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, 2002

                          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 March 10, 2003 was  $1,117,458  based on the last sale price as
quoted by The American Stock Exchange on such date  (officers,  directors and 5%
stockholders are considered affiliates for the purposes of this calculation).

The  number  of  shares of common  stock  outstanding  as of March 10,  2003 was
1,042,900.

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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

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. Controls and Procedures

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

SIGNATURES

CERTIFICATIONS

EXHIBIT INDEX

                           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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                                     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, 2002,
Franklin had $4,632,338 in 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, 2002,
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 provides 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 is
determined by a majority of the  non-Franklin  directors on  Excelsior's  board;
however,  the management fee will be no less than $15,000 per month and Franklin
will  continue to be reimbursed  for all direct  expenses  through  December 31,
2003.  Finally,  Franklin's chief financial  officer serves as Excelsior's chief
financial  officer,  and his salary and benefits are allocated between Excelsior
and Franklin 80% and 20%, respectively. During the year ended December 31, 2002,
Franklin  earned  $450,000 in management  fees and was  reimbursed  $120,936 for
salary and benefits for Franklin's chief financial  officer,  which was recorded
as a reduction of expenses of Franklin.

          On April 3, 2002, Dial Communications Global Media, Inc. ("Newco"),  a
newly formed wholly-owned subsidiary of Excelsior,  completed the acquisition of
substantially all of the assets of Dial Communications Group, Inc. ("DCGI"), and
Dial  Communications  Group,  LLC  ("DCGL"  and  together  with DCGI,  the "Dial
Entities")  used in  connection  with the Dial  Entities'  business  of  selling
advertising  relating to radio  programming (the "Dial  Acquisition").  The Dial
Acquisition was completed pursuant to

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the Asset Purchase  Agreement (the "Purchase  Agreement"),  dated as of April 1,
2002, by and among the Dial Entities, Franklin and Excelsior.  Immediately prior
to the  closing of the  transactions  contemplated  by the  Purchase  Agreement,
Excelsior  assigned  all  of its  rights  and  obligations  under  the  Purchase
Agreement,  as well as certain  other  assets and  liabilities  relating  to the
portion of Excelsior's business dedicated to the sale of advertising relating to
radio programming, to Newco.

          The total  purchase price for the Dial  Acquisition  will be an amount
between  $8,880,000  and  $13,557,500.  The initial  consideration  for the Dial
Acquisition  consisted of  $6,500,000 in cash and a three year  promissory  note
bearing  interest  at 4.5%  issued  by Newco  in favor of DCGL in the  aggregate
principal amount of $460,000.  In addition,  the Purchase Agreement provides for
the minimum payment of $1,920,000 of additional consideration,  which is subject
to increase  to a maximum  amount of  $6,597,500  based upon the  attainment  of
certain  revenue  and  earnings  objectives  in 2002 and  2003.  The  additional
consideration will be comprised of both cash and two additional promissory notes
bearing  interest at 4.5% issued by Newco in favor of DCGL, each with an initial
aggregate  principal  amount of $460,000  that is subject to  increase  upon the
attainment of such revenue and earnings objectives. Each of the promissory notes
issued in  consideration  of the Dial  Acquisition is convertible into shares of
Franklin's  common  stock at a premium  of 115% to 120% of the  average  closing
prices of  Franklin's  common  stock  during a  specified  pre and post  closing
measurement  period.  The promissory  notes are not  convertible  for at least a
one-year  period.  Excelsior has paid to Franklin an amount equal to $300,000 in
consideration  of Franklin's  obligations in connection with any Franklin common
stock that may be issued pursuant to the terms of the Purchase  Agreement or the
promissory notes issued in consideration of the Dial Acquisition.

          Sunshine along with Change Technology  Partners,  Inc. ("Change") both
existing  stockholders  of Excelsior,  loaned  Excelsior an aggregate  amount of
$7,000,000 to finance the initial  consideration  of the Dial  Acquisition.  The
obligations under the loans are secured by certain of Excelsior's assets.

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.  Had the merger gone  through,  Change
shareholders  would have owned  approximately  80% of Franklin  with the balance
held by Franklin's current stockholders.

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, 2002, the Corporation's  portfolio of investments is a composite of illiquid
investments in developing companies.

          The  Corporation  has 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, 2002, Franklin owned 59.1% of Excelsior (29.3% on a fully diluted basis).

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          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 2001  advertising  sales  revenues of
almost  $50  million  and a  client  roster  of  over  forty  independent  radio
production companies.

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

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

          Franklin's  goal is to work with  management  in order to enhance  the
value of  Excelsior's  current  network.  In order  to do this,  Excelsior  will
increase its marketing  efforts to radio stations across the United States.  The
marketing  efforts  will  focus  primarily  on the  top  50  media  markets.  By
increasing its network  presence in the top 50 media markets,  Excelsior will be
able to charge a higher spot rate for its advertising time. The spot rate is the
price a national  advertiser pays per commercial  aired on Excelsior's  network.
Excelsior currently has a network of over 2,000 radio affiliates,  and with over
10,000 radio stations in the United States, Excelsior anticipates  significantly
expanding its network. However, there can be no assurance that Excelsior will be
able to expand its operations.

          Excelsior intends to focus its programming growth with both short-form
and  long-form  programs.  For example  during  2002,  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.

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          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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          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,  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, 2003,  Excelsior  had 64 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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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, 2002, the Corporation had four 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

                                       9
<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 (4.3% 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

                                       10
<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 3,600 square feet of office space pursuant
to a lease  agreement  expiring  December  31,  2003.  As of December  31, 2002,
Franklin had a sublet arrangement with one subtenant for a portion of Franklin's
office space.

                                       11
<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.  in the  Superior  Court of the State of  California  for the County of Los
Angeles.  The lawsuit,  which has subsequently been removed to the United States
District Court for the Central District of California,  alleges that the Winstar
defendants  conspired to commit fraud and breached  their  fiduciary duty to the
plaintiffs  in  connection  with  the  acquisition  of  the  plaintiffs'   radio
production  and  distribution  business.  The  complaint  further  alleges  that
Franklin and Sunshine joined the alleged conspiracy.  The business was initially
acquired  by  certain  entities  affiliated  with  Winstar  Communications  and,
subsequently,  the assets of such  business  were sold to Franklin and Sunshine.
Concurrently with such purchase,  Franklin transferred such assets to Excelsior.
The  plaintiffs  seek  recovery of damages in excess of  $10,000,000,  costs and
attorneys'  fees.  On January 7, 2002,  Franklin  filed a motion to dismiss  the
lawsuit or, in the alternative,  to transfer venue to the United States District
Court of the  Southern  District  of New  York.  The  plaintiffs  filed a motion
opposing Franklin's request on January 28, 2002. Franklin's motion for dismissal
was granted on February 25, 2002,  due to improper  venue.  On June 7, 2002, the
plaintiffs  filed their  complaint to the United States District of the Southern
District of New York. On July 12, 2002,  Franklin  filed a motion to dismiss the
complaint.  On February  25, 2003,  the case  against  Franklin and Sunshine was
dismissed,  however the plaintiffs may file an appeal. An unfavorable outcome in
this  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 November 12, 2002,  the  Corporation  held an annual meeting of its
common and preferred  stockholders.  Stephen L. Brown, Irving Levine, Michael P.
Rolnick,  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             982,581                   10,989
---------------------------- ------------------------- -------------------------
David Lender                 990,418                    3,152
---------------------------- ------------------------- -------------------------
Laurence I. Foster           990,418                    3,152
---------------------------- ------------------------- -------------------------
Michael P. Rolnick           990,418                    3,152
---------------------------- ------------------------- -------------------------
Irving Levine*                11,350                      0
---------------------------- ------------------------- -------------------------
Peter D. Gottlieb*            11,350                      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, 2002.  991,396 shares voted for, 1,570 shares voted against and 604
shares  abstained  from  ratifying  Ernst  &  Young  LLP  as  the  Corporation's
independent auditors.

                                       12
<PAGE>


                                     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.

          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

          2001 QUARTER ENDING           LOW               HIGH

          March 31                      $ 5.875          $ 8.125
          June 30                       $ 4.875          $ 5.75
          September 30                  $ 4.65           $ 5.05
          December 31                   $ 4.09           $ 4.87

DIVIDENDS

          The  Corporation  paid $115,152,  $115,150 and $98,633 in dividends to
preferred  stockholders  during 2002, 2001 and 2000,  respectively,  and has not
paid any dividends to common stockholders during the past two years.

STOCKHOLDERS

          As of March 10, 2003, there were 568 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 1,042,900 shares are
outstanding  at  March  10,  2003.  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 10,  2003.  (See Item 7
Management's  Discussion  and  Analysis of Financial  Condition - Liquidity  and
Capital Resources.)

                                       13
<PAGE>


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>
                                                       2002           2001            2000           1999           1998
                                                   -----------    -----------     -----------    -----------    -----------
<S>                                                <C>            <C>             <C>            <C>            <C>
Total assets                                        $4,632,338     $4,098,866      $5,766,712     $8,995,965     $6,548,696

Liabilities                                         $1,364,798     $1,177,121        $187,632       $555,583       $233,143


Net asset value                                     $3,267,540     $2,921,745      $5,579,080     $8,440,382     $6,315,553

Net asset value per share attributable
  to common stockholders                                 $2.07          $1.19           $3.58          $7.70          $5.61

Net asset value per share, as if converted basis         $2.89          $2.44           $4.57          $7.70          $5.61

Shares outstanding                                   1,049,600      1,074,700       1,098,200      1,095,882      1,126,029

OPERATING DATA FOR THE YEAR ENDED DECEMBER 31:

                                                          2002           2001            2000*          1999           1998
                                                   -----------    -----------     -----------    -----------    -----------

Investment income                                     $455,081       $192,697        $115,015        $72,382       $263,323

Expenses                                            $1,985,450     $1,579,382      $2,372,797     $1,621,780     $1,620,408

Net investment loss from operations                $(1,530,369)   $(1,386,685)    $(2,257,782)   $(1,549,398)   $(1,357,085)

Net realized gain on portfolio of
  investments, net of current income taxes            $237,326       $522,131      $1,195,875       $688,259     $1,628,004

Net increase (decrease) in
  unrealized appreciation of investments,
  net of deferred income taxes                      $1,663,304    $(1,553,756)    $(3,365,513)    $3,086,958    $(1,015,091)

Net increase (decrease) in net Assets
  attributable to common stockholders                 $255,110    $(2,533,460)    $(4,526,053)    $2,225,819      $(744,172)

Basic and diluted net increase (decrease)
  in net assets from operations per weighted
  average number of shares outstanding                   $0.24         $(2.34)         $(4.14)         $1.98         $(0.63)
</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.

                                       14
<PAGE>


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 2002 FINANCIAL STATEMENTS AND NOTES THERETO IN ITEM 8.

CRITICAL ACCOUNTING POLICIES

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

STATEMENT OF OPERATIONS

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

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

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

FINANCIAL CONDITION

          The  Corporation's  total  assets and net assets  were,  respectively,
$4,632,338 and $3,267,540 at December 31, 2002 versus  $4,098,866 and $2,921,745
at  December  31,  2001.  Net  asset  value  per  share  attributable  to common
stockholders and on an as if converted basis was $2.07 and $2.89 at December 31,
2002, respectively,  versus $1.19 and $2.44, respectively, at December 31, 2001.
The  change in total  assets  and net  assets  is  primarily  attributable  to a
increase in the fair market value of the Corporation's investments.

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

                                       15
<PAGE>


                                         DECEMBER 31, 2002   DECEMBER 31, 2001
                                         -----------------   -----------------

Investments, at cost                         $2,511,479          $3,911,105
Unrealized appreciation (depreciation),
  net of deferred taxes                       1,471,071            (182,233)
                                             ----------          ----------
Investments, at fair value                   $3,992,550          $3,728,872
                                             ==========          ==========

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, 2002,  the  Corporation  had an  investment  in Alacra
Corporation  ("Alacra"),  valued at $1,000,000,  which  represents  21.6% of the
Corporation's total assets and 30.6% of its net assets. Alacra, headquartered in
New York and London, is a leading provider of Internet-based  online information
services.   Alacra  provides  a  service  called  .xls,   which  aggregates  and
cross-indexes  over  70  premier  business  databases,   delivering  information
directly to Microsoft Excel, HTML, Microsoft Word or PDF formats at the desktop.
Other products  include  privatesuite(TM), a fast, easy,  cost-effective  way to
identify and retrieve  profiles of privately  held  companies  around the world;
compbook(TM),  a tool  for  company  peer  analysis;  and  Portal  BTM,  a fully
integrated business information portal.

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

          EXCELSIOR RADIO NETWORKS

          At December 31, 2002, the  Corporation  had an investment in Excelsior
Radio Networks, Inc. ("Excelsior"), formerly known as eCom Capital, Inc., valued
at $2,957,875,  which  represents  63.9% of the  Corporation's  total assets and
90.5% of its net assets. Excelsior produces and syndicates programs and services
heard on more than 2,000 radio  stations  nationwide  across most major formats.
Through its Dial Communications  Global Media sales subsidiary,  Excelsior sells
the advertising  inventory radio stations  provide in exchange for the Excelsior
content. The programming and content includes prep services as well as long form
and short form programming. Additionally, Dial Communications Global Media has a
number of independent producer clients, which range from talk and music programs
to  news  and  traffic  services.  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,  2002,  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.

                                       16
<PAGE>


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 $5,081 in 2002,
$72,697 in 2001,  and  $93,015 in 2000.  The  decrease in 2002 from 2001 was the
result  of the sale of the  Avery  preferred  stock on  February  1,  2001.  The
Corporation  earned management fees of $450,000 in 2002, and $120,000 in 2001 in
from its  majority-owned  affiliate,  Excelsior.  The Corporation had $22,000 in
other income during 2000 representing a patent infringement settlement.

          Operating  expenses were  $1,985,450 in 2002,  $1,579,382 in 2001, and
$2,372,797 in 2000. A majority of the Corporation's  operating  expenses consist
of employee  compensation (which for 2000 included a non-cash charge of $349,644
due to the cashless  exercise of incentive  options),  office and rent  expense,
other expenses related to identifying and reviewing investment opportunities and
professional  fees.  Professional  fees consist of general legal fees, audit and
tax fees,  consulting fees and investment  related legal fees.  During 2002, the
Corporation  incurred  professional  fees related to the terminated  merger with
Change of $490,782.

          Net  investment  losses  from  operations  were  $1,530,369  in  2002,
$1,386,685 in 2001, and $2,257,782 in 2000.

          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, 2002,  2001,  and 2000, the
Corporation  realized  net  gains  before  taxes  of  $237,658,   $520,455,  and
$1,215,875, respectively, from the disposition of various investments.

          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 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. ("Go America")  common stock,  an investment
Franklin  has held  since  1995,  a gain of $87,013  from the sale of  1,183,938
shares of Avery  common  stock,  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

                                       17
<PAGE>


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.

          During  2000,  Franklin  realized a gain of $956,576  from the sale of
241,131 shares of Communication  Intelligence  Corporation ("CIC") common stock,
an investment  Franklin has held since 1996, a gain of $161,531 from the sale of
202,000  shares of Avery common  stock,  and a gain of $843,663 from the sale of
105,760  shares of Go America common stock.  Additionally,  gains of $3,819 were
realized on tail payments from partnerships  liquidated during 1999. These gains
were  offset  by a loss of  $440,057  from the  write-off  of the  Corporation's
investment  in  eMattress.com  and a loss of $300,626  from the write-off of the
Corporation's  investment in TradingNews,  Inc as well as a realized net loss of
$9,031 from the sale of various marketable securities.

          UNREALIZED APPRECIATION OF INVESTMENTS

          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  stock and the sale of
Franklin's  position  in Avery  Communications.  The changes in the value of the
investments  occurred during a period of extreme  volatility of publicly traded,
small  capitalization,  high  technology  stocks.  The volatility of the overall
market  will  continue  to  impact  on  the  performance  of  the  Corporation's
investments. The value of the Corporation's investments will vary on a quarterly
basis.

          Unrealized  appreciation  of  investments,   net  of  deferred  taxes,
decreased by $3,365,513 during the year ended December 31, 2000,  primarily from
the decreased value of Avery  Communications and the sale of Franklin's position
in CIC common stock and CIC Standby Ventures, L.P. ("CIC Ventures").

          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  $800,000  at  December  31,  2002.  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  increased  by $282,463 to $562,191 for the
year ended  December 31, 2003,  compared to an decrease of $367,837 for the year
ended December 31, 2001.

          Operating  activities  used  $1,282,171  of cash  for the  year  ended
December 31, 2002, compared to providing  $1,365,563 for the year ended December
31, 2001.

                                       18
<PAGE>


          Operating  activities for the year ended December 31, 2002,  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 for depreciation and amortization of $16,969, realized gains of
$237,327 and  unrealized  gains of  $1,663,304.  For the year ended December 31,
2001,  operating  activities,  exclusive  of  changes  in  operating  assets and
liabilities,  used  $1,366,691  of  cash,  as  the  Corporation's  net  loss  of
$2,418,310  included  non-cash  charges  of  depreciation  and  amortization  of
$19,994, realized gains of $522,131 and unrealized losses of $1,553,756.

          Changes in operating  assets and  liabilities  increased cash $231,229
for the year ended December 31, 2002,  principally  due an increase in the level
of accounts payable and accrued expenses.  For the year ended December 31, 2001,
changes in operating assets and liabilities produced $1,128 of cash.

          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.  In the year ended December
31, 2001,  the  principal  factor in the  $1,236,750  cash provided by investing
activities was proceeds from the sale of Avery  Communications of $1,564,282 and
Go America of  $1,044,782,  partially  offset by an  investment  in Excelsior of
$1,500,000.

          Cash used in financing activities for the year ended December 31, 2002
of $72,650  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.  Financing
activities used $239,024 in the prior year's  comparable  period for the payment
of  preferred  dividends  of $115,150  and the  purchase  of  treasury  stock of
$123,874.

          Franklin is obligated  under an operating  lease,  which  provides for
annual minimum rental payments through December 31, 2003 of $149,600.

          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

                                       19
<PAGE>


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."


                                       20
<PAGE>


ITEM 8.       FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                          FRANKLIN CAPITAL CORPORATION

                   INDEX TO FINANCIAL STATEMENTS AND SCHEDULES

                                                                            Page

     Report of Ernst & Young LLP .........................................    22

     Balance Sheets as of
           December 31, 2002 and 2001 ....................................    23

     Statements of Operations for the years
           ended December 31, 2002, 2001 and 2000 ........................    24

     Statements of Cash Flows for the years
           ended December 31, 2002, 2001 and 2000 ........................    25

     Statements of Changes in Net Assets for the years
           ended December 31, 2002, 2001 and 2000 ........................    26

     Financial Highlights for the years ended December 31,
           2002, 2001, 2000, 1999 and 1998 ...............................    27

     Portfolio of Investments as of
           December 31, 2002 .............................................    28

     Notes to Financial Statements ....................................... 29-37

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

                                       21
<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,  2002 and 2001,  including  the  portfolio  of
investments as of December 31, 2002,  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, 2002, and the financial highlights for each of the five years
in the period ended December 31, 2002. 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, 2002 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, 2002 and 2001, the results of its
operations,  cash flows and changes in net assets for each of the three years in
the period ended December 31, 2002, and the financial highlights for each of the
five years in the period ended December 31, 2002, 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.  The Corporation
has incurred  recurring  operating losses and as more fully described in Note 1,
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 7, 2003

                                       22
<PAGE>


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

Balance Sheets
--------------------------------------------------------------------------------

December 31,                                              2002           2001
--------------------------------------------------------------------------------

ASSETS

Marketable investment securities, at market
  value (cost: December 31, 2002 and 2001 -
  $34,675) (Note 2)                                      $34,675        $34,675
Investments, at fair value
  (cost: December 31, 2002 - $2,476,804;
  December 31, 2001 - $3,876,430) (Note 2)
    Excelsior Radio Networks, Inc.                     2,957,875      2,325,000
    Other investments                                  1,000,000      1,369,197
                                                      ----------     ----------
                                                       3,957,875      3,694,197
                                                      ----------     ----------

Cash and cash equivalents (Note 2)                       562,191        279,728
Other assets                                              77,597         90,266
                                                      ----------     ----------

TOTAL ASSETS                                          $4,632,338     $4,098,866
                                                      ==========     ==========

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

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES

Notes payable (Note 6)                                  $951,817     $1,000,000
Accounts payable and accrued liabilities                 412,981        177,121
                                                      ----------     ----------

TOTAL LIABILITIES                                      1,364,798      1,177,121
                                                      ----------     ----------

Commitments and contingencies  (Note 5)

STOCKHOLDERS' EQUITY

Convertible preferred stock, $1 par value,
  cumulative 7% dividend: 5,000,000 shares
  authorized; 10,950 and 16,450 issued and
  outstanding at December 31, 2002 and 2001,
  respectively
  (Liquidation preference $1,095,000 and
   $1,645,000) (Note 4)                                   10,950         16,450
Common stock, $1 par value: 5,000,000 shares
  authorized; 1,505,888 shares issued: 1,049,600 and
  1,074,700 shares outstanding at December 31, 2002
  and 2001, respectively (Note 7)                      1,505,888      1,505,888
Paid-in capital                                       10,439,610     10,271,610
Unrealized appreciation (depreciation) of
  investments, net of deferred income taxes
  (Notes 2 and 3)                                      1,481,071       (182,233)
Accumulated deficit                                   (7,578,808)    (6,170,614)
                                                      ----------     ----------

                                                       5,858,711      5,441,101
Deduct: 456,288 and 431,188 shares of common stock
  held in treasury, at cost, at December 31, 2002
  and 2001, respectively (Note 4)                     (2,591,171)    (2,519,356)
                                                      ----------     ----------

Net assets (Note 9 for per share information)          3,267,540      2,921,745
                                                      ----------     ----------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY            $4,632,338     $4,098,866
                                                      ==========     ==========

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

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

                                       23
<PAGE>


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

 Statements of Operations
-------------------------------------------------------------------------------------------------------------

For the Year Ended December 31,                                       2002            2001            2000
-------------------------------------------------------------------------------------------------------------
<S>                                                               <C>             <C>             <C>
INVESTMENT INCOME
  Interest on short term investments and money market accounts         $5,081         $45,953         $51,015
  Dividend income                                                          --          26,744          42,000
  Income from majority-owned affiliates  (Note 6)                     450,000         120,000              --
  Other income                                                             --              --          22,000
                                                                  -----------     -----------     -----------

                                                                      455,081         192,697         115,015
                                                                  -----------     -----------     -----------
EXPENSES
  Salaries and employee benefits  (Note 7)                            862,970         933,081       1,419,941
  Professional fees                                                   191,900         168,618         367,629
  Rent  (Note 5)                                                       98,982         126,134         104,332
  Insurance                                                            58,036          41,955          42,314
  Directors' fees                                                       2,003          18,802          67,981
  Taxes other than income taxes                                        39,709          40,394          45,306
  Newswire and promotion                                                1,181           5,707           6,823
  Depreciation and amortization                                        16,969          19,994          21,468
  Interest expense                                                     35,401          11,988              --
  Expenses related to terminated merger                               490,782              --              --
  General and administrative                                          187,517         212,709         297,003
                                                                  -----------     -----------     -----------

                                                                    1,985,450       1,579,382       2,372,797
                                                                  -----------     -----------     -----------

Net investment loss from operations                                (1,530,369)     (1,386,685)     (2,257,782)

Net realized gain on portfolio of investments:
  Investment securities:
    Affiliated                                                        254,088           7,613        (278,526)
    Unaffiliated                                                      (16,430)        512,842       1,490,582
                                                                  -----------     -----------     -----------
  Total investment securities                                         237,658         520,455       1,212,056

  Other than investment securities                                         --              --           3,819
                                                                  -----------     -----------     -----------

Net realized gain on portfolio of investments                         237,658         520,455       1,215,875

Provision (benefit) for current income taxes                              331          (1,676)         20,000
                                                                  -----------     -----------     -----------

Net realized loss                                                  (1,293,042)       (864,554)     (1,061,907)

Increase (decrease) in unrealized appreciation of investments,
  net of deferred income taxes:
    Investment securities:
      Affiliated                                                    1,663,304         279,699      (1,771,744)
      Unaffiliated                                                         --      (1,833,455)       (992,907)
                                                                  -----------     -----------     -----------
    Total investment securities                                     1,663,304      (1,553,756)     (2,764,651)

    Other than investment securities                                       --              --        (951,862)

    Deferred income tax benefit                                            --              --         351,000
                                                                  -----------     -----------     -----------

Increase (decrease) in unrealized appreciation of investments,
  net of deferred income taxes                                      1,663,304      (1,553,756)     (3,365,513)
                                                                  -----------     -----------     -----------

Net increase (decrease) in net assets from operations                 370,262      (2,418,310)     (4,427,420)

Preferred dividends                                                   115,152         115,150          98,633
                                                                  -----------     -----------     -----------

Net increase (decrease) in net assets attributable
  to common stockholders                                             $255,110     ($2,533,460)    ($4,526,053)
                                                                  ===========     ===========     ===========

Basic and diluted net increase (decrease) in net assets
  per share attributable to common stockholders (Note 8)                $0.24          ($2.34)         ($4.14)
                                                                  ===========     ===========     ===========
-------------------------------------------------------------------------------------------------------------
</TABLE>

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

                                       24
<PAGE>


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

Statements of Cash Flows
------------------------------------------------------------------------------------------------------------------------------------

For the Year Ended December 31,                                                            2002            2001            2000
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                     <C>              <C>             <C>
Cash flows from operating activities:
  Net increase (decrease) in net assets from operations                                   $370,262     ($2,418,310)    ($4,427,420)
  Adjustments to reconcile net increase (decrease) in net assets from operations
    to net cash used in operating activities:
      Depreciation and amortization                                                         16,969          19,994          21,468
      Non-cash compensation expense from cashless exercise of officer options                   --              --         349,644
      (Increase) decrease in unrealized appreciation of investments,
        net of deferred taxes                                                           (1,663,304)      1,553,756       3,365,513
      Net realized gain on portfolio of investments, net of current income taxes          (237,327)       (522,131)     (1,195,875)
      Changes in operating assets and liabilities:
        Decrease in receivable from disposal of investments                                     --              --         231,308
        (Increase) decrease in other assets                                                 (4,300)          9,963          (7,763)
        Increase (decrease) in accounts payable and accrued liabilities                    235,529          (8,835)        (36,951)
                                                                                       -----------     -----------     -----------

          Total adjustments                                                             (1,652,433)      1,052,747       2,727,344
                                                                                       -----------     -----------     -----------

          Net cash used in operating activities                                         (1,282,171)     (1,365,563)     (1,700,076)
                                                                                       -----------     -----------     -----------

Cash flows from investing activities:
  Proceeds from sale of majority-owned affiliate                                         1,500,000         250,000              --
  Proceeds from sale of affiliate                                                           78,715       1,564,282         379,527
  Proceeds from sale of other investments                                                       --       1,044,782         950,151
  Proceeds from sale of marketable investment securities                                     6,554         543,927       1,259,323
  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)        (56,311)
  Purchase of investment in affiliate                                                           --              --        (140,000)
  Purchases of other investments                                                                --         (49,095)     (1,575,625)
  Purchases of marketable investment securities                                            (22,985)       (542,146)       (257,239)
                                                                                       -----------     -----------     -----------

          Net cash provided by investing activities                                      1,637,284       1,236,750         559,826
                                                                                       -----------     -----------     -----------

Cash flows from financing activities:
  Proceeds from issuance of preferred stock                                                     --              --       1,645,000
  Payments of preferred dividends                                                         (115,152)       (115,150)        (98,633)
  Cash paid to common stockholders in lieu of fractional shares due to
    stock split of common shares                                                                --              --          (1,448)
  Decrease in note payable                                                                 (48,183)             --              --
  Proceeds from conversion right                                                           300,000              --              --
  Redemption of preferred stock                                                           (137,500)             --              --
  Purchases of treasury stock                                                              (71,815)       (123,874)       (328,445)
                                                                                       -----------     -----------     -----------

          Net cash (used in) provided by financing activities                              (72,650)       (239,024)      1,216,474
                                                                                       -----------     -----------     -----------

Net increase (decrease) in cash and cash equivalents                                       282,463        (367,837)         76,224

Cash and cash equivalents at beginning of year                                             279,728         647,565         571,341
                                                                                       -----------     -----------     -----------

Cash and cash equivalents at end of year                                                  $562,191        $279,728        $647,565
                                                                                       ===========     ===========     ===========

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

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.

                                       25
<PAGE>


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

STATEMENTS OF CHANGES IN NET ASSETS
----------------------------------------------------------------------------------------------------------------

For the Year Ended December 31,                                          2002            2001            2000
----------------------------------------------------------------------------------------------------------------
<S>                                                                  <C>             <C>             <C>
Increase (decrease) in net assets from operations:
  Net investment loss                                                ($1,530,369)    ($1,386,685)    ($2,257,782)
  Net realized gain on portfolio of investments,
    net of current income taxes                                          237,327         522,131       1,195,875
  Increase (decrease) in unrealized appreciation of investments,
    net of deferred income taxes                                       1,663,304      (1,553,756)     (3,365,513)
                                                                     -----------     -----------     -----------

    Net increase (decrease) in net assets from operations                370,262      (2,418,310)     (4,427,420)

Capital stock transactions:
  Issuance of preferred stock                                                 --              --       1,645,000
  Payment of dividends on preferred stock                               (115,152)       (115,150)        (98,633)
  Issuance of stock from treasury for exercise of officer options             --              --         349,644
  Cash paid to common shareholders in lieu of fractional shares               --              --          (1,448)
  Proceeds for conversion right                                          300,000              --              --
  Redemption of preferred stock                                         (137,500)             --              --
  Purchase of treasury stock                                             (71,815)       (123,874)       (328,445)
                                                                     -----------     -----------     -----------

    Total increase (decrease) in net assets                              345,795      (2,657,335)     (2,861,302)
                                                                     -----------     -----------     -----------


Net assets at beginning of year                                        2,921,745       5,579,080       8,440,382
                                                                     -----------     -----------     -----------


Net assets at end of year                                             $3,267,540      $2,921,745      $5,579,080
                                                                     ===========     ===========     ===========
----------------------------------------------------------------------------------------------------------------
</TABLE>

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

                                       26
<PAGE>


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

FINANCIAL HIGHLIGHTS

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

For the Year Ended December 31,                         2002(1)    2001(1)    2000(1)     1999       1998
-----------------------------------------------------------------------------------------------------------
<S>                                                     <C>        <C>        <C>        <C>        <C>
PER SHARE OPERATING PERFORMANCE (2):
Net asset value attributable to common stockholders,
  beginning of year                                      $1.19      $3.58      $7.70      $5.61      $6.11
                                                        ------     ------     ------     ------     ------

    Net investment loss                                  (1.44)     (1.28)     (2.07)     (1.38)     (1.14)
    Net gain (loss) on portfolio of investments
      (realized and unrealized) after taxes               1.78      (0.95)     (1.98)      3.35       0.51
                                                        ------     ------     ------     ------     ------

Total from investment operations                          0.34      (2.23)     (4.05)      1.97      (0.63)
                                                        ------     ------     ------     ------     ------

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                                0.54      (0.16)     (0.07)      0.12       0.12
                                                        ------     ------     ------     ------     ------

Net asset value attributable to common stockholders,
    end of year                                          $2.07      $1.19      $3.58      $7.70      $5.61
                                                        ======     ======     ======     ======     ======

Market value per share, end of year                      $1.62      $4.18      $8.00      $6.83      $3.50
                                                        ======     ======     ======     ======     ======

TOTAL INVESTMENT RETURN:
Based on market value per share (%)                     (58.85)    (47.75)     17.13      95.24     (19.23)

RATIOS TO AVERAGE NET ASSETS:
Expenses (%)                                             56.61      37.67      25.99      24.97      23.73
Net investment loss from operations (%)                 (43.64)    (33.08)    (24.73)    (23.86)    (19.88)

RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (000 omitted)               $3,268     $2,922     $5,579     $8,440     $6,316
Portfolio turnover rate (%)                                 37         89         24         36         39

-----------------------------------------------------------------------------------------------------------
</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.

                                       27
<PAGE>


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

PORTFOLIO OF INVESTMENTS

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

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

                                                                                           NUMBER OF
                                                                                           SHARES OR                       MARKET
                                                                                           PRINCIPAL                        VALUE
DECEMBER 31, 2002 (2)                                                                      AMOUNT ($)       COST(1)        (NOTE 2)
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                                          <C>             <C>
Certificate of Deposit - 1.15%, due 01/04/2003                                                               $34,675         $34,675
                                                                                                          ----------      ----------

     Total Marketable Investment Securities (0.9% of total investments and 1.1% of net assets)               $34,675         $34,675
                                                                                                          ----------      ----------

------------------------------------------------------------------------------------------------------------------------------------
INVESTMENTS, AT FAIR VALUE
------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
                                                                                           NUMBER OF
                                                                                           SHARES OR                     DIRECTORS'
                                                                             EQUITY        PRINCIPAL                     VALUATION
DECEMBER 31, 2002 (2)                                     INVESTMENT        INTEREST       AMOUNT ($)      COST(1)        (NOTE 2)
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                    <C>                       <C>          <C>            <C>             <C>
MAJORITY OWNED AFFILIATE

Excelsior Radio Networks, Inc.                           Common stock         59.07%       1,476,804      $1,476,804      $2,865,000
Excelsior Radio Networks, Inc.                             Warrants              --           87,111              --          92,875
                                                                                                          ----------      ----------
Total Excelsior Radio Networks, Inc.
  (74.1% of total investments and 90.5% of net assets)                        29.26%                       1,476,804       2,957,875
  (Radio production and advertising sales)                               (fully diluted)

OTHER INVESTMENT

Alacra Corporation (25.0% of total investments and       Convertible
  30.6% of net assets)                                 Preferred Stock         1.68%         321,543       1,000,000       1,000,000
                                                                                                          ----------      ----------
    (Internet-based information provider)

    Investments, at Fair Value                                                                             2,476,804       3,957,875

------------------------------------------------------------------------------------------------------------------------------------
</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.

                                       28
<PAGE>


FRANKLIN CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002

1.   DESCRIPTION OF BUSINESS

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

The  accompanying  financial  statements  have been  prepared  assuming that the
Corporation  will continue as a going  concern.  The  Corporation  has a working
capital  deficiency  of  approximately  $800,000 at December 31, 2002.  (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, 2002, 2001 and 2000.

At December 31, 2002 and 2001, 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

                                       29
<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:

                                       December 31,  December 31,   December 31,
                                           2002         2001           2000
                                       ------------  ------------   ------------
Net increase (decrease) in net assets
  attributable to common stockholders:
As reported                              $255,110    $(2,533,460)   $(4,526,053)

Add:
Stock-based employee compensation
  expense included in reported net
  increase (decrease) in net assets
  attributable to common stockholders          --             --        223,772

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        140,585
                                         --------    -----------    -----------
Pro forma                                $250,376    $(2,571,445)   $(4,442,866)

Basic and diluted net increase
  (decrease) in net assets attributable
  to common stockholders:
As reported                                 $0.24         $(2.34)        $(4.14)
Pro forma                                   $0.23         $(2.37)        $(4.06)

                                       30
<PAGE>


FRANKLIN CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)


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.

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".

RECLASSIFICATION

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

3.   INCOME TAXES

For the years ended December 31, 2002, 2001 and 2000, Franklin's tax (provision)
benefit was based on the following:

<TABLE>
<CAPTION>
                                                          2002           2001           2000
                                                      -----------    -----------    -----------
<S>                                                   <C>            <C>            <C>
Net investment loss from operations                   $(1,530,369)   $(1,386,685)   $(2,257,782)
Net realized gain on portfolio of investments             237,657        520,455      1,215,875
Increase (decrease) in unrealized appreciation          1,663,304     (1,553,756)    (3,716,513)
                                                      -----------    -----------    -----------
     Pre-tax book income (loss)                       $   370,592    $(2,419,986)   $(4,758,420)
                                                      ===========    ===========    ===========

                                                          2002           2001           2000
                                                      -----------    -----------    -----------
Federal tax (provision) benefit at 34% on $370,592,
  $(2,419,986), and $(4,758,420), respectively        $  (126,000)   $   823,000    $ 1,618,000
State and local, net of Federal benefit                        --          1,000        (13,000)
Other                                                     (22,000)         5,000       (130,000)
Change in valuation allowance                             148,000       (827,000)    (1,144,000)
                                                      -----------    -----------    -----------
                                                      $        --    $     2,000    $   331,000
                                                      ===========    ===========    ===========

The components of the tax benefit are as follows:
                                                          2002           2001           2000
                                                      -----------    -----------    -----------
Current state and local tax benefit (expense)         $        --    $     2,000    $   (20,000)
Deferred tax benefit                                           --             --        351,000
                                                      -----------    -----------    -----------
Benefit for income taxes                              $        --    $     2,000    $   331,000
                                                      ===========    ===========    ===========
</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, 2002 and 2001,  significant  deferred tax assets and liabilities
consist of:

                                                        Asset (Liability)
                                                   ----------------------------
                                                   December 31,     December 31,
                                                       2002             2001
                                                   -----------      -----------
Deferred Federal and state benefit from
  net operating loss carryforward                  $ 2,356,000      $ 1,905,000
Deferred Federal and state (provision)
  benefit on unrealized (appreciation)
  depreciation of investments                         (533,000)          66,000
Valuation allowance                                 (1,823,000)      (1,971,000)
                                                   -----------      -----------
  Deferred taxes                                   $        --      $        --
                                                   ===========      ===========

                                       31
<PAGE>


FRANKLIN CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)


At December 31, 2002,  Franklin had net operating loss  carryforwards for income
tax purposes of approximately $6,544,000 that will begin to expire in 2011. At a
36%  effective  tax rate the  after-tax  net  benefit  from this  loss  would be
approximately $2,356,000.

4.   STOCKHOLDERS' EQUITY

The  accumulated  deficit at December  31,  2002,  consists of  accumulated  net
realized gains of $5,170,000 and accumulated investment losses of $12,749,000.

On February  22, 2000,  the  Corporation  issued  16,450  shares of  convertible
preferred  stock  with a par  value  of $100 for  $1,645,000.  The  stock  has a
cumulative 7% quarterly dividend and is convertible into the number of shares of
common stock by dividing the purchase price for the convertible  preferred stock
by conversion price in effect (which is currently $13.33),  resulting in 123,375
shares  of common  stock.  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.

On April 26, 2000, the Corporation  declared a three-for-two  stock split of the
Corporation's  Common Stock in the form of a stock dividend to  shareholders  of
record on May 15,  2000,  and  payable  June 7, 2000.  The stock  split has been
reflected in the accompanying financial statements and all applicable references
as to the number of common shares and per share information have been restated.

The Board of Directors has authorized  Franklin to repurchase up to an aggregate
of 525,000  shares of its common stock in open market  purchases on the American
Stock  Exchange when such purchases are deemed to be in the best interest of the
Corporation and its  stockholders.  As of December 31, 2001, the Corporation had
purchased  482,350  shares of its  common  stock of which  431,188  remained  in
treasury.  During the year ended  December 31, 2002, the  Corporation  purchased
25,100 shares of its common stock at a total cost of $71,815.  To date, Franklin
has  repurchased  507,450  shares of its common  stock of which  456,288  shares
remain in treasury at December 31, 2002.

5.   COMMITMENTS AND CONTINGENCIES

Franklin is  obligated  under an  operating  lease,  which  provides  for annual
minimum rental payments through December 31, 2003 of $149,600.

Rent  expense  for the  years  ended  December  31,  2002,  2001 and  2000,  was
approximately $99,000, $126,000, and $104,000, respectively. For the years ended
December 31, 2002,  2001 and 2000, the  Corporation  collected rents of $59,000,
$24,000, and $40,000, 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. Of the amount collected from subtenants during the
year ended December 31, 2000, $30,000,  was received from a corporation included
in Franklin's investment portfolio.

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

                                       32
<PAGE>


FRANKLIN CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)


conspired to commit fraud and breached their fiduciary duty to the plaintiffs in
connection  with  the  acquisition  of  the  plaintiffs'  radio  production  and
distribution  business. The complaint further alleges that Franklin and Sunshine
joined the alleged  conspiracy.  The business was initially  acquired by certain
entities affiliated with Winstar Communications and, subsequently, the assets of
such business were sold to Franklin and Sunshine (see Note 6). Concurrently with
such purchase,  Franklin  transferred  such assets to Excelsior.  The plaintiffs
seek recovery of damages in excess of $10,000,000, costs and attorneys' fees. On
January  7, 2002,  Franklin  filed a motion to dismiss  the  lawsuit  or, in the
alternative,  to  transfer  venue to the  United  States  District  Court of the
Southern District of New York. The plaintiffs filed a motion opposing Franklin's
request on January 28,  2002.  Franklin's  motion for  dismissal  was granted on
February 25, 2002, due to improper venue. On June 7, 2002, the plaintiffs  filed
their  complaint to the United States  District of the Southern  District of New
York. On July 12, 2002,  Franklin  filed a motion to dismiss the  complaint.  On
February 25,  2003,  the case  against  Franklin  and  Sunshine  was  dismissed;
however,  the  plaintiffs  may file an appeal.  An  unfavorable  outcome in this
lawsuit may have a material  adverse  effect on Franklin's  business,  financial
condition and results of operations

6.   TRANSACTIONS WITH AFFILIATES

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

On August 28, 2001,  Franklin  along with  Sunshine  Wireless  LLC  ("Sunshine")
purchased the assets of Winstar Radio  Networks,  Global Media and Winstar Radio
Productions  (collectively  "WRN") for a total  purchase price of $6.25 million.
Change Technology Partners,  Inc. ("Change"),  a public company,  provided $2.25
million  of senior  financing  for the deal.  The  acquisition  was  consummated
through eCom Capital Inc.,  subsequently renamed Excelsior Radio Networks,  Inc.
("Excelsior"),  a then  wholly-owned  subsidiary of Franklin.  Franklin's  total
investment was $2.5 million  consisting of $1.5 million in cash and a $1 million
note payable to WRN.  The note is due  February 28, 2002 with  interest at 3.54%
and has a right of set-off against certain  representations  and warranties made
by WRN. In October 2001, a legal  proceeding  was filed against WRN,  which also
named Franklin as a defendant,  in which the representations and warranties made
by WRN have been challenged.  Until the time that this action is settled the due
date of the note is extended  indefinitely (see Note 5). Additionally,  Franklin
provided a $150,000 note receivable to Excelsior. The note bears interest at 10%
per annum and is issued for a ninety-day rolling period. In connection with this
note, Franklin was granted warrants to acquire 12,879 shares of Excelsior common
stock at an exercise  price of $1.125 per share.  As of December 31, 2002,  this
note has been repaid.  In contemplation of the proposed merger agreement between
Franklin and Change (see Note 11),  Franklin  sold to Change  250,000  shares of
common  stock in  Excelsior  for  $250,000.  On October 3, 2002,  Franklin  sold
773,196  shares  of  common  stock in  Excelsior  for  $1.94 per share for total
proceeds of $1,500,000 realizing a gain of $726,804.

At the  closing,  Franklin  entered  into a services  agreement  with  Excelsior
whereby Franklin provides Excelsior with certain services.  In consideration for
the services provided,  for a period of six months Franklin received $30,000 per
month and was reimbursed for all direct expenses. Since then, Franklin's monthly
fee is determined by a majority of the  non-Franklin  directors;  however,  said
management fee will be no less than $15,000 per month and Franklin will continue
to be reimbursed for all direct  expenses  through  December 31, 2003.  Finally,
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,  2002,  and 2001,  Franklin  earned
$450,000 and $120,000,

                                       33
<PAGE>


FRANKLIN CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)


respectively,  in  management  fees and was  reimbursed  $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.

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

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

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

During the year ended December 31, 2000, the  Corporation  invested  $140,000 in
Excom Ventures,  LLC.  ("Excom").  Excom was formed as a holding company for the
purpose of investing in Expert Commerce,  Inc., a Business-to-Business  purchase
evaluation engine that simulates the way people make decisions.  At December 31,
2001, the Board of Franklin  determined  that this  investment had not value and
recorded an  unrealized  loss.  At December 31, 2002,  Excom was  dissolved  and
Franklin realized a loss of $140,000.

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

                                       34
<PAGE>


FRANKLIN CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)


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.

Forfeited options of 1,875 were issued on March 1, 2000, to one eligible officer
of the Corporation at a strike price of $14.00 per share,  which represented the
closing  price of  Franklin's  Common  Stock as reported by the  American  Stock
Exchange on that date. These options will expire as originally issued on January
28, 2008.  One-half of the reissued  options  vested  immediately,  and one-half
vested on March 1, 2001.

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 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.  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.

On May 9, 2000,  one of Franklin's  officers made a cashless  exercise of 29,062
options resulting in a non-cash charge to compensation  expense of $197,188.  On
September  11, 2000,  one of  Franklin's  officers  made a cashless  exercise of
29,062  options  resulting  in a  non-cash  charge to  compensation  expense  of
$129,317.  On December 21, 2000,  three of  Franklin's  officers  made  cashless
exercises  of 7,501  options  resulting  in a  non-cash  charge to  compensation
expense of $23,139.

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

<TABLE>
<CAPTION>
                                    December 31, 2002       December 31, 2001      December 31, 2000
                                  --------------------    --------------------    --------------------
                                              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   39,375      $11.27      39,375      $11.27      65,625      $ 4.59
Granted                                --          --          --          --      39,375      $11.27
Exercised                              --          --          --          --      65,625      $ 4.42
Forfeited                          18,750      $11.13          --          --          --          --
Expired                                --          --          --          --          --          --
                                                                       ------      ------      ------
Outstanding at end of year         20,625      $11.39      39,375      $11.27      39,375      $11.27
                                   ======                  ======                  ======
Exercisable at end of year         20,625      $11.39      26,875      $11.33      13,438      $11.33
                                   ======                  ======                  ======
Weighted average fair value
  of options granted                   --                      --                  $ 2.40
</TABLE>

The fair value of the  options  granted was  estimated  on the date of the grant
using the Black-Scholes option pricing model with the following assumptions:

                                             December 31, 2000
          Stock volatility                        41.3%
          Risk-free interest rate                  5.5%
          Option term in years                      4
          Stock dividend yield                      --

                                       35
<PAGE>


FRANKLIN CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)


The options issued under the SIP have a remaining contractual life of 5.1 years.
The options issued under the SOP have a remaining contractual life of 7.1 years.

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

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

<TABLE>
<CAPTION>
                                                                December 31,
                                                -------------------------------------------
                                                    2002            2001            2000
                                                -------------------------------------------
<S>                                             <C>             <C>             <C>
Numerator:
    Net increase (decrease) in net
       assets from operations                   $   370,262     ($2,418,310)    ($4,427,420)
    Preferred stock dividends                      (115,152)       (115,150)        (98,633)
                                                -----------     -----------     -----------
    Numerator for basic and diluted
       earnings per share - net increase
       (decrease) in net assets attributable
       to common stockholders                   $   255,110     ($2,533,460)    ( $4,526,053)
                                                ===========     ===========     ===========

Denominator:
    Denominator for basic and diluted
       increase (decrease) in net assets
       from operations - weighted -
       average shares                             1,066,195       1,083,408       1,094,373
                                                ===========     ===========     ===========

Basic and diluted net increase (decrease) in
    net assets from operations per share        $      0.24     $     (2.34)    $     (4.14)
                                                ===========     ===========     ===========
</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):

                                                     Period ended December 31,
                                                   -----------------------------
                                                     2002       2001       2000
                                                   -----------------------------
Preferred stock convertible into common stock      123,375    123,375    123,375
Stock options                                       20,625     39,375     25,625

9.   NET ASSET VALUE PER SHARE

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

                                                    December 31,    December 31,
                                                        2002            2001
                                                     ----------     ----------
Numerator:
     Numerator for net asset value per
       common share, as if converted basis           $3,267,540     $2,921,745
     Liquidation value of convertible preferred
       stock                                         (1,095,000)    (1,645,000)
                                                     ----------     ----------
     Numerator for net asset value per share
       attributable to common stockholders           $2,172,540     $1,276,745
                                                     ==========     ==========


                                       36
<PAGE>


FRANKLIN CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)


Denominator:
     Number of common shares outstanding,
       denominator for net asset value per share
       attributable to common stockholders            1,049,600      1,074,700
     Number of shares of common stock to be
       issued upon conversion of preferred stock         82,125        123,375
                                                     ----------     ----------
     Denominator for net asset value per common
       share as if converted basis                    1,131,725      1,198,075
                                                     ==========     ==========

     Net asset value per share attributable
       to common stockholders                        $     2.07     $     1.19
                                                     ==========     ==========

     Net asset value per common share, as if
       converted basis                               $     2.89     $     2.44
                                                     ==========     ==========

10.  PURCHASES AND SALES OF INVESTMENT SECURITIES

The  cost of  purchases  and  proceeds  from  sales  of  investment  securities,
excluding   short-term   investments,   aggregated   $22,985   and   $1,660,269,
respectively,  for the year ended December 31, 2002;  $3,241,241 and $3,477,991,
respectively,  for  the  year  ended  December  31,  2001;  and  $1,944,500  and
$2,543,819, respectively, for the year ended December 31, 2000.

11.  MERGER WITH CHANGE TECHNOLOGY PARTNERS, INC.

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

12.  SELECTED QUARTERLY DATA (UNAUDITED)

<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)

                                                                         2001
                                              ---------------------------------------------------------
                                               Quarter 1       Quarter 2       Quarter 3      Quarter 4
                                              -----------     -----------     -----------     ---------

Total investment income                       $    42,557     $    14,802     $    41,735     $  93,603
Net investment loss from operations              (390,097)       (371,291)       (317,146)     (308,151)
Net decrease in net assets
  attributable to common stockholders          (1,181,953)       (443,100)       (395,004)     (398,253)
Basic and diluted earnings per common share         (1.08)          (0.41)          (0.37)        (0.48)
</TABLE>


                                       37
<PAGE>


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

          Not applicable.

                                    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 64, 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. 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.  He is the
father  of  Spencer  L.  Brown,  Senior  Vice  President  and  Secretary  of the
Corporation.

          DAVID T.  LENDER,(3)  age 50,  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.

          MICHAEL P. ROLNICK,(2) age 37, joined the Board as a director in 1998.
Mr. Rolnick is a General  Partner at  ComVentures,  a venture  capital firm that
invests in early stage  Internet and  communications  companies.  Mr. Rolnick is
responsible  for private equity  investments and managing  portfolio  companies.
Prior to joining  ComVentures  in 1999,  Mr. Rolnick had been Vice President for
New Ventures at E* Trade Group Inc. since 1997.

PREFERRED STOCK DIRECTORS

          IRVING LEVINE,  (1),(2),(3)  age 81, 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 61, 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
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

                                       38
<PAGE>


EXECUTIVE OFFICERS

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

          SPENCER  L.  BROWN,  age 37, had been  Senior  Vice  President  of the
Corporation since November 1995, Secretary of the Corporation since October 1994
and was Vice  President  from August 1994 to November 1995. Mr. Brown is the son
of Stephen L. Brown,  the Chairman and Chief Executive of the  Corporation.  Mr.
Brown resigned his positions with Franklin on January 1, 2003 in order to become
the Chief  Executive  Officer of  Excelsior  Radio  Networks,  Inc.,  Franklin's
largest investment.

          HIRAM M. LAZAR,  age 38,  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, 2002.

<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)        2002       $420,000         $30,000             --                  --              --
CHAIRMAN &                  2001        420,000            --               --                  --              --
PRESIDENT                   2000        350,000         125,000             --                  --              --

Spencer L. Brown(3)         2002        225,000          41,667             --                  --              --
SENIOR VICE PRESIDENT       2001        225,000            --               --                  --              --
   & SECRETARY              2000        200,000          40,000             --                  --              --

Hiram M. Lazar              2002        130,000           3,750             --                  --              --
CHIEF FINANCIAL             2001        130,000            --               --                  --              --
OFFICER                     2000        120,000          15,000             --                 1,875            --
</TABLE>

                                       39
<PAGE>


(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.

(3)  Mr. Brown resigned January 1, 2003 to become the Chief Executive Officer of
     Excelsior, Franklin's largest investment.

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.

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

Stephen L. Brown     $ --           --                 --           --

David T. Lender      $500           --                 --           $500

Michael P. Rolnick   $500           --                 --           $500

Lawrence J. Foster   $500           --                 --           $500

Irving Levine        $500           --                 --           $500

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

          Irving  Levine,  Laurence  Foster,  and Michael  Rolnick served on the
Compensation  Committee  during  2002.  There  were  no  Compensation  Committee
interlocks or insider (employee) participation during 2002.

OPTION GRANTS

          No options were granted  during the year ended  December 31, 2002,  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, 2002, 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.

                                       40
<PAGE>


          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.

          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.

          Mr.  Spencer L. Brown was covered under an employment  agreement  that
was terminated  effective January 1, 2003, upon Mr. Brown's resignation from the
Corporation to become the Chief  Executive  Officer of Excelsior Radio Networks,
Inc.

          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.

                                       41
<PAGE>


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 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,  2002,  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

                                       42
<PAGE>


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.

          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.

                                       43
<PAGE>


          TYPE OF AWARDS

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

          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

                                       44
<PAGE>


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 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.

                                       45
<PAGE>


          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 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 10, 2003, 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 1000, New York, NY 10022.

COMMON STOCK

     NAME AND ADDRESS OF            AMOUNT AND NATURE OF            PERCENT
      BENEFICIAL OWNER              BENEFICIAL OWNERSHIP           OF CLASS
----------------------------        --------------------           --------
The Prudential Insurance
   Company of America                      187,438                    18.0%
   751 Broad Street
   Newark, NJ 07102

                                       46
<PAGE>


     NAME AND ADDRESS OF            AMOUNT AND NATURE OF            PERCENT
      BENEFICIAL OWNER              BENEFICIAL OWNERSHIP           OF CLASS
----------------------------        --------------------           --------
Stephen L. Brown                           144,791           (1)      13.9%
Irving Levine                               46,375           (2)       4.3%
Hiram M. Lazar                               9,085           (3)        *
Michael P. Rolnick                           7,250           (4)        *
David T. Lender                                300                      *
Laurence I. Foster                              --                      *
All officers and directors
   as a group (5 persons)                  207,801                    19.0%

-----------------------
 * Less than 1.0%

(1)  Does not include  40,779 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.

(4)  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.

PREFERRED STOCK

     NAME AND ADDRESS OF            AMOUNT AND NATURE OF            PERCENT
      BENEFICIAL OWNER              BENEFICIAL OWNERSHIP           OF CLASS
----------------------------        --------------------           --------
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                               --                       *
Michael P. Rolnick                            --                       *
Laurence I. Foster                            --                       *

All officers and directors
  As a group (6 persons)                   4,850                      44.3%

----------
   * Less than 1.0%

(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.

                                       47
<PAGE>


Set forth below is the dollar range of equity securities  beneficially  owned by
each nominee and continuing director as of March 10, 2003:

                                          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
          Michael P. Rolnick              $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.

(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, 2002.

<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.       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

                                       48
<PAGE>


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 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, 2002 and 2001
                  Statements of Operations for the years ended
                    December 31, 2002, 2001 and 2000
                  Statements of Cash Flows for the years ended
                    December 31, 2002, 2001 and 2000
                  Statements of Changes in Net Assets for the years ended
                    December 31, 2002, 2001 and 2000
                  Financial Highlights for the years ended
                    December 31, 2002, 2001, 2000, 1999 and 1998
                  Portfolio of Investments as of December 31, 2002
                  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


                                       49
<PAGE>


                              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

(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

                                       50
<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 31, 2003                   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                               Chief Financial Officer
----------------------
Hiram M. Lazar


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


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


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


/s/ Michael P. Rolnick                           Director
----------------------
Michael P. Rolnick


                                       51
<PAGE>


                                 CERTIFICATIONS

I, Stephen L. Brown, certify that:

1.   I have reviewed this annual report on Form 10-K of Franklin Capital
     Corporation;

2.   Based on my knowledge, this annual report does not contain any untrue
     statement of a material fact or omit to state a material fact necessary to
     make the statements made, in light of the circumstances under which such
     statements were made, not misleading with respect to the period covered by
     this annual report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this annual report, fairly present in all material
     respects the financial condition, results of operations and cash flows of
     the registrant as of, and for, the periods presented in this annual report;

4.   The registrant's other certifying officers and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

          a.   Designed such disclosure controls and procedures to ensure that
               material information relating to the registrant, including its
               consolidated subsidiaries, is made known to us by others within
               those entities, particularly during the period in which this
               annual report is being prepared;

          b.   Evaluated the effectiveness of the registrant's disclosure
               controls and procedures as of a date within 90 days prior to the
               filing date of this annual report (the "Evaluation Date"); and

          c.   Presented in this annual report our conclusions about the
               effectiveness of the disclosure controls and procedures based on
               our evaluation as of the Evaluation Date;

5.   The registrant's other certifying officers and I have disclosed, based on
     our most recent evaluation, to the registrant's auditors and the audit
     committee of registrant's board of directors (or persons performing the
     equivalent function):

          a.   All significant deficiencies in the design or operation of
               internal controls which could adversely affect the registrant's
               ability to record, process, summarize and report financial data
               and have identified for the registrant's auditors any material
               weaknesses in internal controls; and

          b.   Any fraud, whether or not material, that involves management or
               other employees who have a significant role in the registrant's
               internal controls; and

6.   The registrant's other certifying officers and I have indicated in this
     annual report whether or not there were significant changes in internal
     controls or in other factors that could significantly affect internal
     controls subsequent to the date of our most recent evaluation, including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.


Date March 31, 2003


     By: /s/ Stephen L. Brown
         -------------------------------
         Name:  Stephen L. Brown
         Title: Chairman and Chief Executive Officer

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<PAGE>


                                 CERTIFICATIONS

I, Hiram M. Lazar, certify that:

1.   I have reviewed this annual report on Form 10-K of Franklin Capital
     Corporation;

2.   Based on my knowledge, this annual report does not contain any untrue
     statement of a material fact or omit to state a material fact necessary to
     make the statements made, in light of the circumstances under which such
     statements were made, not misleading with respect to the period covered by
     this annual report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this annual report, fairly present in all material
     respects the financial condition, results of operations and cash flows of
     the registrant as of, and for, the periods presented in this annual report;

4.   The registrant's other certifying officers and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

          a.   Designed such disclosure controls and procedures to ensure that
               material information relating to the registrant, including its
               consolidated subsidiaries, is made known to us by others within
               those entities, particularly during the period in which this
               annual report is being prepared;

          b.   Evaluated the effectiveness of the registrant's disclosure
               controls and procedures as of a date within 90 days prior to the
               filing date of this annual report (the "Evaluation Date"); and

          c.   Presented in this annual report our conclusions about the
               effectiveness of the disclosure controls and procedures based on
               our evaluation as of the Evaluation Date;

5.   The registrant's other certifying officers and I have disclosed, based on
     our most recent evaluation, to the registrant's auditors and the audit
     committee of registrant's board of directors (or persons performing the
     equivalent function):

          a.   All significant deficiencies in the design or operation of
               internal controls which could adversely affect the registrant's
               ability to record, process, summarize and report financial data
               and have identified for the registrant's auditors any material
               weaknesses in internal controls; and

          b.   Any fraud, whether or not material, that involves management or
               other employees who have a significant role in the registrant's
               internal controls; and

6.   The registrant's other certifying officers and I have indicated in this
     annual report whether or not there were significant changes in internal
     controls or in other factors that could significantly affect internal
     controls subsequent to the date of our most recent evaluation, including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.


Date March 31, 2003


By: /s/ Hiram M. Lazar
    -----------------------------------
     Name:  Hiram M. Lazar
     Title: Chief Financial Officer

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