         deferred taxes .......              1,005,466           1,471,071
                                            ----------          ----------
Investments, at fair value ....             $2,955,169          $3,992,550
                                            ==========          ==========

INVESTMENTS

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

         ALACRA CORPORATION

         At December 31,  2003,  the  Corporation  had an  investment  in Alacra
Corporation  ("Alacra"),  valued at $1,000,000,  which  represents  30.7% of the
Corporation's  total  assets and 49.4% of its net assets.  Alacra,  based in New
York, is a leading global provider of business and financial information. Alacra
provides a diverse portfolio of fast,  sophisticated  online services that allow
users to quickly find, analyze,  package and present  mission-critical  business
information.   Alacra's  customers  include  more  than  750  leading  financial
institutions,   management  consulting,  law  and  accounting  firms  and  other
corporations throughout the world.

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

         EXCELSIOR RADIO NETWORKS

         At December 31, 2003,  the  Corporation  had an investment in Excelsior
Radio Networks, Inc. ("Excelsior"), formerly known as eCom Capital, Inc., valued
at $1,921,270,  which  represents  59.0% of the  Corporation's  total assets and
94.9% of its net assets.  This  valuation  represents the same value as the last
sales  price  realized  by the  Corporation  for a sale  of  375,000  shares  of
Excelsior's  common stock on October 8, 2003.  Excelsior produces and syndicates
programs and services heard on more than 2,000 radio stations  nationwide across
most  major  formats.   Through  its  Dial  Communications  Global  Media  sales
subsidiary,  Excelsior sells the advertising inventory radio stations provide in
exchange for the Excelsior  content.  The programming and content  includes prep
services  as well as long form and short form  programming.  Additionally,  Dial
Communications Global Media has a number of independent


                                       15
<PAGE>


producer  clients,  which range from talk and music programs to news and traffic
services. See Item 1 Business - Current Portfolio Investments - Excelsior.

         On August 28,  2001,  the  Corporation  purchased  $2,500,000  worth of
Excelsior  Common Stock and issued a secured note for  $150,000.  In  connection
with this note,  Franklin  was  granted  warrants  to acquire  12,879  shares of
Excelsior  common stock at an exercise price of $1.125 per share. As of December
31,  2003,  the secured note was paid back to  Franklin.  Franklin  sold 250,000
common  shares  for $1.00 per share on  December  4, 2001 for no gain or loss in
connection  with the proposed merger with Change.  On October 1, 2002,  Franklin
received  74,232  warrants to acquire  shares of  Excelsior  common  stock at an
exercise  price of $1.20 per share for  arranging a financing of  Excelsior.  On
October 3, 2002,  Franklin  sold 773,196  common  shares for $1.94 per share for
total proceeds of $1,500,000 realizing a gain of $726,804.  On January 31, 2003,
Franklin  purchased and  subsequently  on May 29, 2003,  Franklin  cancelled the
purchase,  33,750  common  shares for $1.625  per share and 65,199  warrants  to
acquire  shares of  Excelsior  common  stock at an exercise  price of $1.125 per
share for $0.50 per warrant.  On August 12, 2003,  Franklin sold 193,000  common
shares for $1.30 per share for total  proceeds of  $250,900  realizing a gain of
$57,900.  Franklin  has  stock  appreciation  rights on these  common  shares as
follows,  a) in the event that Excelsior is sold on or before August 8, 2004 for
gross proceeds of no less than  $40,000,000,  then Franklin shall be entitled to
receive fifty percent (50%) of any net value above $1.30 per share not to exceed
proceeds to Franklin of $1.94 per share,  and b) in the event that the Excelsior
is sold  on or  before  August  8,  2005  for  gross  proceeds  of no less  than
$40,000,000,  then Franklin  shall be entitled to receive fifty percent (50%) of
any net value above $1.30 per share not to exceed proceeds to Franklin of $1.625
per share. On October 8, 2003,  Franklin sold to Sunshine  375,000 shares of the
common stock of Excelsior for an aggregate purchase price of $750,000, realizing
a gain of $375,000,  pursuant to a stock purchase agreement between Sunshine and
Franklin.  Franklin has stock  appreciation  rights on these common  shares such
that if Excelsior is sold and the  purchaser of the common  shares from Franklin
receives  more than $3.50 per share,  Franklin is entitled to receive 80% of the
value  greater than $3.50 per share.  After giving effect to the purchase of the
common stock,  Sunshine owns  approximately  63.6% and the Company owns 36.4% of
the issued and outstanding  common stock,  and voting power, of Excelsior.  On a
fully  diluted  basis,  after giving  effect to the exercise of the  outstanding
warrants  and the  conversion  of  Sunshine's  outstanding  preferred  stock  of
Excelsior  into  common  stock,  the  Corporation  owns  approximately  13.8% of
Excelsior.  Franklin  continues  to maintain a seat on the board of directors of
Excelsior.

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 stock,  corporate bonds
and other fixed income  securities.  The amount of interest  income varies based
upon the average  balance of the  Corporation's  fixed income  portfolio and the
average yield on this portfolio.

         The  Corporation  had interest  and dividend  income of $3,159 in 2003,
$5,081 in 2002, and $72,697 in 2001. The Corporation  earned  management fees of
$180,000 in 2003, $450,000 in 2002, and $120,000 in 2001 from its majority-owned
affiliate, Excelsior.

         Operating  expenses were  $1,279,526 in 2003,  $1,985,450 in 2002,  and
$1,579,382 in 2001. A majority of the Corporation's  operating  expenses consist
of employee  compensation,  office and rent


                                       16
<PAGE>


expense,   other  expenses  related  to  identifying  and  reviewing  investment
opportunities  and professional  fees.  Operating expense decreased from 2002 to
2003 due to the merger fees  discussed  below and the  resignation of one senior
officer of the Corporation  who was employed in 2003 by Excelsior.  Professional
fees  consist of general  legal fees,  audit and tax fees,  consulting  fees and
investment  related legal fees.  During 2003 and 2002, the Corporation  incurred
professional  fees related to the  terminated  merger with Change of $73,500 and
$490,782, respectively.

         Net  investment   losses  from  operations  were  $1,096,367  in  2003,
$1,530,369 in 2002, and $1,386,685 in 2001.

         The Corporation has relied and continues to rely to a large extent upon
proceeds from sales of  investments  rather than  investment  income to defray a
significant  portion of its  operating  expenses.  Because  such sales cannot be
predicted with certainty,  the Corporation attempts to maintain adequate working
capital to provide for fiscal periods when there are no such sales.

         NET REALIZED GAINS AND LOSSES ON PORTFOLIO OF INVESTMENTS

         During the three years ended  December 31, 2003,  2002,  and 2001,  the
Corporation realized net gains before taxes of $430,883, $237,658, and $520,455,
respectively, from the disposition of various investments.

         During  2003,  Franklin  realized a gain of  $432,900  from the sale of
568,000 shares of Excelsior  Radio Networks,  Inc.  common stock.  This gain was
offset by a loss of $2,017 from sale of marketable securities.

         During  2002,  Franklin  realized a gain of  $726,804  from the sale of
773,196 shares of Excelsior  Radio Networks,  Inc.  common stock.  This gain was
offset by a loss of $300,000 from the sale of 188,425  shares of Structured  Web
common  stock,  a  previous  portfolio  holding  of the  Corporation,  a loss of
$140,000 from the write down of Excom Ventures,  a previous portfolio holding of
the  Corporation  which was  determined  to be a worthless  security,  a loss of
$32,715  from the sale of  363,938  shares of  Primal  common  stock a  previous
portfolio  holding of the  Corporation as well as a realized net loss of $16,430
from sale of marketable securities.

         During  2001,  Franklin  realized a gain of  $598,617  from the sale of
434,024 shares of Go America,  Inc. common stock a previous portfolio holding of
the  Corporation,  a gain of $87,013 from the sale of 1,183,938  shares of Avery
common  stock a previous  portfolio  holding of the  Corporation,  and a gain of
$50,750 from the sale of 350,000 shares of Avery  preferred  stock.  These gains
were offset by a loss of $130,139  from the sale of  1,150,000  shares of Primal
common  stock as well as a realized net loss of $85,786 from the sale of various
marketable securities.

         UNREALIZED APPRECIATION OF INVESTMENTS

         Unrealized   appreciation  of  investments,   net  of  deferred  taxes,
decreased by $475,605  during the year ended December 31, 2003, due primarily to
the sale of a portion of the  Corporation's  holdings of Excelsior offset by the
increased valuation of Excelsior.

         Unrealized   appreciation  of  investments,   net  of  deferred  taxes,
increased by $1,663,304  during the year ended  December 31, 2002, due primarily
to the increased valuation of Excelsior.

         Unrealized   appreciation  of  investments,   net  of  deferred  taxes,
decreased by $1,553,756 during the year ended December 31, 2001,  primarily from
the sale of  Franklin's  position  in Go  America  common


                                       17
<PAGE>

stock and the sale of Franklin's position in Avery  Communications.  The changes
in the value of these investments occurred during a period of extreme volatility
of publicly traded, small capitalization, high technology stocks.

         TAXES

         Franklin does not qualify for pass through tax treatment as a Regulated
Investment  Company under  Subchapter M of the Internal  Revenue Code for income
tax  purposes.  The  Corporation  is taxed under  Regulation  C of the Code and,
therefore,  it is subject to federal  income tax on the  portion of its  taxable
income and net capital as well as such distribution to its stockholders.

         LIQUIDITY AND CAPITAL RESOURCES

         The accompanying  financial statements have been prepared assuming that
the Corporation will continue as a going concern.  The Corporation has a working
capital  deficiency  of  approximately  $900,000  at  December  31,  2003.  This
condition raises  substantial doubt about the Corporation's  ability to continue
as a going concern. The Corporation is currently seeking financing. There can be
no  assurance  that the  Corporation  would  be able to  obtain  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.

         Cash and cash  equivalents  decreased  by $337,966 to $224,225  for the
year ended  December 31, 2003,  compared to an increase of $282,463 for the year
ended December 31, 2002.

         Operating  activities  used  $1,192,248  of  cash  for the  year  ended
December 31, 2003,  compared to using $1,282,171 for the year ended December 31,
2002.

         Operating activities for the year ended December 31, 2003, exclusive of
changes in operating  assets and  liabilities,  used  $1,079,395 of cash, as the
Corporation's net decrease in net assets from operations of $1,141,089  included
non-cash charges for depreciation and amortization of $16,972, realized gains of
$430,883  and  unrealized  losses of $475,605.  For the year ended  December 31,
2002,  operating  activities,  exclusive  of  changes  in  operating  assets and
liabilities,  used $1,513,400 of cash, as the  Corporation's net increase in net
assets from operations of $370,262 included non-cash charges of depreciation and
amortization  of $16,969,  realized  gains of $237,327 and  unrealized  gains of
$1,663,304.

         Changes in operating assets and liabilities decreased cash $112,853 for
the year ended  December  31, 2003,  principally  due a decrease in the level of
accounts  payable and accrued  expenses.  For the year ended  December 31, 2002,
changes in operating assets and liabilities produced $231,229 of cash.

           The  principal  factor in the $992,658 of cash  provided by investing
activities in the year ended  December 31, 2003 was the sale of a portion of the
Corporation's  holding in Excelsior for $1,000,900.  The principal factor in the
$1,637,284 of cash provided by investing  activities in the year ended  December
31, 2002 was the sale of a portion of the Corporation's holding in Excelsior for
$1,500,000.

         Cash used in financing  activities for the year ended December 31, 2003
of $138,376  resulted  primarily  from the  payment of  preferred  dividends  of
$76,652 and the purchase of treasury  stock of $25,661.  Additionally,  the note
payable was offset by certain  payments  made  allowed for in the note  payable.
Cash used in  financing  activities  for the year  ended  December  31,  2002 of
$72,650 primarily resulted from payment of preferred dividends of $115,152,  the
redemption of preferred  stock of $137,500 and the purchase of treasury stock of
$71,815  offset by the issuance of certain  rights to convert  promissory  notes
issued from Excelsior to Dial into Franklin stock of $300,000.


                                       18
<PAGE>


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

         On February 22, 2000, the Corporation  issued $1,645,000 of convertible
preferred  stock. The stock was issued at a price of $100 per share and has a 7%
quarterly  dividend.  The stock is convertible  into Franklin  common stock at a
conversion  price  of  $13.33  per  common  share.  On  December  31,  2002  the
Corporation  redeemed  from  certain  preferred  stockholders  5,500  shares  of
convertible preferred stock for $25.00 per share.

ITEM 7A. 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."




                                       19
<PAGE>


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                          FRANKLIN CAPITAL CORPORATION

                   INDEX TO FINANCIAL STATEMENTS AND SCHEDULES

                                                                         PAGE
                                                                         ----

         Report of Ernst & Young LLP..................................     21

         Balance Sheets as of
                  December 31, 2003 and 2002..........................     22

         Statements of Operations for the years
                  ended December 31, 2003, 2002 and 2001..............     23

         Statements of Cash Flows for the years
                  ended December 31, 2003, 2002 and 2001..............     24

         Statements of Changes in Net Assets for the years
                  ended December 31, 2003, 2002 and 2001..............     25

         Financial Highlights for the years ended December 31,
                  2003, 2002, 2001, 2000 and 1999.....................     26

         Portfolio of Investments as of
                  December 31, 2003...................................     27

         Notes to Financial Statements................................  28-35

The schedules for which  provision is made in the  applicable  regulation of the
Securities   and  Exchange   Commission  are  not  required  under  the  related
instruction or are inapplicable and, therefore, have been omitted


                                       20
<PAGE>


                         REPORT OF INDEPENDENT AUDITORS

To the Stockholders and Board of Directors
Franklin Capital Corporation

         We have audited the  accompanying  balance  sheets of Franklin  Capital
Corporation  as of  December  31,  2003 and 2002,  including  the  portfolio  of
investments as of December 31, 2003,  and the related  statements of operations,
cash flows and  changes in net assets for each of the three  years in the period
ended December 31, 2003, and the financial highlights for each of the five years
in the period ended December 31, 2003. These financial  statements and financial
highlights  are  the  responsibility  of  the  Corporation's   management.   Our
responsibility  is to  express  an opinion  on these  financial  statements  and
financial highlights based on our audits.

         We conducted our audits in accordance with auditing standards generally
accepted in the United States.  Those standards require that we plan and perform
the audit to obtain reasonable  assurance about whether the financial statements
and financial  highlights are free of material  misstatement.  An audit includes
examining,  on a test basis,  evidence supporting the amounts and disclosures in
the financial statements and financial  highlights.  Our procedures included the
confirmation of securities owned as of December 31, 2003 by correspondence  with
the custodian.  An audit also includes assessing the accounting  principles used
and significant estimates made by management,  as well as evaluating the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

         In our opinion,  the  financial  statements  and  financial  highlights
referred to above  present  fairly,  in all  material  respects,  the  financial
position of Franklin  Capital  Corporation  at December  31, 2003 and 2002,  the
results of its operations,  cash flows and changes in net assets for each of the
three years in the period ended December 31, 2003, and the financial  highlights
for each of the five years in the period ended  December 31, 2003, in conformity
with accounting principles generally accepted in the United States.

         The accompanying  financial statements have been prepared assuming that
Franklin  Capital  Corporation  will continue as a going concern.  As more fully
described in Note 1, the Corporation has incurred recurring operating losses and
has a working capital deficiency. These conditions raise substantial doubt about
the Corporation's ability to continue as a going concern.  Management's plans in
regard to these matters are also  described in Note 1. 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.


                                                              ERNST & YOUNG LLP

New York, New York
March 5, 2004, except for Note 13, as to which the
   date is March 19, 2004




                                       21
<PAGE>



                          FRANKLIN CAPITAL CORPORATION
===============================================================================
<TABLE>
<CAPTION>
BALANCE SHEETS
------------------------------------------------------------------------------------------------------------------------------------
DECEMBER 31,                                                                                            2003               2002
------------------------------------------------------------------------------------------------------------------------------------

ASSETS
<S>                                                                                                   <C>                 <C>
Marketable investment securities, at market value (cost: December 31,
    2003 - $40,899; December 31, 2002 - $34,675)  (Note 2)                                              $33,899             $34,675
Investments, at fair value (cost: December 31, 2003 - $1,908,804;
    December 31, 2002 - $2,476,804)  (Note 2)
         Excelsior Radio Networks, Inc.                                                               1,921,270           2,957,875
         Other investments                                                                            1,000,000           1,000,000
                                                                                                     ----------          ----------
                                                                                                      2,921,270           3,957,875
                                                                                                     ----------          ----------

Cash and cash equivalents (Note 2)                                                                      224,225             562,191
Other assets                                                                                             78,638              77,597
                                                                                                     ----------          ----------

TOTAL ASSETS                                                                                         $3,258,032          $4,632,338
                                                                                                     ==========          ==========
------------------------------------------------------------------------------------------------------------------------------------

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES

Notes payable (Note 6)                                                                                 $915,754            $951,817
Accounts payable and accrued liabilities                                                                318,140             412,981
                                                                                                     ----------          ----------

TOTAL LIABILITIES                                                                                     1,233,894           1,364,798
                                                                                                     ----------          ----------

Commitments and contingencies  (Note 5)

STOCKHOLDERS' EQUITY

Convertible preferred stock, $1 par value, cumulative 7% dividend:
    5,000,000 shares authorized; 10,950 issued and outstanding
    at December 31, 2003 and 2002
    (Liquidation preference $1,095,000) (Note 4)                                                         10,950              10,950
Common stock, $1 par value: 5,000,000 shares authorized;
    1,505,888 shares issued: 1,020,100 and 1,049,600 shares outstanding
    at December 31, 2003 and 2002, respectively  (Note 7)                                             1,505,888           1,505,888
Paid-in capital                                                                                      10,439,610          10,439,610
Unrealized appreciation of investments,
    net of deferred income taxes  (Notes 2 and 3)                                                     1,005,466           1,481,071
Accumulated deficit                                                                                  (8,320,944)         (7,578,808)
                                                                                                     ----------          ----------

                                                                                                      4,640,970           5,858,711
Deduct: 485,788 and 456,288 shares of common stock held in treasury,
    at cost, at December 31, 2003 and 2002, respectively  (Note 4)                                   (2,616,832)         (2,591,171)
                                                                                                     ----------          ----------

Net assets (Note 9 for per share information)                                                         2,024,138           3,267,540
                                                                                                     ----------          ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                                           $3,258,032          $4,632,338
                                                                                                     ==========          ==========
</TABLE>

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

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


                                       22
<PAGE>



                          FRANKLIN CAPITAL CORPORATION
================================================================================
 STATEMENTS OF OPERATIONS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>


FOR THE YEAR ENDED DECEMBER 31,                                                       2003               2002               2001
-----------------------------------------------------------------------------------------------------------------------------------

INVESTMENT INCOME
<S>                                                                                  <C>             <C>           <C>
    Interest on short term investments and money market accounts                           $3,159         $5,081        $45,953
    Dividend income                                                                          --             --           26,744
    Income from affiliates (Note 6)                                                       180,000        450,000        120,000
                                                                                     ------------   ------------   ------------

                                                                                          183,159        455,081        192,697
                                                                                     ------------   ------------   ------------

EXPENSES
    Salaries and employee benefits, net of reimbursements  (Note 7)                       548,269        862,970        933,081
    Professional fees                                                                     231,164        191,900        168,618
    Rent  (Note 5)                                                                         71,942         98,982        126,134
    Insurance                                                                              67,728         58,036         41,955
    Directors' fees                                                                         9,158          2,003         18,802
    Taxes other than income taxes                                                          29,708         39,709         40,394
    Newswire and promotion                                                                     --          1,181          5,707
    Depreciation and amortization                                                          16,972         16,969         19,994
    Interest expense                                                                       42,903         35,401         11,988
    Expenses related to terminated merger                                                  73,500        490,782           --
    General and administrative                                                            188,182        187,517        212,709
                                                                                     ------------   ------------   ------------
                                                                                        1,279,526      1,985,450      1,579,382
                                                                                     ------------   ------------   ------------

    Net investment loss from operations                                                (1,096,367)    (1,530,369)    (1,386,685)

    Net  realized gain (loss) on portfolio of investments: Investment securities:
              Affiliated                                                                  432,900        254,088          7,613
              Unaffiliated                                                                 (2,017)       (16,430)       512,842
                                                                                     ------------   ------------   ------------
    Net realized gain on portfolio of investments                                         430,883        237,658        520,455

    Provision (benefit) for current income taxes
                                                                                             --              331         (1,676)
                                                                                     ------------   ------------   ------------

    Net realized loss                                                                    (665,484)    (1,293,042)      (864,554)

    (Decrease) increase in unrealized appreciation of investments, net of deferred
        income taxes:
         Investment securities:
              Affiliated                                                                 (479,392)     1,663,304        279,699
              Unaffiliated                                                                  3,787           --       (1,833,455)
                                                                                     ------------   ------------   ------------
    (Decrease) increase in unrealized appreciation of investments,
     net of deferred income taxes                                                        (475,605)     1,663,304     (1,553,756)
                                                                                     ------------   ------------   ------------

    Net (decrease) increase in net assets from operations                              (1,141,089)       370,262     (2,418,310)

    Preferred dividends                                                                    76,652        115,152        115,150
                                                                                     ------------   ------------   ------------

    Net (decrease) increase in net assets attributable
       to common stockholders                                                         ($1,217,741)      $255,110    ($2,533,460)
                                                                                     ============   ============   ============

    Basic and diluted net (decrease) increase in net assets per share
      attributable to common stockholders (Note 8)                                         ($1.17)         $0.24         ($2.34)
                                                                                     ============   ============   ============
</TABLE>

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

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


                                       23
<PAGE>



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

                            STATEMENTS OF CASH FLOWS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

FOR THE YEAR ENDED DECEMBER 31,                                                               2003            2002           2001
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                           <C>         <C>             <C>
Cash flows from operating activities:
  Net (decrease) increase in net assets from operations                                   ($1,141,089)      $370,262    ($2,418,310)
  Adjustments to reconcile net (decrease) increase in net assets from operations
    to net cash used in operating activities:
      Depreciation and amortization                                                            16,972         16,969         19,994
      Decrease (increase) in unrealized appreciation of investments,
           net of deferred taxes                                                              475,605     (1,663,304)     1,553,756
      Net realized gain on portfolio of investments, net of current income taxes             (430,883)      (237,327)      (522,131)
      Changes in operating assets and liabilities:
        (Increase) decrease in other assets                                                   (18,013)        (4,300)         9,963
        (Decrease) increase in accounts payable and accrued liabilities                       (94,840)       235,529         (8,835)
                                                                                          -----------    -----------    -----------

          Total adjustments                                                                   (51,159)    (1,652,433)     1,052,747
                                                                                          -----------    -----------    -----------

          Net cash used in operating activities                                            (1,192,248)    (1,282,171)    (1,365,563)
                                                                                          -----------    -----------    -----------

Cash flows from investing activities:
  Proceeds from sale of majority-owned affiliate                                                 --        1,500,000        250,000
  Proceeds from sale of affiliate                                                           1,000,900         78,715      1,564,282
  Proceeds from sale of other investments                                                        --             --        1,044,782
  Proceeds from sale of marketable investment securities                                       28,924          6,554        543,927
  Loan payments received from majority-owned affiliate                                           --           75,000         75,000
  Loan to majority owned affiliate                                                               --             --         (150,000)
  Purchases of investment in majority-owned affiliate                                            --             --       (1,500,000)
  Purchases of other investments                                                                 --             --          (49,095)
  Purchases of marketable investment securities                                               (37,166)       (22,985)      (542,146)
                                                                                          -----------    -----------    -----------

          Net cash provided by investing activities                                           992,658      1,637,284      1,236,750
                                                                                          -----------    -----------    -----------

Cash flows from financing activities:
  Payments of preferred dividends                                                             (76,652)      (115,152)      (115,150)
  Decrease in note payable                                                                    (36,063)       (48,183)          --
  Proceeds from conversion right                                                                 --          300,000           --
  Redemption of preferred stock                                                                  --         (137,500)          --
  Purchases of treasury stock                                                                 (25,661)       (71,815)      (123,874)
                                                                                          -----------    -----------    -----------

          Net cash used in financing activities                                              (138,376)       (72,650)      (239,024)
                                                                                          -----------    -----------    -----------

Net (decrease) increase in cash and cash equivalents                                         (337,966)       282,463       (367,837)

Cash and cash equivalents at beginning of year                                                562,191        279,728        647,565
                                                                                          -----------    -----------    -----------

Cash and cash equivalents at end of year                                                     $224,225       $562,191       $279,728
                                                                                          ===========    ===========    ===========

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

Supplemental disclosure of cash flow information:
  Non-cash liability issued in connection with purchase of majority owned affiliate             --             --        $1,000,000
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

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



                                       24
<PAGE>

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

STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,                                                          2003            2002             2001
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                  <C>                  <C>            <C>
(Decrease) increase in net assets from operations:
   Net investment loss                                                              ($1,096,367)      ($1,530,369)      ($1,386,685)
   Net realized gain on portfolio of investments,
       net of current income taxes                                                      430,883           237,327           522,131
   (Decrease) increase in unrealized appreciation of investments,
       net of deferred income taxes                                                    (475,605)        1,663,304        (1,553,756)
                                                                                    -----------       -----------       -----------
       Net (decrease) increase in net assets from operations                         (1,141,089)          370,262        (2,418,310)

Capital stock transactions:
   Payment of dividends on preferred stock                                              (76,652)         (115,152)         (115,150)
   Proceeds for conversion right                                                           --             300,000              --
   Redemption of preferred stock                                                           --            (137,500)             --
   Purchase of treasury stock                                                           (25,661)          (71,815)         (123,874)
                                                                                    -----------       -----------       -----------

       Total (decrease) increase in net assets                                       (1,243,402)          345,795        (2,657,335)
                                                                                    -----------       -----------       -----------

Net assets at beginning of year                                                       3,267,540         2,921,745         5,579,080
                                                                                    -----------       -----------       -----------

Net assets at end of year                                                            $2,024,138        $3,267,540        $2,921,745
                                                                                    ===========       ===========       ===========

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

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



                                       25
<PAGE>


                          FRANKLIN CAPITAL CORPORATION
================================================================================
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

FOR THE YEAR ENDED DECEMBER 31,                                             2003(1)         2002(1)     2001(1)   2000(1)   1999
---------------------------------------------------------------------------------------------------------------------------------

<S>                                                                          <C>            <C>          <C>       <C>       <C>
PER SHARE OPERATING PERFORMANCE (2):
Net asset value attributable to common stockholders,
   beginning of year                                                         $2.07          $1.19        $3.58     $7.70     $5.61
                                                                             -----          -----        -----     -----     -----
       Net investment loss                                                   (1.06)         (1.44)       (1.28)    (2.07)    (1.38)
       Net (loss) gain on portfolio of
         investments (realized and unrealized) after taxes                   (0.04)          1.78        (0.95)    (1.98)     3.35
                                                                             -----          -----        -----     -----     -----
Total from investment operations                                             (1.10)          0.34        (2.23)    (4.05)     1.97
                                                                             -----          -----        -----     -----     -----
Less dividends and distributions:
       Distributions from accumulated
          deficit and earnings                                                0.00           0.00         0.00      0.00      0.00
                                                                             -----          -----        -----     -----     -----
Total dividends and distributions                                             0.00           0.00         0.00      0.00      0.00
                                                                             -----          -----        -----     -----     -----
Capital stock transactions                                                   (0.06)          0.54        (0.16)    (0.07)     0.12
                                                                             -----          -----        -----     -----     -----
Net asset value attributable to common stockholders,
     end of year                                                             $0.91          $2.07        $1.19     $3.58     $7.70
                                                                             =====          =====        =====     =====     =====

Market value per share, end of year                                          $1.06          $1.62        $4.18     $8.00     $6.83
                                                                             =====          =====        =====     =====     =====

TOTAL INVESTMENT RETURN:
Based on market value per share (%)                                         (38.37)        (58.85)      (47.75)    17.13     95.24

RATIOS TO AVERAGE NET ASSETS:
Expenses (%)                                                                 48.36          56.61        37.67     25.99     24.97
Net investment loss from operations (%)                                     (41.44)        (43.64)      (33.08)   (24.73)   (23.86)

RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (000 omitted)                                   $2,024         $3,268       $2,922    $5,579    $8,440
Portfolio turnover rate (%)                                                     26             37           89        24        36
</TABLE>

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

(1) - Includes liquidation preference of preferred stockholders.
(2) - Calculated based on weighted average number of shares outstanding during
the period.

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


                                       26
<PAGE>


                          FRANKLIN CAPITAL CORPORATION
================================================================================
PORTFOLIO OF INVESTMENTS
--------------------------------------------------------------------------------
MARKETABLE INVESTMENT SECURITIES
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                                             NUMBER OF
                                                                                             SHARES OR                  MARKET
                                                                                             PRINCIPAL                  VALUE
DECEMBER 31, 2003 (2)                                                                        AMOUNT ($)   COST(1)       NOTE 2)
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                            <C>        <C>          <C>
Explore Technologies                                                                           7,500      $14,650       $7,650
Certificate of Deposit - 0.7%, due 02/02/2004                                                              26,249       26,249
                                                                                                          -------       ------

 Total Marketable Investment Securities
  (1.1% of total investments and 1.7%
   of net assets)                                                                                         $40,899      $33,899
                                                                                                         ========      =======
</TABLE>

--------------------------------------------------------------------------------
INVESTMENTS, AT FAIR VALUE
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                                                             NUMBER OF
                                                                                             SHARES OR                 DIRECTORS'
                                                                               EQUITY        PRINCIPAL                 VALUATION
DECEMBER 31, 2003 (2)                                          INVESTMENT     INTEREST       AMOUNT ($)   COST(1)      (NOTE 2)
------------------------------------------------------------------------------------------------------------------------------------
AFFILIATE
<S>                                                             <C>            <C>            <C>        <C>        <C>
Excelsior Radio Networks, Inc.                                Common stock     36.35%         908,804    $908,804   $1,817,608
Excelsior Radio Networks, Inc.                                  Warrants         -             87,111        -         103,662
                                                                                                         --------   ----------
Total Excelsior Radio Networks, Inc.
   (65.0% of total investments and 94.9% of net assets)                        13.82%                     908,804    1,921,270
   (Radio production and advertising sales)                                (fully diluted)
OTHER INVESTMENT
Alacra Corporation (33.8% of total investments
   and 49.4% of net assets)                            Convertible Preferred    1.68%         321,543   1,000,000    1,000,000
                                                                 Stock                                 ----------   ----------
    (Internet-based information provider)
Investments, at Fair Value                                                                              1,908,804    2,921,270
                                                                                                       ==========   ==========
</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.



                                       27
<PAGE>


FRANKLIN CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003

1. DESCRIPTION OF BUSINESS

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

The  accompanying  financial  statements  have been  prepared  assuming that the
Corporation  will continue as a going  concern.  The  Corporation  has a working
capital  deficiency  of  approximately  $900,000 at December 31, 2003.  (Working
capital is defined as total  liabilities  less liquid  assets.)  This  condition
raises substantial doubt about the Corporation's  ability to continue as a going
concern.  The  Corporation  is  currently  seeking  financing.  There  can be no
assurance that the Corporation  would 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 years ended December
31, 2003, 2002 and 2001.

At December 31, 2003 and 2002, the  Corporation  held cash and cash  equivalents
primarily in money market funds at two commercial banking institutions,  and two
broker/dealers.

VALUATION OF INVESTMENTS

Security  investments which are publicly traded on a national exchange or Nasdaq
Stock Market are stated at the last reported sales price on the day of valuation
or, if no sale was reported on that date,  then the securities are stated at the
last  quoted  bid price.  The Board of  Directors  of  Franklin  (the  "Board of
Directors") may determine, if appropriate,  to discount the value where there is
an impediment to the marketability of the securities held.

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


                                       28
<PAGE>

FRANKLIN CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

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.

STOCK-BASED COMPENSATION

The  Corporation  has elected to follow APB Opinion  25,  "Accounting  for Stock
Issued to Employees," to account for its  Non-Qualified  Stock Option Plan under
which no  compensation  cost is recognized  because the option exercise price is
equal to at least the market price of the underlying stock on the date of grant.
Had  compensation  cost for these plans been  determined  at the grant dates for
awards under the  alternative  accounting  method  provided for in SFAS No. 148,
"Accounting  for  Stock-Based  Compensation  -  Transition  and  Disclosure - an
Amendment of FASB  Statement  No. 123," net income and earnings per share,  on a
pro forma basis, would have been:
<TABLE>
<CAPTION>

                                                     DECEMBER 31, 2003    DECEMBER 31, 2002    DECEMBER 31, 2001
                                                     -----------------    -----------------    -----------------
<S>                                                    <C>                    <C>                 <C>
Net (decrease) increase in net assets
   attributable to common
   stockholders:
As reported                                            $(1,217,741)           $255,110            $(2,533,460)
Deduct:
Total stock-based  employee  compensation  expense
   determined  under fair value
   based method for all awards, net of related
    tax effect                                               --                  4,734                 37,985
                                                      ------------             --------            -----------
Pro forma                                              $(1,217,741)            $250,376           $(2,571,445)

Basic and diluted net (decrease)  increase
   in net assets  attributable to common
   stockholders:
As reported                                            $(1.17)                 $0.24              $(2.34)
Pro forma                                              $(1.17)                 $0.23              $(2.37)
</TABLE>

DEPRECIATION AND AMORTIZATION

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



                                       29
<PAGE>

FRANKLIN CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NET INCREASE (DECREASE) IN NET ASSETS PER COMMON SHARE

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

3. INCOME TAXES

For the years ended December 31, 2003, 2002 and 2001, Franklin's tax (provision)
benefit was based on the following:
<TABLE>
<CAPTION>

                                                                     2003                  2002                      2001
                                                                -------------         ---------------           ---------------
<S>                                                             <C>                      <C>                      <C>
Net investment loss from operations                             $(1,096,367)             $(1,530,369)             $(1,386,685)
Net realized gain on portfolio of investments                       430,883                  237,657                  520,455
(Decrease) increase in unrealized appreciation                     (475,605)               1,663,304               (1,553,756)
                                                                -----------              -----------              -----------
     Pre-tax book (loss) income                                 $(1,141,089)             $   370,592              $(2,419,986)
                                                                ===========              ===========              ===========
</TABLE>
<TABLE>
<CAPTION>

                                                                     2003                  2002                      2001
                                                                -------------         ---------------           ---------------
<S>                                                                <C>                       <C>                     <C>
Federal tax benefit (provision) at 34% on $(1,141,089),
     $370,592, and $(2,419,986), respectively                   $   388,000                 (126,000)             $   823,000
State and local, net of Federal benefit                              22,500                     --                      1,000
Other                                                                (5,500)                 (22,000)                   5,000
Change in valuation allowance                                      (405,000)                 148,000                 (827,000)
                                                                -----------              -----------              -----------
                                                                $        -              $        -                $     2,000
                                                                ============            ============              ============

The components of the tax benefit are as follows:

                                                                     2003                  2002                      2001
                                                                -------------         ---------------           ---------------
Current state and local tax benefit                            $        -               $          -                $  2,000
                                                                ============            ============              ============
</TABLE>

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

At December 31, 2003 and 2002,  significant  deferred tax assets and liabilities
consist of:

                                ASSET (LIABILITY)
<TABLE>
<CAPTION>

                                                                              December 31,        December 31,
                                                                                  2003                2002
                                                                            ----------------     ---------------
<S>                                                                         <C>                  <C>

Deferred Federal and state benefit from net operating
loss carryforward.................................................          $  2,605,000         $  2,356,000
Deferred Federal and state (provision) benefit on unrealized
  (appreciation) depreciation of investments.............................       (377,000)            (533,000)
Valuation allowance......................................................     (2,228,000)          (1,823,000)
                                                                              -----------          -----------
  Deferred taxes.........................................................   $          -         $          -
                                                                            =============        =============
</TABLE>


At December 31, 2002,  Franklin had net operating loss  carryforwards for income
tax purposes of approximately $7,236,000 that will begin to expire in 2011. At a
36%  effective  tax rate the  after-tax  net  benefit  from this  loss  would be
approximately $2,605,000.

4. STOCKHOLDERS' EQUITY

The  accumulated  deficit at December  31,  2003,  consists of  accumulated  net
realized gains of $5,524,000 and accumulated investment losses of $13,845,000.

The convertible  preferred  stock has a cumulative 7% quarterly  dividend and is
convertible  into the number of shares of common  stock by dividing the purchase
price  for the  convertible  preferred  stock by  conversion  price  in  effect,


                                       30
<PAGE>

FRANKLIN CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

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

On  December  31,  2002,  the  Corporation   redeemed  from  certain   preferred
stockholders 5,500 shares of convertible preferred stock for $25.00 per share.

The Board of Directors has authorized  Franklin to repurchase up to an aggregate
of 575,000  shares of its common stock in open market  purchases on the American
Stock  Exchange when such purchases are deemed to be in the best interest of the
Corporation and its  stockholders.  As of December 31, 2002, the Corporation had
purchased  507,450  shares of its  common  stock of which  456,288  remained  in
treasury.  During the year ended  December 31, 2003, the  Corporation  purchased
29,500 shares of its common stock at a total cost of $25,661.  To date, Franklin
has  repurchased  536,950  shares of its common  stock of which  485,788  shares
remain in treasury at December 31, 2003.

5. COMMITMENTS AND CONTINGENCIES

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

Rent  expense  for the  years  ended  December  31,  2003,  2002 and  2001,  was
approximately $72,000, $99,000, and $126,000,  respectively. For the years ended
December 31, 2003,  2002 and 2001, the  Corporation  collected rents of $37,500,
$59,000, and $24,000, respectively, from subtenants under month-to-month leases,
for a portion of its  existing  office space that is reflected as a reduction in
rent expense for that period.

On October 15, 2001, Jeffrey A. Leve and Jeffrey Leve Family  Partnership,  L.P.
filed a lawsuit against Franklin, Sunshine Wireless, LLC ("Sunshine"),  and four
other defendants  affiliated with Winstar  Communications,  Inc. On February 25,
2003,  the case  against  Franklin  and  Sunshine  was  dismissed,  however  the
plaintiffs  have a right  to  appeal.  The  lawsuit  alleges  that  the  Winstar
defendants  conspired to commit fraud and breached  their  fiduciary duty to the
plaintiffs  in  connection  with  the  acquisition  of  the  plaintiff's   radio
production  and  distribution  business.  The  complaint  further  alleges  that
Franklin  and  Sunshine  joined the  alleged  conspiracy.  The  plaintiffs  seek
recovery of damages in excess of  $10,000,000,  costs and  attorneys'  fees.  An
unfavorable  outcome  in an  appeal,  should  it be  brought,  together  with an
unfavorable  outcome  in the  lawsuit  may have a  material  adverse  effect  on
Franklin's business, financial condition and results of operations.

6. EXCELSIOR RADIO NETWORKS, INC.

Franklin valued its position in Excelsior at $2.00 per common share based on the
sale of 375,000  common  shares to Sunshine on October 8, 2003 (See Note 11) and
the receipt of an  unsolicited  non-binding  expression of interest by Excelsior
from a third party at a price greater than $2.00 per common share.

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

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

                                       31
<PAGE>

FRANKLIN CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

Franklin  entered into a services  agreement  with  Excelsior  whereby  Franklin
provides Excelsior with certain services.  Franklin receives a management fee of
not  less  than  $15,000  per  month  as   determined  by   Excelsior's   board.
Additionally,  Franklin's  chief  financial  officer serves in that capacity for
Excelsior  and his salary and  benefits  are  allocated  between  Excelsior  and
Franklin on an 80/20 basis.  During the years ended December 31, 2003,  2002 and
2001,  Franklin  earned  $180,000,  $450,000  and  $120,000,   respectively,  in
management fees and was reimbursed $144,000, $120,936 and $40,156, respectively,
for salary and  benefits  for  Franklin's  chief  financial  officer,  which was
recorded as a reduction of expenses on Franklin.

Excelsior  issued  notes,  each with an initial  aggregate  principal  amount of
$460,000 in connection with the acquisition of  substantially  all of the assets
of Dial Communications  Group, Inc., and Dial Communications Group, LLC in April
2002. At the time of issuance each of the promissory  notes was convertible into
shares of Franklin's  common stock at a premium ranging from 115% to 120% of the
average  closing  prices of  Franklin's  common stock during a specified pre and
post closing measurement  period.  Excelsior 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 promissory
notes. Excelsior and the note holders agreed to revise the notes on December 15,
2003, such that the notes are no longer convertible into Franklin common stock.

Franklin along with Sunshine initially  purchased  Excelsior on August 28, 2001.
On October 3, 2002,  Franklin sold 773,196 common shares for $1.94 per share for
$1,500,000 realizing a gain of $726,804. On January 31, 2003, Franklin purchased
and subsequently on May 29, 2003, Franklin cancelled the purchase, 33,750 common
shares for $1.625 per share and 65,199  warrants to acquire  shares of Excelsior
common stock at an exercise price of $1.125 per share for $0.50 per warrant.  On
August 12, 2003,  Franklin  sold 193,000  common  shares for $1.30 per share for
$250,900 realizing a gain of $57,900.  Franklin has stock appreciation rights on
these  common  shares as follows,  a) in the event that  Excelsior is sold on or
before  August 8,  2004 for gross  proceeds  of no less than  $40,000,000,  then
Franklin shall be entitled to receive fifty percent (50%) of any net value above
$1.30 per share not to exceed total proceeds to Franklin of $1.94 per share, and
b) in the event  that  Excelsior  is sold on or before  August 8, 2005 for gross
proceeds of no less than $40,000,000, then Franklin shall be entitled to receive
fifty  percent  (50%) of any net  value  above  $1.30  per  share  not to exceed
proceeds to Franklin of $1.625 per share.  On October 8, 2003,  Franklin sold to
Sunshine  375,000  shares of the  common  stock of  Excelsior  for an  aggregate
purchase  price of $750,000,  realizing a gain of $375,000,  pursuant to a stock
purchase   agreement   between   Sunshine  and  Franklin.   Franklin  has  stock
appreciation  rights on these  common  shares such that if Excelsior is sold and
the purchaser of the common  shares from  Franklin  receives more than $3.50 per
share,  Franklin is entitled to receive 80% of the value  greater than $3.50 per
share.  There can be no guarantee that Franklin will be able to continue to sell
shares of Excelsior to Sunshine.

After  giving  effect  to  the  purchase  of the  common  stock,  Sunshine  owns
approximately  63.6% and the  Company  owns 36.4% of the issued and  outstanding
common stock,  and voting power, of Excelsior.  On a fully diluted basis,  after
giving effect to the exercise of the outstanding  warrants and the conversion of
Sunshine's  outstanding  preferred  stock of Excelsior  into common  stock,  the
Corporation owns approximately 13.8% of Excelsior.

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.

                                       32
<PAGE>

FRANKLIN CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

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

<TABLE>
<CAPTION>
                                                 December 31, 2003        December 31, 2002        December 31, 2001
                                               ---------------------    ---------------------    ---------------------
                                                            Weighted                 Weighted                 Weighted
                                                            Average                  Average                  Average
                                                            Exercise                 Exercise                 Exercise
                                                 Shares      Price      Shares        Price      Shares        Price
                                               ----------   --------    ------       --------    ------       --------
<S>                                               <C>        <C>        <C>          <C>         <C>          <C>
Outstanding at beginning of year                  20,625     $11.39     39,375       $11.27      39,375       $11.27
Granted                                             -           -          -            -          -             -
Exercised                                           -           -          -            -          -             -
Forfeited                                           -           -       18,750       $11.13        -             -
Expired                                             -           -          -            -          -             -
                                               ----------             ----------               ----------
Outstanding at end of year                        20,625     $11.39     20,625       $11.39      39,375       $11.27
                                                  ======                ======                   ======
Exercisable at end of year                        20,625     $11.39     20,625       $11.39      26,875       $11.33
                                                  ======                ======                   ======
</TABLE>

The options issued under the SIP have a remaining contractual life of 4.1 years.
The options issued under the SOP have a remaining contractual life of 6.1 years.

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

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

<TABLE>
<CAPTION>
                                                                                     December 31,
                                                                 ----------------------------------------------------
                                                                      2003               2002                2001
                                                                 ----------------------------------------------------
<S>                                                              <C>                   <C>               <C>
Numerator:
         Net (decrease) increase in net
            assets from operations                               $(1,141,089)          $370,262          ($2,418,310)
         Preferred stock dividends                                   (76,652)          (115,152)            (115,150)
                                                                 -----------          ---------           ----------
         Numerator for basic and diluted
            earnings per share - net (decrease)
            increase in net assets attributable
            to common stockholders                               $(1,217,741)          $255,110          ($2,533,460)
                                                                 ===========          =========           ==========

Denominator:
         Denominator for basic and diluted
            (decrease) increase in net assets
            from operations - weighted -
            average shares                                         1,037,443          1,066,195            1,083,408
                                                                 ===========          =========           ==========

Basic and diluted net (decrease) increase in
         net assets from operations per share                         $(1.17)             $0.24               $(2.34)
                                                                 ===========          =========           ==========
</TABLE>

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

<TABLE>
<CAPTION>
                                                                       Period Ended December 31,
                                                              ---------------------------------------------
                                                                  2003             2002             2001
                                                              ---------------------------------------------
<S>                                                              <C>             <C>              <C>
Preferred stock convertible into common stock                    82,125          123,375          123,375
Stock options                                                    20,625           20,625           39,375
</TABLE>


                                       33
<PAGE>

FRANKLIN CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

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>
                                                                                December 31,              December 31,
                                                                                --------------------------------------
                                                                                    2003                     2002
                                                                                --------------------------------------
<S>                                                                              <C>                       <C>
Numerator:
         Numerator for net asset value per
           common share, as if converted basis                                   $2,024,138                $3,267,540
         Liquidation value of convertible preferred
           stock                                                                 (1,095,000)               (1,095,000)
                                                                                 ----------                ----------
         Numerator for net asset value per share
           attributable to common stockholders                                   $  929,138                $2,172,540
                                                                                 ==========                ==========

Denominator:
         Number of common shares outstanding,
           denominator for net asset value per share
           attributable to common stockholders                                    1,020,100                 1,049,600
         Number of shares of common stock to be
           issued upon conversion of preferred stock                                 82,125                    82,125
                                                                                 ----------                ----------
         Denominator for net asset value per common
           share as if converted basis                                            1,102,225                 1,131,725
                                                                                 ==========                ==========

         Net asset value per share attributable to common stockholders                $0.91                     $2.07
                                                                                 ==========                ==========

         Net asset value per common share, as if converted basis                      $1.84                     $2.89
                                                                                 ==========                ==========
</TABLE>

10. PURCHASES AND SALES OF INVESTMENT SECURITIES

The  cost of  purchases  and  proceeds  from  sales  of  investment  securities,
excluding   short-term   investments,   aggregated   $37,166   and   $1,021,398,
respectively,  for the year ended  December  31, 2003;  $22,985 and  $1,660,269,
respectively,  for  the  year  ended  December  31,  2002;  and  $3,241,241  and
$3,477,991, respectively, for the year ended December 31, 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.

12. SELECTED QUARTERLY DATA (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                          2003
                                                                                          ----
                                                              Quarter 1         Quarter 2        Quarter 3         Quarter 4
                                                              --------------------------------------------------------------
<S>                                                            <C>              <C>              <C>               <C>
Total investment income                                        $45,678          $  45,080        $  45,090         $  47,311
Net investment loss from operations                           (273,727)          (277,926)        (271,683)         (273,031)
Net (decrease) increase in net assets
  attributable to common stockholders                         (245,347)          (821,688)         145,013          (295,719)
Basic and diluted earnings per common share                      (0.23)             (0.79)            0.14             (0.29)
</TABLE>

                                       34
<PAGE>

FRANKLIN CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
                                                                             2002
                                                                             ----
                                                 Quarter 1         Quarter 2        Quarter 3         Quarter 4
                                                 --------------------------------------------------------------
<S>                                               <C>              <C>              <C>               <C>
Total investment income                           $91,549          $120,560         $120,110          $122,862
Net investment loss from operations              (254,441)         (434,455)        (472,220)         (369,253)
Net (decrease) increase in net assets
  attributable to common stockholders            (268,903)        2,225,964       (1,396,784)         (305,167)
Basic and diluted earnings per common share         (0.25)             2.08            (1.31)            (0.29)
</TABLE>

13. SUBSEQUENT EVENT

On March 19, 2004,  Franklin sold to Sunshine  58,804 shares of the common stock
of Excelsior  for an  aggregate  purchase  price of  $117,608,  $2.00 per common
share,  pursuant to a stock purchase  agreement  between  Sunshine and Franklin.
Franklin  has stock  appreciation  rights on these  common  shares  such that if
Excelsior is sold and the purchaser of the common shares from Franklin  receives
more than $3.50 per share,  Franklin  is  entitled  to receive  80% of the value
greater than $3.50 per share.









                                       35
<PAGE>





ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

        Not applicable.

ITEM 9A. CONTROLS AND PROCEDURES

                  The Corporation's  chief executive officer and chief financial
officer  have  evaluated  the  effectiveness  of  the  Corporation's  disclosure
controls and procedures (as defined in Rules  13a-14(c) and 15d-14(c)  under the
Securities  Exchange  Act of  1934  (the  "Exchange  Act"))  as of a  date  (the
"Evaluation  Date") within 90 days before the filing date of this annual report.
Based on such  evaluation,  they have concluded that, as of the Evaluation Date,
the information  required to be disclosed by the Corporation in the reports that
it files or submits  under the Exchange Act is recorded,  processed,  summarized
and  reported,  within the time periods  specified in the rules and forms of the
Securities and Exchange Commission.

         There  were  no  significant  changes  in  the  Corporation's  internal
controls or in other  factors that could  significantly  affect  these  controls
during the period covered by this annual report.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         All of the  Corporation's  directors are independent with the exception
of Stephen L. Brown.

COMMON STOCK DIRECTORS

         STEPHEN L. BROWN, (1) age 65, was elected to the Corporation's Board of
Directors and  appointed  Chairman of its Board of Directors in October 1986. He
has been Chairman and Chief  Executive  Officer  since  October  1986.  Prior to
joining Franklin,  Mr. Brown was Chairman of S.L. Brown & Company,  Inc. ("SLB &
Co.,  Inc."),  a private  investment  firm.  Mr.  Brown is a director  of Copley
Financial Services  Corporation,  advisor to Copley Fund, Inc., a mutual fund as
well as a director of U.S. Energy Systems, Inc. an independent producer of clean
efficient energy for growing energy markets. Mr. Brown is an "interested person"
of the  Corporation  as  defined  in the 1940 Act  because  he serves as both an
officer and director of the Corporation.

         DAVID T.  LENDER,  (3) age 51,  joined the Board as a director in 2000.
Mr. Lender is a Managing  Director at Banc of America  Securities,  LLC where he
specializes  in  mergers  and  acquisitions.  Prior to  joining  Banc of America
Securities,  LLC,  Mr.  Lender  was a  Managing  Director  in  the  Mergers  and
Acquisitions Group of Rothschild, Inc.

PREFERRED STOCK DIRECTORS

         IRVING LEVINE,  (1), (2), (3) age 82, joined the Board as a director in
1990. He has been  Chairman of the Board and  President of Copley Fund,  Inc., a
mutual fund,  since 1978,  and Chairman and Treasurer of Stuffco  International,
Inc., a ladies  handbag  processor and  chain-store  operator,  since 1978.  Mr.
Levine is  President  and a director of Copley  Financial  Services  Corporation
(advisor to Copley  Fund,  Inc.) as well as a director of U.S.  Energy  Systems,
Inc. an  independent  producer  of clean  efficient  energy for  growing  energy
markets.

         LAURENCE I. FOSTER,  (2), (3) age 62, joined the Board as a director in
2002.  He was a partner at KPMG until his  retirement in May 2000 when he joined
Richard  E.  Eisner & Company  LLP's New York  City  office as a partner  in the
personal  financial  planning  practice.  In June  2002  Mr.  Foster  became  an


                                       36
<PAGE>

independent  consultant.  Mr.  Foster holds the American  Institute of Certified
Public Accountants "Personal Financial Specialist" (PFS) designation. Mr. Foster
is a member of the American  Institute of Certified Public  Accountants where he
is the Chairman on the PFS Credential Committee.  Mr. Foster is also a member of
the New York  State  Society  of  Certified  Public  Accountants  and the former
chairman of their Estate Planning Committee.

(1) - Member of Executive Committee, (2) - Member of Compensation Committee,
(3) - Member of Audit Committee

EXECUTIVE OFFICERS

         STEPHEN L. BROWN,  Chairman and Chief Executive Officer. For additional
information about Mr. Brown, please see the Directors' biographical  information
section above.

         HIRAM M.  LAZAR,  age 39,  joined the  Corporation  as Chief  Financial
Officer  in January  1999.  From June 1992 to January  1999,  Mr.  Lazar was the
Vice-President of Finance and Corporate  Controller for Lebenthal & Co., Inc., a
regional full-service broker/dealer.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

     Section 16(a) of the Securities Exchange Act of 1934, as amended,  requires
the  Corporation's  officers  and  directors,  and  persons who own more than 10
percent of the Corporation's  common stock to file reports (including a year-end
report) of ownership and changes in ownership  with the  Securities and Exchange
Commission  (the "SEC") and to furnish  the  Company  with copies of all reports
filed.

     Based  solely on a review of the forms  furnished  to the  Corporation,  or
written representations from certain reporting persons, the Corporation believes
that all persons who were  subject to Section  16(a) in 2002  complied  with the
filing requirements.

ITEM 11. EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

         The  following  table sets  forth a summary  for each of the last three
years of the cash and non-cash  compensation  awarded to,  earned by, or paid to
the Chief Executive Officer of the Corporation and the other executive  officers
of the Corporation, whose individual remuneration exceeded $100,000 for the year
ended December 31, 2003.

<TABLE>
<CAPTION>
                                                                                                 SECURITIES
                                                                              OTHER              UNDERLYING
            NAME &                                                           ANNUAL               OPTIONS          OTHER
      PRINCIPAL POSITION        YEAR      SALARY ($)       BONUS ($)    COMPENSATION($) (1)      AWARDED (#)   COMPENSATION ($)
      ------------------        ----      -----------      ---------    --------------------     -----------   ----------------
  <S>                           <C>        <C>              <C>                   <C>                 <C>               <C>
  Stephen L. Brown (2)          2003       $387,500         $40,000               -                   -                 -
  CHAIRMAN &                    2002        420,000          30,000               -                   -                 -
  PRESIDENT                     2001        420,000            -                  -                   -                 -

  Hiram M. Lazar                2003        160,000           3,750               -                   -                 -
  CHIEF FINANCIAL               2002        130,000           3,750               -                   -                 -
  OFFICER                       2001        130,000            -                  -                   -                 -
</TABLE>

(1) There were no perquisites paid by the Corporation in excess of the lesser of
$50,000 or 10% of the compensated  person's total salary and bonus for the year.

(2) Mr. Brown is an "interested person" of the Corporation, as defined under the
1940 Act,  because he serves as both a  director  and  executive  officer of the
Corporation.

                                       37
<PAGE>

COMPENSATION OF DIRECTORS

         Each director of the  Corporation,  other than Mr. Stephen L. Brown, is
eligible to receive a fee of $500 plus  reimbursement  of  expenses  incurred in
attending each board meeting.

<TABLE>
<CAPTION>
                                                   PENSION OR
                                                   RETIREMENT BENEFITS
                                                   ACCRUED AS PART OF     ESTIMATED ANNUAL
                              AGGREGATE            CORPORATION'S          BENEFITS UPON         TOTAL COMPENSATION
NAME OF DIRECTOR              COMPENSATION         EXPENSES               RETIREMENT            PAID TO DIRECTORS

<S>                           <C>                  <C>                    <C>                   <C>
Stephen L. Brown              $ -                  -                      -                     -

David T. Lender               $3,000               -                      -                     $3,000

Michael P. Rolnick            $1,000               -                      -                     $1,000

Lawrence J. Foster            $3,000               -                      -                     $3,000

Irving Levine                 $3,000               -                      -                     $3,000
</TABLE>

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

         Irving  Levine,  Laurence  Foster,  and  David  Lender  served  on  the
Compensation  Committee  during  2003.  There  were  no  Compensation  Committee
interlocks or insider (employee) participation during 2003.

OPTION GRANTS

         No options were granted during the year ended December 31, 2003, to the
Chief Executive  Officer of the  Corporation or the other executive  officers of
the Corporation.

OPTION EXERCISES

         No options were  exercised  during the year ended December 31, 2003, by
the Chief Executive  Officer of the Corporation or the other executive  officers
of the Corporation.

EMPLOYMENT AGREEMENTS

         On July 26,  2002,  the Board  authorized  an  amendment  to Stephen L.
Brown's  Employment  Agreement with the  Corporation  (as amended,  the "Stephen
Brown Employment  Agreement").  The Stephen Brown Employment  Agreement will now
expire on December 31, 2004 ("the Term"). The Term will automatically renew from
year to year thereafter, unless the Corporation notifies Mr. Brown not less than
120 days prior to the end of any Term in writing that the  Corporation  will not
be renewing the Stephen Brown Employment Agreement.

         The Stephen Brown  Employment  Agreement  provides that Mr.  Stephen L.
Brown will serve as the Chairman and Chief Executive  Officer of the Corporation
and be responsible for the general management of the affairs of the Corporation,
reporting directly to the Board. It also provides that he will serve as a member
of the  Board  for the  period  of which he is and  shall  from  time to time be
elected or reelected.

                                       38
<PAGE>

         Mr.  Stephen L. Brown  receives  compensation  under the Stephen  Brown
Employment  Agreement in the form of base salary of $420,000.  In addition,  the
Board may increase such salary at its discretion from time to time. Mr. Brown is
also entitled to be paid bonuses as the Board determines in its sole discretion.
Under the Stephen Brown  Employment  Agreement,  the  Corporation  furnishes Mr.
Brown with an automobile and reimburses him for certain expenses related to such
automobile.  In  addition,  Mr.  Brown is  reimbursed  for  expenses  related to
membership in a club to be used  primarily for business  purposes.  Mr. Brown is
entitled  under the Stephen Brown  Employment  Agreement to  participate  in any
employee benefit plans or programs and to receive all benefits,  perquisites and
emoluments for which salaried employees are eligible. Mr. Brown is also entitled
to severance pay in the event of  termination  without cause or by  constructive
discharge  equal to the  remaining  base salary  payable under the Stephen Brown
Employment  Agreement and provides for death  benefits  payable to his surviving
spouse equal to Mr. Brown's base salary for a period of one year.

         In  addition,  on July 26, 2002 the Board  authorized  an  amendment to
Stephen L. Brown's Severance Agreement (as amended, the "Stephen Brown Severance
Agreement"). Under the terms of the Stephen Brown Severance Agreement, Mr. Brown
is entitled to receive severance if following a change in control (as defined in
the Stephen  Brown  Severance  Agreement)  his  employment  is terminated by the
Corporation  without cause or by the executive within one year of such change in
control.  The amendment  has  increased the amount of the severance  payment Mr.
Brown is entitled to receive upon the  occurrence  of such event from 1.5 to 2.5
times his average compensation over the past five years.

         On  January  1,  2003,  Mr.  Hiram  Lazar  entered  into an  employment
agreement with the  Corporation,  the "Hiram Lazar  Employment  Agreement".  The
Hiram Lazar Employment  Agreement will expire on December 31, 2003 ("the Term").
The Term will  automatically  renew  from year to year  thereafter,  unless  the
Corporation  notifies  Mr.  Lazar not less than 90 days  prior to the end of any
Term in  writing  that the  Corporation  will not be  renewing  the Hiram  Lazar
Employment Agreement.

         The Hiram Lazar Employment Agreement provides that Mr. Lazar will serve
as the Chief  Financial  Officer of the  Corporation  and be responsible for the
financial affairs of the Corporation,  reporting directly to the Chief Executive
Officer.

         Mr.  Lazar  receives  compensation  under  the Hiram  Lazar  Employment
Agreement  in the form of base salary of $160,000.  In  addition,  the Board may
increase  such salary at its  discretion  from time to time.  Mr.  Lazar is also
entitled to be paid bonuses up to 20% of base salary as the Board  determines in
its sole  discretion.  Mr.  Lazar is entitled  under the Hiram Lazar  Employment
Agreement  to  participate  in any  employee  benefit  plans or programs  and to
receive all benefits,  perquisites  and emoluments for which salaried  employees
are  eligible.  Mr.  Lazar is also  entitled  to  severance  pay in the event of
termination  without cause or by  constructive  discharge equal to the remaining
base salary payable under the Hiram Lazar Employment  Agreement and provides for
death benefits  payable to his surviving spouse equal to Mr. Lazar's base salary
for a period of six months.  Excelsior reimburses the Corporation for 80% of Mr.
Lazar's total compensation.

COMPENSATION PLANS

         On  September 9, 1997,  Franklin  Capital's  stockholders  approved two
Stock Option  Plans:  a Stock  Incentive  Plan ("SIP") to be offered to Franklin
Capital's consultants, officers and employees (including any officer or employee
who is also a director of Franklin  Capital)  and a  Non-Statutory  Stock Option
Plan  ("SOP") to be offered to Franklin  Capital's  "outside"  directors,  I.E.,
those  directors  who are not also  officers or employees  of Franklin.  112,500
shares of Franklin  Capital's common stock have been



                                       39
<PAGE>

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 Investment Company 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.

         On December  31,  2003,  there were 20,625  options to purchase  common
stock outstanding and 26,250 remain available for future issuance.

         The  following  is a  description  of each of the  Stock  Option  Plans
followed by a  description  of the  provisions  applicable  to both Stock Option
Plans.

STOCK INCENTIVE PLAN (SIP)

         PURPOSE

         The purpose of the SIP is to give the  Corporation and its Affiliates a
competitive   advantage  in  attracting,   retaining  and  motivating  officers,
employees and consultants of the Corporation and to provide the Corporation with
a stock plan that provides  incentives  linked to the  financial  results of the
Corporation and increase in stockholder value.

         TYPE OF AWARDS

         The SIP permits,  at the discretion of the  Committee,  the granting to
SIP participants of options to purchase Common Stock (including  incentive stock
options within the meaning of Section 422 of the Code ("ISOs") or "non-statutory
stock options"  ("non-ISOs")),  stock appreciation rights,  restricted stock and
tax offset bonuses. A stock appreciation right entitles an optionee to an amount
equal to the excess of the fair market  value of one share of common  stock over
the per share  exercise  price  multiplied by the number of shares in respect of
which the stock appreciation right is exercised.  Stock appreciation  rights may
only be granted in conjunction with all or part of an option grant.

         Restricted  stock  may be  awarded  to  any  participant,  for no  cash
consideration  and  may  be  subject  to  such  conditions,  including  vesting,
forfeiture and restrictions on transfer, as the Committee shall determine.  Such
terms and conditions will be specified in an agreement evidencing the award.

         Finally,  the SIP  permits  the  granting  of a right to receive a cash
payment at such time or times as an award under the SIP results in  compensation
income to the participant for the purpose of assisting the participant in paying
the resulting taxes.

         Upon exercise of an ISO or non-ISO, the Committee may elect to cash out
all or any  portion of the  shares of common  stock for which an option is being
exercised  by paying the optionee the excess of the fair market value of a share
of common  stock over the per share  exercise  price for each such option  share
being  cashed  out.  All  options  granted  under the SIP  become  automatically
exercisable upon a "change of control" and remain  exercisable  until expiration
of their respective  terms. A "change in control" is defined in the Stock Option
Plans as the acquisition by any person or group (other than Stephen L. Brown and
his Affiliates) of more than 25% of the voting  securities of the Corporation or
a sale or other  disposition  of all or  substantially  all of the assets of the
Corporation to any person.

                                       40
<PAGE>

         ADMINISTRATION

         The SIP will be  administered  by a committee of the Board of Directors
composed of not fewer than two outside  directors each of whom will qualify as a
"non-employee  director" within the meaning of Rule 16b-3 of the 1934 Act and an
"outside  Director"  within the  meaning of Section  162(m) of the Code with all
grants under the SIP approved pursuant to Section 57(o) of the 1940 Act. Section
57(o) of the 1940 Act  requires  that  grants be  approved  by a majority of the
directors   with  no  financial   interest  in  the  grant  and  a  majority  of
non-interested  directors.  The Committee will have the  authority,  among other
rights,  to select the  participants  to whom awards may be  granted,  determine
whether to grant ISOs, non-ISOs,  stock appreciation rights or restricted stock,
or any combination  thereof and determine the vesting terms and other conditions
of an award to an SIP participant.

         PARTICIPANTS

         SIP  participants  will  be the  officers,  employees  (including  such
officers and employees who are also directors) or consultants of the Corporation
and its  Affiliates  who are  responsible  for or contribute to the  management,
growth and  profitability of the business of the Corporation and its Affiliates.
Each grant of an award under the SIP will be evidenced  by an agreement  between
the  participant  and the  Corporation,  which  shall  include  such  terms  and
provisions as the Committee may determine from time to time.

         TRANSITION OF AWARDS

         Under the SIP,  generally,  upon an SIP participant's  death or when an
SIP  participant's  employment is terminated for any reason,  all unvested stock
options will be  forfeited.  Upon the  termination  of employment of an optionee
other than as a result of the optionee's  death,  unless  otherwise  provided in
such  optionee's  option  agreement,  an  optionee's  right to exercise a vested
option  will  expire  three  months  after  termination  of  employment.  If  an
optionee's  employment is terminated by reason of death,  the period of exercise
for  options  vested  at the  optionee's  death is 12  months.  Options  are not
transferable except on the death of the optionee,  by will or the laws of decent
and distribution.  Stock appreciation rights may be exercised and transferred to
the same  extent  that the  options to which they  relate  may be  exercised  or
transferred.

         The Board of Directors may terminate,  suspend, amend or revise the SIP
at any time subject to limitations  in the plan. The Board may not,  without the
consent  of the  optionee,  alter or impair  rights  under any award  previously
granted except in order to comply with applicable law.

NON-STATUTORY STOCK OPTION PLAN (SOP)

         PURPOSE

         The purpose of the SOP is to further the interests of the  Corporation,
its stockholders  and its employees by providing the "outside"  directors of the
Corporation  (I.E.,  those  who are  not  also  officers  and  employees  of the
Corporation)  the opportunity to purchase the Common Stock of the Corporation as
an appropriate reward for the dedication and loyalty of the "outside" directors.

         TYPE OF AWARDS

         The SIP only permits the granting of options to purchase  common stock.
Only non-ISOs can be granted under the SOP.

                                       41
<PAGE>

         ADMINISTRATION

         The  SOP  will  be  administered  by  the  Board  of  Directors  of the
Corporation with all grants approved  pursuant to Section 57(o) of the 1940 Act.
Options granted under the SOP are intended to comply with the exemption afforded
by Rule 16b-3 of the 1934 Act.  The  Board,  in its  discretion,  can impose any
vesting or other restrictions on options granted under the SOP.

         PARTICIPANTS

         SOP participants will be outside directors of the Corporation.

         TERMINATION OF AWARDS

         Under  the  SOP,  options  expire  30  days  after  the  date  of a SOP
participant's  appointment  with the  Corporation  is terminated  except if such
termination is by reason of death or disability.  In the event of termination by
reason of disability,  options expire 12 months after such  termination.  In the
event of the participant's  death while serving as director or within the 30-day
period following termination of the participant's appointment, options expire 12
months following the date of death.

PROVISIONS APPLICABLE TO BOTH STOCK OPTION PLANS

         AVAILABLE SHARES

         The  aggregate  number of shares of common stock  reserved for issuance
under the Stock Option Plans will be 112,500,  of which 67,500  shares have been
reserved for issuance  under the SIP and 45,000 have been  reserved for issuance
under the SOP.  Shares  subject to options  that  terminate  or expire  prior to
exercise will be available for future grants under the Stock Option Plan.

         The number of shares of common stock  reserved  for issuance  under the
Stock Option Plans,  the number of shares  issuable upon the exercise of options
or subject to stock  appreciation  rights, the exercise price of such awards and
the number of restricted  stock awards  granted under the Stock Option Plans may
be  subject  to  "anti-dilution"  adjustments,  in the  sole  discretion  of the
Committee,   in  the  event  of  any  merger,   reorganization,   consolidation,
separation,   liquidation,  stock  dividend,  stock  split,  share  combination,
recapitalization   or  other  change  in  corporate   structure   affecting  the
outstanding common stock of the Corporation.

         GRANT AND EXERCISE OF AWARDS

         The  exercise  price for options  under the Stock  Option Plans will be
determined,  in the case of the SIP,  by the  Committee,  and in the case of the
SOP,  by the Board of  Directors,  but will not be less  than the  "Fair  Market
Value" of the Corporation's common stock at the date of grant (as defined in the
Stock  Option  Plans as the  closing  market  price of the  common  stock on the
American Stock Exchange on the date of such grant).

         Options  granted  under the Stock  Option Plans are  exercisable  for a
period of 10 years  from the date of grant  (five  years  with  respect  to ISOs
granted  to  optionees  who  own  more  than  10% of  the  voting  power  of the
Corporation or any  subsidiary) or such shorter period as the  administrator  of
such plan (either the Committee or the Board,  as the case may be) may establish
as to any or all shares of common  stock  subject to any  option.  Options  will
become  exercisable in accordance with the vesting  schedule  prescribed in such
optionee's  option  agreement,  and may be subject to satisfaction of such other
conditions as the administrator may determine. Stock appreciation rights granted
under the SIP are


                                       42
<PAGE>

exercisable  to the same  extent as the  options to which  they  relate and upon
exercise terminate the related option.

         An employee,  officer or director  exercising a non-ISO pursuant to the
SIP may  elect to have the  Corporation  withhold  shares  of the  Corporation's
common  stock to satisfy  tax  liabilities  arising  from the  exercise  of such
options.  Initially,  there will be three employees of the  Corporation,  two of
whom are also  directors,  who will be eligible to participate in the SIP. There
are five outside directors eligible to participate in the SOP.

CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF OPTIONS

         The following discussion of certain relevant federal income tax effects
applicable  to stock  options  granted  under the Stock  Option Plans is a brief
summary  only,  and  reference  is made to the  Code  and  the  regulations  and
interpretations  issued  thereunder  for a complete  statement  of all  relevant
federal tax consequences.

         INCENTIVE STOCK OPTIONS

         No taxable  income will be  realized  by an optionee  upon the grant or
timely  exercise of an ISO. If shares are issued to an optionee  pursuant to the
timely exercise of an ISO and a disqualifying  disposition of such shares is not
made by the optionee  (I.E.,  no  disposition is made within two years after the
date of grant or within one year after the  receipt of shares by such  optionee,
whichever is later),  then (i) upon sale of the shares,  any amount  realized in
excess  of the  exercise  price of the ISO will be  taxed to the  optionee  as a
long-term  capital gain and any loss sustained  will be long-term  capital loss,
and (ii) no deduction  will be allowed to the  Corporation.  However,  if shares
acquired upon the timely  exercise of an ISO are disposed of prior to satisfying
the holding  period  described  above,  generally  (a) the optionee will realize
ordinary  income in the year of disposition in an amount equal to the excess (if
any) of the fair  market  value of the shares at the time of  exercise  (or,  if
less,  the amount  realized on the  disposition of the shares) over the exercise
price  thereof,  and (b) the  Corporation  will be  entitled to deduct an amount
equal to such income.  Any  additional  gain  recognized  by the optionee upon a
disposition  of shares prior to satisfying the holding  period  described  above
will be taxed as a short-term or long-term capital gain, as the case may be, and
will not result in any deduction for the Corporation.

         If an ISO is not  exercised  on a  timely  basis,  the  option  will be
treated as a nonqualified stock option. Subject to certain expectations,  an ISO
generally  will not be exercised on a timely basis if it is exercised  more than
three months following termination of employment.

         The amount that the fair market  value of shares of common stock on the
exercise date of an ISO exceeds the exercise price  generally will constitute an
item that increases the optionee's alternative minimum taxable income.

         In general,  the Corporation will not be required to withhold income or
payroll taxes on the timely exercise of an ISO.

         NON-ISOS

         In  general,  an  optionee  will  not be  subject  to tax at the time a
non-ISO is granted.  Upon exercise of a non-ISO where the exercise price is paid
in cash, the optionee  generally must include in ordinary  income at the time of
exercise an amount equal to the excess,  if any, of the fair market value of the
shares of common  stock at the time of exercise  over the  exercise  price.  The
optionee's  tax  basis in the  shares  acquired  upon  exercise  will  equal the
exercise price plus the amount taxable as ordinary  income to the


                                       43
<PAGE>

optionee.  The federal income tax consequences of an exercise of a non-ISO where
the  exercise  price is paid in  previously  owned  shares of  common  stock are
generally  similar to those where the exercise  price is paid in cash.  However,
the optionee will not be subject to tax on the surrender of such shares, and the
tax basis of the shares  acquired  on  exercise  that are equal in number to the
shares  surrendered  will  be the  same  as the  optionee's  tax  basis  in such
surrendered shares. Special timing rules may apply to an optionee who is subject
to reporting under Section 16(a) of the 1934 Act (generally an executive officer
of the Corporation) and would be subject to liability under Section 16(b) of the
1934 Act.

         The Corporation generally will be entitled to a deduction in the amount
of an  optionee's  ordinary  income at the time such income is recognized by the
optionee  upon the exercise of a non-ISO.  Income and payroll taxes are required
to be withheld for employees on the amount of ordinary income resulting from the
exercise of a non-ISO.

         On February 14, 2000, 30,000 options were granted under the SOP to four
eligible  "outside"  directors.  The strike  price of the options was $11.50 per
share,  which  represented  the  closing  price of  Franklin's  common  stock as
reported by the American Stock  Exchange on that date.  One-third of the options
granted vested  immediately;  another one-third vested one year from the date of
issuance; and the final one-third vest two years after the date of issuance. The
options  expire  after ten years.  On June 7, 2000,  7,500  options were granted
under the SOP to four  eligible  "outside"  directors.  The strike  price of the
options was $9.67 per share,  which  represented the closing price of Franklin's
common stock as reported by the American Stock Exchange on that date.  One-third
of the options granted vested immediately;  another one-third vest one year from
the date of issuance;  and the final  one-third vest two years after the date of
issuance. The options expire after ten years.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
         RELATED STOCKHOLDER MATTERS

         The  following  tables set forth  certain  information  with respect to
beneficial  ownership (as that term is defined in the rules and  regulations  of
the  Commission)  of the  Corporation's  common stock as of March 9, 2004, by 1)
each person who is known by the  Corporation to be the beneficial  owner of more
than five  percent of the  outstanding  common  stock,  2) each  director of the
Corporation,   3)  each  current   executive   officer  listed  in  the  Summary
Compensation   Table  and  4)  all  directors  and  executive  officers  of  the
Corporation  as a group.  Except as otherwise  indicated,  to the  Corporation's
knowledge,  all shares are beneficially owned and investment and voting power is
held as stated by the persons  named as owners.  The address for all  beneficial
owners,  unless stated otherwise below, is c/o Franklin Capital  Corporation 450
Park Avenue, Suite 2002, New York, NY 10022.

COMMON STOCK

<TABLE>
<CAPTION>
                  NAME AND ADDRESS OF                  AMOUNT AND NATURE OF                           PERCENT
                    BENEFICIAL OWNER                   BENEFICIAL OWNERSHIP                           OF CLASS
                  -------------------                  --------------------                           --------
       The Prudential Insurance Company
       <S>                                                   <C>                       <C>               <C>
          of America                                         161,854                                     15.9%
          751 Broad Street, Newark, NJ 07102
       Stephen L. Brown                                      142,590                   (1)               14.0%
       Irving Levine                                          46,375                   (2)                4.5%
       Hiram M. Lazar                                          9,085                   (3)                   *
       David T. Lender                                           300                                         *
       Laurence I. Foster                                        -                                           *
       All officers and directors
            as a group (5 persons)                           198,350                                     19.4%
       -----------------------
        * Less than 1.0%
</TABLE>

                                       44
<PAGE>

(1)  Does not include 5,023D Does not include 45,829 shares owned by Mr. Brown's
     children. Mr. Brown disclaims beneficial ownership of such shares.

(2)  Includes options for 2,500 shares exercisable on February 14, 2000, options
     for 625  shares  exercisable  on June 7,  2000,  options  for 2,500  shares
     exercisable on February 14, 2001 and options for 625 shares  exercisable on
     June 7, 2001.  Also  includes  preferred  stock which is  convertible  into
     35,625 shares of common stock owned by Copley Fund,  Inc.  ("Copley").  Mr.
     Levine  may be deemed  to be a  controlling  person  of  Copley  due to his
     position as Chairman and Chief Executive Officer. Therefore, Mr. Levine may
     be deemed to be a beneficial owner of all shares owned by Copley.

(3)  Includes  options for 937 shares  exercisable on March 1, 2000, and options
     for 938 shares  exercisable on March 1, 2001. Also includes preferred stock
     held which is convertible into 750 shares of common stock.

PREFERRED STOCK

<TABLE>
<CAPTION>
                  NAME AND ADDRESS OF                  AMOUNT AND NATURE OF                           PERCENT
                    BENEFICIAL OWNER                   BENEFICIAL OWNERSHIP                           OF CLASS
                  -------------------                  --------------------                           --------
       <S>                                                     <C>                  <C>                 <C>
       Irving Levine                                           4,750                (1)                 43.4%
       Mark Rattner                                            2,000                                    18.3%
         37 Radio Circle Drive
         Mount Kisco, NY 10549
       Gerry M. Ritterman                                      1,500                                    13.7%
         47 Lawrence Farms Crossways
         Chappaqua, NY 10514
       Hiram M. Lazar                                            100                                        *
       Stephen L. Brown                                           -                                         *
       David T. Lender                                            -                                         *
       Laurence I. Foster                                         -                                         *
       All officers and directors
            As a group (6 persons)                             4,850                                    44.3%
       -----------------------
        * Less than 1.0%
</TABLE>

(1)  Preferred  stock owned by Copley Fund, Inc.  ("Copley").  Mr. Levine may be
     deemed to be a controlling person of Copley due to his position as Chairman
     and Chief Executive  Officer.  Therefore,  Mr. Levine may be deemed to be a
     beneficial owner of all shares owned by Copley.

Set forth below is the dollar range of equity securities  beneficially  owned by
each nominee and continuing director as of March 10, 2004:

                                                     DOLLAR RANGE OF EQUITY
                       NAME OF                       SECURITIES BENEFICIALLY
                       DIRECTOR                      OWNED(1)(2)(4)
                       ------------------            -----------------------
                       Stephen L. Brown(3)           over $100,000
                       David T. Lender               $1-$10,000
                       Lawrence J. Foster            None
                       Irving Levine                 over $100,000

----------

(1)  Beneficial   ownership  has  been   determined  in  accordance   with  Rule
     16a-1(a)(2) of the Securities Exchange Act of 1934.

(2)  The dollar ranges are: None, $1-$10,000, $10,001-$50,000,  $50,001-100,000,
     or over $100,000.

(3)  Denotes  an  individual  who is an  "interested  person"  as defined in the
     Investment Company Act of 1940.


                                       45
<PAGE>

(4)  Franklin  Capital  has  not  provided   information  with  respect  to  the
     "Aggregate Dollar Range of Equity Securities in All Funds Overseen or to be
     Overseen by Director or Nominee in Family of Investment  Companies" because
     it is not part of a family of investment companies.

EQUITY COMPENSATION PLAN INFORMATION

         The following table summarizes information about the options,  warrants
and rights and other equity compensation under the Corporation's equity plans as
of December 31, 2003.

<TABLE>
<CAPTION>
                                                                                NUMBER OF SECURITIES REMAINING
                                                                                AVAILABLE FOR FUTURE ISSUANCE
                           NUMBER OF SECURITIES TO   WEIGHTED-AVERAGE           UNDER EQUITY COMPENSATION PLANS
                           BE ISSUED UPON EXERCISE   EXERCISE PRICE OF          (EXCLUDING SECURITIES REFLECTED
PLAN CATEGORY              OF OUTSTANDING OPTIONS    OUTSTANDING OPTIONS        IN COLUMN (A))
<S>                                 <C>                       <C>                       <C>
Equity compensation plans
approved by security holders (1)    20,625                    $11.39                    26,250
</TABLE>

(1) Includes  options to purchase  shares of Corporation  common stock under the
following stockholder approved plans: Stock Incentive Plan and the Non-Statutory
Stock Option Plan both approved on September 9, 1997.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         See Items 10 through 12 and Footnote 6 to the Financial Statements.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

         AUDIT  FEES.  The  aggregate  fees  billed  for  professional  services
rendered by Ernst & Young LLP for 2003 for the audit of the Corporation's annual
financial  statements  for 2003 and for the review of the  financial  statements
included in the Corporation's Forms 10-Q for 2003 were $89,500.

         ALL OTHER FEES. Ernst & Young LLP billed fees of $7,500 during for 2003
for services that were not related to the audit and review of the  Corporation's
financial statements.


                                     PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K

The following financial statements are set forth under Item 8.

(a)      (1) Financial Statements
                 Report of Ernst & Young LLP
                 Balance Sheets as of December 31, 2003 and 2002
                 Statements of Operations for the years ended December 31, 2003,
                   2002 and 2001
                 Statements of Cash Flows for the years ended December 31, 2003,
                   2002 and 2001
                 Statements of Changes in Net Assets for the years ended
                   December 31, 2003, 2002 and 2001
                 Financial Highlights for the years ended December 31, 2003,
                   2002, 2001, 2000 and 1999


                                       46

<PAGE>

                 Portfolio of Investments as of December 31, 2003
                 Notes to Financial Statements

The following exhibits are filed herewith or incorporated as set forth below:

                  (2) Exhibits
                           (2)(i)      Agreement and Plan of Merger between
                                       Franklin Capital Corporation and Change
                                       Technology Partners, Inc. dated as of
                                       December 4, 2001(1)
                           (3)(i)      Articles of Incorporation(2) (3) (ii)
                                       By-Laws(2)
                           (3)(iii)    Amendment to Articles of Incorporation(3)
                           (4)(i)      Certificate of Designation(4)
                           (4)(ii)     Registration Rights Agreement(5)
                           (4)(iii)    Preferred Stock Purchase Agreement(6)
                           (10)(i)     Employment Agreement - Stephen L.
                                       Brown(7)
                           (10)(ii)    Employment Agreement - Spencer L.
                                       Brown(8)
                           (10)(iii)   Severance Agreement - Stephen L. Brown(9)
                           (10)(iv)    Severance Agreement - Spencer L.
                                       Brown(10)
                           (10)(v)     Stock Incentive Plan(12)
                           (10)(vi)    Stock Option Plan(13)
                           (10)(vii)   Management Agreement with Excelsior Radio
                                       Networks(14)
                           (10)(viii)  Asset Purchase Agreement, dated as of
                                       April 1, 2002, by and among the Dial
                                       Entities, Franklin and Excelsior (11)
                           (10)(ix)    Convertible Promissory Note, dated April
                                       3, 2002, issued by Newco in favor of DCGL
                                       (11)
                           (10)(x)     Convertible Promissory Note, dated April
                                       3, 2002, issued by Newco in favor of DCGL
                                       (11)
                           (10)(xi)    Convertible Promissory Note, dated April
                                       3, 2002, issued by Newco in favor of DCGL
                                       (11)
                           (10)(xii)   Promissory Note, dated April 3, 2002,
                                       issued by Excelsior in favor of Change
                                       (11)
                           (10)(xiii)  Promissory Note, dated April 3, 2002,
                                       issued by Excelsior in favor of Sunshine
                                       (11)
                           (10)(xiv)   Security Agreement, dates as of April 3,
                                       2002, by and among Excelsior, Sunshine
                                       and Change (11)
                           (10)(xv)    Amendment No. 1 to Agreement and Plan of
                                       Merger, dated as of April 3, 2002, by and
                                       between Change and Franklin (11)
                           (21)        List of Subsidiaries(15)
                           (23)        Consent of Ernst & Young LLP
                           (99.1)      Certification Pursuant To 18 U.S.C.
                                       Section 1350, As Adopted By Section 906
                                       Of The Sarbanes-Oxley Act Of 2002
                           (99.2)      Certification Pursuant To 18 U.S.C.
                                       Section 1350, As Adopted By Section 906
                                       Of The Sarbanes-Oxley Act Of 2002
--------------------------------------------------------------------------------
(1)  Incorporated by reference to the Current Report on Form 8-K filed December
     5, 2001.
(2)  Incorporated by reference to the Corporation's Form N-2, as amended, filed
     July 31, 1992.
(3)  Incorporated by reference to Exhibit 3(iii) filed on the Company's Annual
     Report filed on Form 10-K for the year ended December 31, 2000
(4)  Incorporated by reference to Exhibit 4(i) filed on the Company's Annual
     Report filed on Form 10-K for the year ended December 31, 2000
(5)  Incorporated by reference to Exhibit 4(ii) filed on the Company's Annual
     Report filed on Form 10-K for the year ended December 31, 2000


                                       47
<PAGE>
(6)  Incorporated by reference to Exhibit 4(iii) filed on the Company's Annual
     Report filed on Form 10-K for the year ended December 31, 2000
(7)  Incorporated by reference to Exhibit 10(i) filed on the Company's Annual
     Report filed on Form 10-K for the year ended December 31, 2000
(8)  Incorporated by reference to Exhibit 10(ii) filed on the Company's Annual
     Report filed on Form 10-K for the year ended December 31, 2000
(9)  Incorporated by reference to Exhibit 10(iii) filed on the Company's Annual
     Report filed on Form 10-K for the year ended December 31, 2000
(10) Incorporated by reference to Exhibit 10(iv) filed on the Company's Annual
     Report filed on Form 10-K for the year ended December 31, 2000
(11) Incorporated by reference to Current Report on form 8-K filed on April 3,
     2002
(12) Incorporated by reference to Exhibit 10(v) filed on the Company's Annual
     Report filed on Form 10-K for the year ended December 31, 2001
(13) Incorporated by reference to Exhibit 10(vi) filed on the Company's Annual
     Report filed on Form 10-K for the year ended December 31, 2001
(14) Incorporated by reference to Exhibit 10(vii) filed on the Company's Annual
     Report filed on Form 10-K for the year ended December 31, 2001
(15) Incorporated by reference to Exhibit 21 filed on the Company's Annual
     Report filed on Form 10-K for the year ended December 31, 2001

             (b)   Reports on Form 8-K.
                        None







                                       48

<PAGE>

                                   SIGNATURES

         Pursuant to the  requirements  of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the  Corporation  has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.

                                      FRANKLIN CAPITAL CORPORATION

Date: March 30, 2004                  By:   /s/ Stephen L. Brown
                                            ----------------------------
                                            Stephen L. Brown
                                            CHAIRMAN & CHIEF EXECUTIVE OFFICER

         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
this  report  has  been  signed  by  the  following  persons  on  behalf  of the
Corporation in the capacities and on the dates indicated.

    SIGNATURES                                        TITLE
    ----------                                        -----

/s/ Stephen L. Brown                            Chairman &
--------------------                            Chief Executive Officer
Stephen L. Brown


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


/s/ Laurence I. Foster
----------------------
Laurence I. Foster                              Director


/s/ David T. Lender
-------------------
David T. Lender                                 Director


/s/ Irving Levine
-----------------
Irving Levine                                   Director









                                       49